UNITED STATES
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 2023 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Delaware 98-1510303 (State or other jurisdiction of (I.R.S. Employer 55112 (Address of principal executive offices) (Zip Code) Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.0001 per share APG New York Stock Exchange o o Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company o Emerging growth company o o September 30, December 31, Assets Current assets: Cash and cash equivalents $ 395 $ 1,188 Restricted cash 3 302 Accounts receivable, net of allowances of $2 and $3 at September 30, 2022 and 1,249 767 Inventories 150 69 Contract assets 511 217 Prepaid expenses and other current assets 164 83 Total current assets 2,472 2,626 Property and equipment, net 399 326 Operating lease right of use assets 209 101 Goodwill 2,327 1,106 Intangible assets, net 1,683 882 Deferred tax assets 61 73 Pension and post-retirement assets 576 — Other assets 214 45 Total assets $ 7,941 $ 5,159 Liabilities, Redeemable Convertible Preferred Stock, and Shareholders’ Equity Current liabilities: Short-term and current portion of long-term debt $ 6 $ 1 Accounts payable 469 236 Contingent consideration and compensation liabilities 18 22 Accrued salaries and wages 294 209 Contract liabilities 428 243 Operating and finance leases 65 27 Other accrued liabilities 243 129 Total current liabilities 1,523 867 Long-term debt, less current portion 2,781 1,766 Pension and post-retirement obligations 65 — Contingent consideration and compensation liabilities 14 10 Operating and finance leases 158 79 Deferred tax liabilities 342 43 Other noncurrent liabilities 111 71 Total liabilities 4,994 2,836 Commitments and contingencies (Note 17) 5.5% Series B Redeemable Convertible Preferred Stock, $0.0001 par value, 800,000 authorized 797 — Shareholders’ equity: Series A Preferred Stock, $0.0001 par value, 7,000,000 authorized shares, 4,000,000 shares — — Common Stock, $0.0001 par value, 500,000,000 authorized shares, 233,786,135 shares and — — Additional paid-in capital 2,565 2,560 Accumulated deficit (186 ) (237 ) Accumulated other comprehensive loss (229 ) — Total shareholders’ equity 2,150 2,323 Total liabilities, redeemable convertible preferred stock, and shareholders’ equity $ 7,941 $ 5,159 Three Months Ended Nine Months Ended 2022 2021 2022 2021 Net revenues $ 1,735 $ 1,047 $ 4,855 $ 2,828 Cost of revenues 1,295 795 3,604 2,163 Gross profit 440 252 1,251 665 Selling, general, and administrative expenses 379 211 1,138 579 Operating income 61 41 113 86 Interest expense, net 33 14 88 43 (Gain) loss on extinguishment of debt, net (5 ) — (5 ) 9 Non-service pension benefit (10 ) — (32 ) — Investment income and other, net (3 ) (3 ) (5 ) (12 ) Other expense, net 15 11 46 40 Income before income taxes 46 30 67 46 Income tax provision 18 11 16 14 Net income $ 28 $ 19 $ 51 $ 32 Net income attributable to common shareholders: Stock dividend on Series B Preferred Stock (11 ) — (33 ) — Net income attributable to common shareholders $ 17 $ 19 $ 18 $ 32 Net income per common share: Basic $ 0.06 $ 0.08 $ 0.06 $ 0.14 Diluted 0.06 0.08 0.06 0.14 Weighted average shares outstanding: Basic 234 205 233 199 Diluted 266 209 266 205 Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Net income $ 28 $ 19 $ 51 $ 32 Other comprehensive (loss) income: Fair value change - derivatives, net of tax benefit (expense) 51 5 82 13 Foreign currency translation adjustment (86 ) (9 ) (311 ) (9 ) Comprehensive (loss) income $ (7 ) $ 15 $ (178 ) $ 36 Preferred Stock Issued Common Stock Issued Additional Accumulated Accumulated Total Shares Amount Shares Amount Capital Deficit Income (Loss) Equity Balance, December 31, 2021 4,000,000 $ — 224,625,193 $ — $ 2,560 $ (237 ) $ — $ 2,323 Net loss — — — — — (7 ) — (7 ) Fair value change - derivatives — — — — — — 9 9 Foreign currency translation adjustment — — — — — — (59 ) (59 ) Series A Preferred Stock dividend — — 7,539,697 — — — — — Series B Preferred Stock dividend — — 519,469 — — — — — Share repurchases — — (531,431 ) — (11 ) — — (11 ) Profit sharing plan contributions — — 622,655 — 15 — — 15 Share-based compensation and other, net — — 413,029 — 8 — — 8 Balance, March 31, 2022 4,000,000 $ — 233,188,612 $ — $ 2,572 $ (244 ) $ (50 ) $ 2,278 Net income — — — — — 30 — 30 Fair value change - derivatives — — — — — — 22 22 Foreign currency translation adjustment — — — — — — (166 ) (166 ) Series B Preferred Stock dividend — — 686,455 — — — — — Share repurchases — — (681,329 ) — (11 ) — — (11 ) Share-based compensation and other, net — — 24,584 — 3 — — 3 Balance, June 30, 2022 4,000,000 $ — 233,218,322 $ — $ 2,564 $ (214 ) $ (194 ) $ 2,156 Net income — — — — — 28 — 28 Fair value change - derivatives — — — — — — 51 51 Foreign currency translation adjustment — — — — — — (86 ) (86 ) Series B Preferred Stock dividend — — 739,015 — — — — — Share repurchases — — (738,572 ) — (11 ) — — (11 ) Share-based compensation and other, net — — 567,370 — 12 — — 12 Balance, September 30, 2022 4,000,000 $ — 233,786,135 $ — $ 2,565 $ (186 ) $ (229 ) $ 2,150 Preferred Stock Issued Common Stock Issued Additional Accumulated Accumulated Total Shares Amount Shares Amount Capital Deficit Income (Loss) Equity Balance, December 31, 2020 4,000,000 $ — 168,052,024 $ — $ 1,856 $ (284 ) $ (14 ) $ 1,558 Net loss — — — — — (8 ) — (8 ) Fair value change - derivatives — — — — — — (1 ) (1 ) Foreign currency translation adjustment — — — — — — (4 ) (4 ) Series A Preferred Stock dividend 12,447,912 — — — Warrants exercised — — 19,994,203 — 230 — — 230 Profit sharing plan contributions 630,109 13 — 13 Share-based compensation and other, net — — 157,979 — 3 — — 3 Balance, March 31, 2021 4,000,000 $ — 201,282,227 $ — $ 2,102 $ (292 ) $ (19 ) $ 1,791 Net income — — — — — 21 — 21 Fair value change - derivatives — — — — — — 9 9 Foreign currency translation adjustment — — — — — — 4 4 Share-based compensation and other, net — — (1,140 ) — 3 — — 3 Balance, June 30, 2021 4,000,000 $ — 201,281,087 $ — $ 2,105 $ (271 ) $ (6 ) $ 1,828 Net income — — — — — 19 — 19 Fair value change - derivatives — — — — — — 5 5 Foreign currency translation adjustment — — — — — — (9 ) (9 ) Issuance of common shares — — 22,716,049 — 446 — — 446 Share-based compensation and other, net — — 452,840 — 8 — — 8 Balance, September 30, 2021 4,000,000 $ — 224,449,976 $ — $ 2,559 $ (252 ) $ (10 ) $ 2,297 Nine Months Ended September 30, 2022 2021 Cash flows from operating activities: Net income $ 51 $ 32 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 60 59 Amortization 165 95 Restructuring charges, net of cash paid 12 — Deferred taxes (9 ) (1 ) Share-based compensation expense 14 8 Profit-sharing expense 10 11 Non-cash lease expense 49 24 Non-service pension benefit (32 ) — (Gain) loss on extinguishment of debt, net (5 ) 9 Other, net 13 5 Pension contributions (27 ) — Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable (104 ) (76 ) Contract assets (134 ) (81 ) Inventories (25 ) (5 ) Prepaid expenses and other current assets (25 ) (11 ) Accounts payable 68 54 Accrued liabilities and income taxes payable (6 ) (11 ) Contract liabilities 46 16 Other assets and liabilities (39 ) (60 ) Net cash provided by operating activities 82 68 Cash flows from investing activities: Acquisitions, net of cash acquired (2,881 ) (51 ) Purchases of property and equipment (60 ) (43 ) Proceeds from sales of property, equipment, held for sale assets, and businesses 10 13 Net cash used in investing activities (2,931 ) (81 ) Cash flows from financing activities: Proceeds from long-term borrowings 1,104 350 Payments on long-term borrowings (33 ) (320 ) Repurchases of long-term borrowings (30 ) — Payments of debt issuance costs (25 ) (4 ) Repurchases of common stock (33 ) — Proceeds from equity issuances 797 676 Payments of acquisition-related consideration (6 ) (72 ) Restricted shares tendered for taxes (1 ) (1 ) Net cash provided by financing activities 1,773 629 Effect of foreign currency exchange rate change on cash, cash equivalents, and restricted cash (17 ) (1 ) Net (decrease) increase in cash, cash equivalents, and restricted cash (1,093 ) 615 Cash, cash equivalents, and restricted cash, beginning of period 1,491 515 Cash, cash equivalents, and restricted cash, end of period $ 398 $ 1,130 Supplemental cash flow disclosures: Cash paid for interest $ 81 $ 32 Cash paid for income taxes, net of refunds 24 55 Accrued consideration issued in business combinations 1 13 Shares of common stock issued to profit sharing plan 13 13 Nature of business Cash, cash equivalents, and restricted cash Investments The following table summarizes the Cash paid at closing $ 2,935 Working capital and net indebtedness adjustment (42 ) Total net consideration $ 2,893 Cash $ 60 Accounts receivable 438 Inventories 67 Contract assets 183 Other current assets 20 Property and equipment 77 Operating lease right of use assets 154 Pension and post-retirement assets 626 Other noncurrent assets 9 Intangible assets 1,099 Goodwill 1,412 Accounts payable (191 ) Contract liabilities (162 ) Accrued expenses (221 ) Finance and operating lease liabilities (155 ) Pension and post-retirement obligations (71 ) Deferred tax liabilities (363 ) Other noncurrent liabilities (89 ) Net assets acquired $ 2,893 Customer relationships $ 584 Trade names and trademarks 465 Contractual backlog 50 Total intangibles $ 1,099 Three Months Ended Nine Months Ended Net revenues $ 1,567 $ 4,450 Net income (loss) 8 (45 ) Premier Fire NAC Other 2021 Cash paid at closing $ 32 $ 36 $ 25 Accrued consideration 7 4 9 Total consideration $ 39 $ 40 $ 34 Cash $ 3 $ 2 $ 2 Current assets 10 22 6 Property and equipment 1 2 2 Intangible assets, net 14 14 10 Goodwill 17 13 19 Current liabilities (6 ) (13 ) (5 ) Net assets acquired $ 39 $ 40 $ 34 Accrued consideration RESTRUCTURING The following table summarizes the Company's Nine Months Ended Balance as of December 31, 2021 $ — Charged to cost of revenues - employee related 4 Charged to selling, general, and administrative expenses - employee related 14 Payments (6 ) Currency translation adjustment and other (1 ) Balance as of September 30, 2022 $ 11 The Company disaggregates its net revenues primarily by segment, service type, and country from which revenues are invoiced, as the nature, timing, and uncertainty of cash flows are relatively consistent within each of these categories. The following tables provide disclosure of disaggregated net revenues by segment for the three and nine months ended September 30, Three Months Ended September 30, 2022 Safety Specialty Corporate and Consolidated Life Safety $ 1,008 $ — $ — $ 1,008 Heating, Ventilation, and Air Conditioning ("HVAC") 146 — — 146 Infrastructure / Utility — 341 — 341 Fabrication — 87 — 87 Specialty Contracting — 162 — 162 Corporate and Eliminations — — (9 ) (9 ) Net revenues $ 1,154 $ 590 $ (9 ) $ 1,735 Three Months Ended September 30, 2021 Safety Specialty Corporate and Consolidated Life Safety $ 430 $ — $ — $ 430 HVAC 103 — — 103 Infrastructure / Utility — 317 — 317 Fabrication — 44 — 44 Specialty Contracting — 166 — 166 Corporate and Eliminations — — (13 ) (13 ) Net revenues $ 533 $ 527 $ (13 ) $ 1,047 Nine Months Ended September 30, 2022 Safety Specialty Corporate and Consolidated Life Safety $ 2,966 $ — $ — $ 2,966 HVAC 408 — — 408 Infrastructure / Utility — 849 — 849 Fabrication — 194 — 194 Specialty Contracting — 477 — 477 Corporate and Eliminations — — (39 ) (39 ) Net revenues $ 3,374 $ 1,520 $ (39 ) $ 4,855 Nine Months Ended September 30, 2021 Safety Specialty Corporate and Consolidated Life Safety $ 1,201 $ — $ — $ 1,201 HVAC 310 — — 310 Infrastructure / Utility — 747 — 747 Fabrication — 183 — 183 Specialty Contracting — 417 — 417 Corporate and Eliminations — — (30 ) (30 ) Net revenues $ 1,511 $ 1,347 $ (30 ) $ 2,828 Three Months Ended September 30, 2022 Safety Specialty Corporate and Consolidated United States $ 568 $ 565 $ (9 ) $ 1,124 France 125 — — 125 Other 461 25 — 486 Net revenues $ 1,154 $ 590 $ (9 ) $ 1,735 Three Months Ended September 30, 2021 Safety Specialty Corporate and Consolidated United States $ 442 $ 516 $ (13 ) $ 945 France — — — — Other 91 11 — 102 Net revenues $ 533 $ 527 $ (13 ) $ 1,047 Nine Months Ended September 30, 2022 Safety Specialty Corporate and Consolidated United States $ 1,576 $ 1,481 $ (39 ) $ 3,018 France 417 — — 417 Other 1,381 39 — 1,420 Net revenues $ 3,374 $ 1,520 $ (39 ) $ 4,855 Nine Months Ended September 30, 2021 Safety Specialty Corporate and Consolidated United States $ 1,247 $ 1,323 $ (30 ) $ 2,540 France — — — — Other 264 24 — 288 Net revenues $ 1,511 $ 1,347 $ (30 ) $ 2,828 months. Accounts Contract Contract Balance as of September 30, 2022 $ 1,249 $ 511 $ 428 Balance as of December 31, 2021 767 217 243 The following table provides disclosure of goodwill by segment as of September 30, Safety Specialty Total Goodwill as of December 31, 2021 $ 925 $ 181 $ 1,106 Acquisitions 1,415 — 1,415 Foreign currency translation and other, net (1) (194 ) — (194 ) Goodwill as of September 30, 2022 $ 2,146 $ 181 $ 2,327 The Company’s identifiable intangible assets are comprised of the following as of September 30, September 30, 2022 Weighted Average Gross Accumulated Net Carrying Amortized intangibles: Contractual backlog 1.3 $ 145 $ (117 ) $ 28 Customer relationships 9.7 1,365 (322 ) 1,043 Trade names and trademarks 13.4 687 (75 ) 612 Total $ 2,197 $ (514 ) $ 1,683 December 31, 2021 Weighted Average Gross Accumulated Net Carrying Amortized intangibles: Contractual backlog 0.8 $ 101 $ (97 ) $ 4 Customer relationships 6.4 859 (221 ) 638 Trade names and trademarks 12.7 280 (40 ) 240 Total $ 1,240 $ (358 ) $ 882 Amortization expense recognized on identifiable intangible assets is as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Cost of revenues $ 15 $ 2 $ 22 $ 5 Selling, general, and administrative expenses 36 30 143 90 Total intangible asset amortization expense $ 51 $ 32 $ 165 $ 95 Observable inputs such as quoted prices for identical assets or liabilities in active markets. Observable inputs other than quoted prices that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. The following tables summarize the fair values and levels within the fair value hierarchy in which the measurements fall for assets and liabilities measured on a recurring basis as of September 30, Fair Value Measurements at September 30, 2022 Level 1 Level 2 Level 3 Total Financial assets: Derivatives designated as hedge instruments Cash flow hedges - interest rate swaps $ 17 $ — $ 17 Cash flow hedges - cross currency contracts — 25 — 25 Net investment hedges — 45 — 45 Fair value hedges — 95 — 95 Derivatives not designated as hedge instruments Foreign currency contracts — — — — Total $ — $ 182 $ — $ 182 Financial liabilities: Derivatives not designated as hedge instruments Foreign currency contracts — (2 ) — (2 ) Contingent consideration obligations — — (4 ) (4 ) Total $ — $ (2 ) $ (4 ) $ (6 ) Fair Value Measurements at December 31, 2021 Level 1 Level 2 Level 3 Total Financial assets: Derivatives designated as hedge instruments Cash flow hedges - cross currency swaps $ — $ 6 $ — $ 6 Net investment hedges — 12 — 12 Total $ — $ 18 $ — $ 18 Financial liabilities: Derivatives designated as hedge instruments Cash flow hedges - interest rate swaps $ — $ (11 ) $ — $ (11 ) Derivatives not designated as hedge instruments Foreign currency contracts — — — — Contingent consideration obligations — — (4 ) (4 ) Total $ — $ (11 ) $ (4 ) $ (15 ) The table below presents a reconciliation of the fair value of the Company’s contingent consideration obligations that use unobservable inputs (Level 3), as well as other information about the contingent consideration obligations: Nine Months Ended Balance as of December 31, 2021 $ 4 Issuances — Settlements — Adjustments to fair value — Balance as of September 30, 2022 $ 4 Number of open contingent consideration arrangements at the end of period 3 Maximum potential payout at end of period $ 5 2023. The following table presents the carrying amount and fair value of the Company’s September 30, 2022 December 31, 2021 Carrying Value Fair Value Carrying Value Fair Value 4.125% Senior Notes $ 337 $ 267 $ 350 $ 348 4.750% Senior Notes 277 230 300 305 NOTE 9. DERIVATIVES 2026. 2028. Variations in the assets and liability balances are primarily driven by changes in the applicable forward yield curves related to SOFR. accounting prospectively. dedesignated swap is being amortized to interest expense on a straight-line basis through the third quarter of 2029. The components of property and equipment as of September 30, Estimated September 30, December 31, Land N/A $ 29 $ 26 Building 39 97 77 Machinery and equipment 1-20 302 228 Autos and trucks 4-10 115 106 Office equipment 3-7 24 26 Leasehold improvements 1-15 28 18 Total cost 595 481 Accumulated depreciation (196 ) (155 ) Property and equipment, net $ 399 $ 326 NOTE 11. DEBT Operating Finance Total Remainder of 2022 $ 17 $ 2 $ 19 2023 63 5 68 2024 46 5 51 2025 33 3 36 2026 21 1 22 2027 14 — 14 Thereafter 36 — 36 Total lease payments $ 230 $ 16 $ 246 Less imputed interest (22 ) (1 ) (23 ) Total present value of lease liabilities $ 208 $ 15 $ 223 Operating and finance leases - current $ 60 $ 5 $ 65 Operating and finance leases - non-current 148 10 158 Total present value of lease liabilities $ 208 $ 15 $ 223 September 30, December 31, Weighted-average remaining lease term: Operating leases 5.2 years 6.0 years Finance leases 3.0 years 2.8 years Weighted-average discount rate: Operating leases 3.6 % 3.4 % Finance leases 4.0 % 2.3 % Debt obligations consist of the following: Maturity Date September 30, December 31, Term loan facility 2019 Term Loan October 1, 2026 $ 1,127 $ 1,140 Revolving Credit Facility October 1, 2026 — — 2021 Term Loan January 3, 2029 1,085 — Senior notes 4.125% Senior Notes July 15, 2029 337 350 4.750% Senior Notes October 15, 2029 277 300 Other obligations 7 1 Total debt obligations 2,833 1,791 Less: unamortized deferred financing costs (46 ) (24 ) Total debt, net of deferred financing costs 2,787 1,767 Less: short-term and current portion of long-term debt (6 ) (1 ) Long-term debt, less current portion $ 2,781 $ 1,766 credit, respectively. The Company repurchased $23 of the 4.750% Senior Notes in September 2022 and the balance as of September 30, 2023 was $277. 2022. vehicles. Remainder of 2022 $ 2 2023 12 2024 11 2025 11 2026 1,138 2027 11 Thereafter 1,648 Total $ 2,833 The Company’s quarterly income tax provision is measured using an estimate of its consolidated annual effective tax rate, adjusted in the current period for discrete income tax items, within the periods presented. The comparison of the Company’s income tax provision between periods may be impacted by the level and mix of earnings and losses by tax jurisdiction, foreign income tax rate differentials, and discrete items. The Company’s effective tax rate was 2036. expense. U.S. federal jurisdiction, and various state, local, and foreign jurisdictions. As of September 30, January 3, 2022 Plan assets $ 2,615 January 3, 2022 Projected benefit obligation ("PBO") funded status Fair value of plan assets $ 2,615 Benefit obligations (2,041 ) Funded status of plans $ 574 January 3, 2022 Pension and post-retirement benefits $ 626 Other accrued liabilities — Other noncurrent liabilities (52 ) Net amount recognized $ 574 January 3, 2022 PBO $ 78 Accumulated benefit obligation 64 Fair value of plan assets 26 January 3, 2022 PBO $ 78 Accumulated benefit obligation 64 Fair value of plan assets 26 Three Months Ended Nine Months Ended Service cost $ 3 $ 9 Interest cost 7 24 Expected return on plan assets (18 ) (56 ) Net periodic pension benefit $ (8 ) $ (23 ) Three and Nine Months Ended September 30, 2022 Benefit Obligation Net Periodic Discount rates: PBO 1.9 % 1.9 % Interest cost — 1.7 % Service cost — 2.2 % Salary scale 2.9 % 2.9 % Expected return on plan assets — 3.1 % Quoted Prices in Significant Significant Active Markets for Observable Unobservable Not Identical Assets Inputs Inputs Subject to Asset Category Level 1 Level 2 Level 3 Leveling Total Public equities: Global equity funds at net asset value 1 $ — $ — $ — $ 238 $ 238 Fixed income securities: Governments — 1,608 — 69 1,677 Corporate bonds — 638 — — 638 Fixed income securities 1 — — — 106 106 Real estate 1,2 — — — 11 11 Other 1,3 — (212 ) — 59 (153 ) Cash & cash equivalents 1,4 — 33 — 65 98 Subtotal $ — $ 2,067 $ — $ 548 $ 2,615 Other assets & liabilities 5 — Total at January 3, 2022 $ 2,615 2023, respectively. 15. COMMITMENTS AND CONTINGENCIES of the Company. AND REDEEMABLE CONVERTIBLE PREFERRED STOCK Repurchases The following table sets forth the computation of Three Months Ended Nine Months Ended 2022 2021 2022 2021 Basic earnings per common share: Net income $ 28 $ 19 $ 51 $ 32 Less income attributable to Series A Preferred Stock (2 ) (2 ) (2 ) (4 ) Less income attributable to Series B Preferred Stock (2 ) — (2 ) — Less stock dividend attributable to Series B Preferred Stock (11 ) — (33 ) — Net income attributable to common shareholders - basic $ 13 $ 17 $ 14 $ 28 Weighted average shares outstanding - basic (1) 233,605,429 204,851,780 232,982,467 199,472,387 Income per common share - basic $ 0.06 $ 0.08 $ 0.06 $ 0.14 Diluted earnings per common share: Net income $ 28 $ 19 $ 51 $ 32 Less income attributable to Series A Preferred Stock (2 ) (2 ) (2 ) (4 ) Less income attributable to Series B Preferred Stock — — — Less stock dividend attributable to Series B Preferred Stock (11 ) — (33 ) — Net income attributable to common shareholders - diluted $ 15 $ 17 $ 16 $ 28 Weighted average shares outstanding - basic 233,605,429 204,851,780 232,982,467 199,472,387 Dilutive securities: RSUs, PSUs, and stock options (1) 336,325 713,750 357,350 1,773,018 Shares issuable upon conversion of Series B Preferred Stock 32,520,000 — 32,520,000 — Shares issuable pursuant to the annual Series A Preferred Stock dividend (2) — 3,821,671 — 3,547,120 Weighted average shares outstanding - diluted 266,461,754 209,387,201 265,859,817 204,792,525 Income per common share - diluted $ 0.06 $ 0.08 $ 0.06 $ 0.14 amounts.) Summarized financial information for the Company’s reportable segments is presented and reconciled to consolidated financial information in the following tables, including a reconciliation of consolidated operating income (loss) to EBITDA: Three Months Ended September 30, 2022 Safety Specialty Corporate and Consolidated Net revenues $ 1,154 $ 590 $ (9 ) $ 1,735 EBITDA Reconciliation Operating income (loss) $ 60 $ 45 $ (44 ) $ 61 Plus: Investment income and other, net 1 2 — 3 Non-service pension benefit 10 — — 10 Gain on extinguishment of debt, net — — 5 5 Depreciation 8 12 2 22 Amortization 37 14 — 51 EBITDA $ 116 $ 73 $ (37 ) $ 152 Total assets $ 5,879 $ 1,357 $ 705 $ 7,941 Capital expenditures 5 16 5 26 Three Months Ended September 30, 2021 Safety Specialty Corporate and Consolidated Net revenues $ 533 $ 527 $ (13 ) $ 1,047 EBITDA Reconciliation Operating income (loss) $ 56 $ 31 $ (46 ) $ 41 Plus: Investment income and other, net — 4 (1 ) 3 Depreciation 3 16 1 20 Amortization 16 14 2 32 EBITDA $ 75 $ 65 $ (44 ) $ 96 Total assets $ 3,108 $ 1,482 $ 193 $ 4,783 Capital expenditures 3 6 — 9 Nine Months Ended September 30, 2022 Safety Specialty Corporate and Consolidated Net revenues $ 3,374 $ 1,520 $ (39 ) $ 4,855 EBITDA Reconciliation Operating income (loss) $ 186 $ 70 $ (143 ) $ 113 Plus: Investment income and other, net 2 5 (2 ) 5 Non-service pension benefit 32 — — 32 Gain on extinguishment of debt, net — — 5 5 Depreciation 20 35 5 60 Amortization 120 43 2 165 EBITDA $ 360 $ 153 $ (133 ) $ 380 Total assets $ 5,879 $ 1,357 $ 705 $ 7,941 Capital expenditures 16 37 7 60 Nine Months Ended September 30, 2021 Safety Specialty Corporate and Consolidated Net revenues $ 1,511 $ 1,347 $ (30 ) $ 2,828 EBITDA Reconciliation Operating income (loss) $ 153 $ 37 $ (104 ) $ 86 Plus: Investment income and other, net 5 8 (1 ) 12 Loss on extinguishment of debt, net — — (9 ) (9 ) Depreciation 6 49 4 59 Amortization 49 43 3 95 EBITDA $ 213 $ 137 $ (107 ) $ 243 Total assets $ 3,108 $ 1,482 $ 193 $ 4,783 Capital expenditures 5 38 — 43 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS fiscal year 2024. three months ended September 30, 2023, we recorded an impairment charge of $13 million. O F EY LINE ITEMS CCOUNTING P AND ESTIMATES F OPERATIONS 2022. Three Months Ended September 30, Change ($ in millions) 2022 2021 $ % Net revenues $ 1,735 $ 1,047 $ 688 65.7 % Cost of revenues 1,295 795 500 62.9 % Gross profit 440 252 188 74.6 % Selling, general, and administrative expenses 379 211 168 79.6 % Operating income 61 41 20 48.8 % Interest expense, net 33 14 19 135.7 % Gain on extinguishment of debt, net (5 ) — (5 ) NM Non-service pension benefit (10 ) — (10 ) NM Investment income and other, net (3 ) (3 ) — — Other expense, net 15 11 4 36.4 % Income before income taxes 46 30 16 53.3 % Income tax provision 18 11 7 63.6 % Net income $ 28 $ 19 $ 9 47.4 % 2022 revenue. Three Months Ended September 30, Change ($ in millions) 2022 2021 $ % Gross profit $ 440 $ 252 $ 188 74.6 % Gross margin 25.4 % 24.1 % Three Months Ended September 30, Change ($ in millions) 2022 2021 $ % Selling, general, and administrative expenses $ 379 $ 211 $ 168 79.6 % SG&A expenses as a % of net revenues 21.8 % 20.2 % SG&A (excluding amortization) (Non-GAAP) $ 343 $ 181 $ 162 89.5 % SG&A expenses (excluding amortization) as a % of net revenues 19.8 % 17.3 % Operating margin 3.5 % 3.9 % year, partially offset by a decrease in the outstanding principal amounts of our floating rate debt. prior year. taxes. Three Months Ended September 30, Change ($ in millions) 2022 2021 $ % Net income $ 28 $ 19 $ 9 47.4 % EBITDA (non-GAAP) 152 96 56 58.3 % Net income as a % of net revenues 1.6 % 1.8 % EBITDA as a % of net revenues 8.8 % 9.2 % Net Revenues Three Months Ended September 30, Change ($ in millions) 2022 2021 $ % Safety Services $ 1,154 $ 533 $ 621 116.5 % Specialty Services 590 527 63 12.0 % Corporate and Eliminations (9 ) (13 ) 4 (30.8 )% $ 1,735 $ 1,047 $ 688 65.7 % Operating Income (Loss) Three Months Ended September 30, Change ($ in millions) 2022 2021 $ % Safety Services $ 60 $ 56 $ 4 7.1 % Safety Services operating margin 5.2 % 10.5 % Specialty Services $ 45 $ 31 $ 14 45.2 % Specialty Services operating margin 7.6 % 5.9 % Corporate and Eliminations $ (44 ) $ (46 ) $ 2 (4.3 )% $ 61 $ 41 $ 20 48.8 % EBITDA Three Months Ended September 30, Change ($ in millions) 2022 2021 $ % Safety Services $ 116 $ 75 $ 41 54.7 % Safety Services EBITDA as a % of net revenues 10.1 % 14.1 % Specialty Services $ 73 $ 65 $ 8 12.3 % Specialty Services EBITDA as a % of net revenues 12.4 % 12.3 % Corporate and Eliminations $ (37 ) $ (44 ) $ 7 (15.9 )% $ 152 $ 96 $ 56 58.3 % 2022. strategic pricing improvements. Nine Months Ended September 30, Change ($ in millions) 2022 2021 $ % Net revenues $ 4,855 $ 2,828 $ 2,027 71.7 % Cost of revenues 3,604 2,163 1,441 66.6 % Gross profit 1,251 665 586 88.1 % Selling, general, and administrative expenses 1,138 579 559 96.5 % Operating income 113 86 27 31.4 % Interest expense, net 88 43 45 104.7 % (Gain) loss on extinguishment of debt, net (5 ) 9 (14 ) (155.6 )% Non-service pension benefit (32 ) — (32 ) NM Investment income and other, net (5 ) (12 ) 7 (58.3 )% Other expense, net 46 40 6 15.0 % Income before income taxes 67 46 21 45.7 % Income tax provision 16 14 2 14.3 % Net income $ 51 $ 32 $ 19 59.4 % revenue. Nine Months Ended September 30, Change ($ in millions) 2022 2021 $ % Gross profit $ 1,251 $ 665 $ 586 88.1 % Gross margin 25.8 % 23.5 % Nine Months Ended September 30, Change ($ in millions) 2022 2021 $ % Selling, general, and administrative expenses $ 1,138 $ 579 $ 559 96.5 % SG&A expenses as a % of net revenues 23.4 % 20.5 % SG&A (excluding amortization) (Non-GAAP) $ 995 $ 489 $ 506 103.5 % SG&A expenses (excluding amortization) as a % of net revenues 20.5 % 17.3 % Operating margin 2.3 % 3.0 % prior year. discrete items. Nine Months Ended September 30, Change ($ in millions) 2022 2021 $ % Net income $ 51 $ 32 $ 19 59.4 % EBITDA (non-GAAP) 380 243 137 56.4 % Net income as a % of net revenues 1.1 % 1.1 % EBITDA as a % of net revenues 7.8 % 8.6 % Net Revenues Nine Months Ended September 30, Change ($ in millions) 2022 2021 $ % Safety Services $ 3,374 $ 1,511 $ 1,863 123.3 % Specialty Services 1,520 1,347 173 12.8 % Corporate and Eliminations (39 ) (30 ) (9 ) 30.0 % $ 4,855 $ 2,828 $ 2,027 71.7 % Operating Income (Loss) Nine Months Ended September 30, Change ($ in millions) 2022 2021 $ % Safety Services $ 186 $ 153 $ 33 21.6 % Safety Services operating margin 5.5 % 10.1 % Specialty Services $ 70 $ 37 $ 33 89.2 % Specialty Services operating margin 4.6 % 2.7 % Corporate and Eliminations $ (143 ) $ (104 ) $ (39 ) 37.5 % $ 113 $ 86 $ 27 31.4 % EBITDA Nine Months Ended September 30, Change ($ in millions) 2022 2021 $ % Safety Services $ 360 $ 213 $ 147 69.0 % Safety Services EBITDA as a % of net revenues 10.7 % 14.1 % Specialty Services $ 153 $ 137 $ 16 11.7 % Specialty Services EBITDA as a % of net revenues 10.1 % 10.2 % Corporate and Eliminations $ (133 ) $ (107 ) $ (26 ) 24.3 % $ 380 $ 243 $ 137 56.4 % 2022. end markets and strategic pricing improvements. 2022. amortization and impairment) Three Months Ended September 30, ($ in millions) 2022 2021 Reported SG&A expenses $ 379 $ 211 Adjustments to reconcile to SG&A expenses to SG&A expenses (excluding amortization) Amortization expense (36 ) (30 ) SG&A expenses (excluding amortization) $ 343 $ 181 Nine Months Ended September 30, ($ in millions) 2022 2021 Reported SG&A expenses $ 1,138 $ 579 Adjustments to reconcile to SG&A expenses to SG&A expenses (excluding amortization) Amortization expense (143 ) (90 ) SG&A expenses (excluding amortization) $ 995 $ 489 Three Months Ended September 30, ($ in millions) 2022 2021 Reported net income $ 28 $ 19 Adjustments to reconcile net income to EBITDA: Interest expense, net 33 14 Income tax provision 18 11 Depreciation 22 20 Amortization 51 32 EBITDA $ 152 $ 96 IQUIDITY ND C APITAL Nine Months Ended September 30, ($ in millions) 2022 2021 Reported net income $ 51 $ 32 Adjustments to reconcile net income to EBITDA: Interest expense, net 88 43 Income tax provision 16 14 Depreciation 60 59 Amortization 165 95 EBITDA $ 380 $ 243 ESOURCES transformation transactions or initiatives. Nine Months Ended September 30, ($ in millions) 2022 2021 Net cash provided by operating activities $ 82 $ 68 Net cash used in investing activities (2,931 ) (81 ) Net cash provided by financing activities 1,773 629 Effect of foreign currency exchange rate change on cash and cash equivalents (17 ) (1 ) Net (decrease) increase in cash and cash equivalents $ (1,093 ) $ 615 Cash, cash equivalents, and restricted cash at the end of the period $ 398 $ 1,130 2022. 2023. initial aggregate principal amount of the 2019 Term Loan. The 2019 Term Loan matures on October 1, 2026. 2022. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Credit Agreement. 2022. CONTROLS AND PROCEDURES 2022. PART II. OTHER INFORMATION RISK FACTORS AND ISSUER PURCHASES OF EQUITY SECURITIES During the Three Months Ended September 30, 2022 Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) July 1, 2022 - July 31, 2022 — $ — — $ — August 1, 2022 - August 31, 2022 — — — — September 1, 2022 - September 30, 2022 738,572 14.89 738,572 217 Total 738,572 $ 14.89 738,572 $ 217 2023: MINE SAFETY DISCLOSURES EXHIBITS 31.1* 31.2* 32.1** 32.2** 95.1* 101.INS* Inline XBRL Instance Document. 101.SCH* Inline XBRL Taxonomy Extension Schema Document. 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). APi GROUP CORPORATION November /s/ Russell A. Becker Russell A. Becker Chief Executive Officer (Duly Authorized Officer) November /s/ Kevin S. Krumm Kevin S. Krumm Chief Financial Officer (Principal Financial Officer)☒x2022☐o
incorporation or organization)
Identification No.), Minnesota(651) (651) 636-4320Yesx ☒ No ☐Yesx ☒ No ☐☒☐☐☐☐☐☐o No ☒x233,906,920235,559,170 shares of common stock as of October 27, 2022.26, 2023.TABLE OF CONTENTS33415859616161616263
2022
2021September 30,
2023December 31,
2022Assets Current assets: Cash and cash equivalents $ 461 $ 605
December 31, 2021, respectivelyAccounts receivable, net of allowances of $4 and $3 at September 30, 2023 and December 31, 2022, respectively Accounts receivable, net of allowances of $4 and $3 at September 30, 2023 and December 31, 2022, respectively 1,280 1,313 Inventories 155 163 Contract assets 530 459 Prepaid expenses and other current assets 226 112 Total current assets 2,652 2,652 Property and equipment, net 377 407 Operating lease right of use assets 227 222 Goodwill 2,404 2,382 Intangible assets, net 1,624 1,784 Deferred tax assets 107 108 Pension and post-retirement assets 407 392 Other assets 151 144 Total assets $ 7,949 $ 8,091 Liabilities, Redeemable Convertible Preferred Stock, and Shareholders’ Equity Current liabilities: Short-term and current portion of long-term debt $ 256 $ 206 Accounts payable 431 490 Contingent consideration and compensation liabilities 18 27 Accrued salaries and wages 320 337 Contract liabilities 474 463 Operating and finance leases 72 73 Other accrued liabilities 328 325 Total current liabilities 1,899 1,921 Long-term debt, less current portion 2,342 2,583 Pension and post-retirement obligations 37 40 Contingent consideration and compensation liabilities 10 6 Operating and finance leases 170 166 Deferred tax liabilities 340 340 Other noncurrent liabilities 122 111 Total liabilities 4,920 5,167 Commitments and contingencies (Note 15) Commitments and contingencies (Note 15)
shares, 800,000 shares and 0 shares issued and outstanding at September 30, 2022 and December
31, 2021, respectively; aggregate liquidation preference of $8405.5% Series B Redeemable Convertible Preferred Stock, $0.0001 par value, 800,000 authorized shares, 800,000 shares issued and outstanding at September 30, 2023 and December 31, 2022; aggregate liquidation preference of $840 5.5% Series B Redeemable Convertible Preferred Stock, $0.0001 par value, 800,000 authorized shares, 800,000 shares issued and outstanding at September 30, 2023 and December 31, 2022; aggregate liquidation preference of $840 797 797 Shareholders’ equity:
issued and outstanding at September 30, 2022 and December 31, 2021
224,625,193 shares issued at September 30, 2022 and December 31, 2021, respectively
(excluding 7,539,697 shares declared for stock dividend at December 31, 2021)Series A Preferred Stock, $0.0001 par value; 7,000,000 authorized shares; 4,000,000 shares issued and outstanding at September 30, 2023 and December 31, 2022 Series A Preferred Stock, $0.0001 par value; 7,000,000 authorized shares; 4,000,000 shares issued and outstanding at September 30, 2023 and December 31, 2022 — — Common stock; $0.0001 par value, 500,000,000 authorized shares, 235,146,035 shares and 233,403,912 shares issued at September 30, 2023 and December 31, 2022, respectively (excluding 413,135 and 584,584 shares declared for stock dividend at September 30, 2023 and December 31, 2022, respectively) Common stock; $0.0001 par value, 500,000,000 authorized shares, 235,146,035 shares and 233,403,912 shares issued at September 30, 2023 and December 31, 2022, respectively (excluding 413,135 and 584,584 shares declared for stock dividend at September 30, 2023 and December 31, 2022, respectively) — — Additional paid-in capital 2,562 2,558 Accumulated deficit (36) (164) Accumulated other comprehensive loss (294) (267) Total shareholders’ equity 2,232 2,127 Total liabilities, redeemable convertible preferred stock, and shareholders’ equity $ 7,949 $ 8,091 3
September 30,
September 30,Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net revenues $ 1,784 $ 1,735 $ 5,169 $ 4,855 Cost of revenues 1,273 1,295 3,737 3,604 Gross profit 511 440 1,432 1,251 Selling, general, and administrative expenses 407 379 1,148 1,138 Operating income 104 61 284 113 Interest expense, net 37 33 112 88 (Gain) loss on extinguishment of debt, net — (5) 3 (5) Non-service pension benefit (3) (10) (9) (32) Investment income and other, net (4) (3) (9) (5) Other expense, net 30 15 97 46 Income before income taxes 74 46 187 67 Income tax provision 20 18 59 16 Net income $ 54 $ 28 $ 128 $ 51 Net income attributable to common shareholders: Stock dividend on Series B Preferred Stock (11) (11) (33) (33) Net income attributable to common shareholders $ 43 $ 17 $ 95 $ 18 Net income per common share: Basic $ 0.15 $ 0.06 $ 0.32 $ 0.06 Diluted 0.15 0.06 0.32 0.06 Weighted average shares outstanding: Basic 235 234 235 233 Diluted 270 266 269 266
of ($16), ($1), ($27), and ($4), respectivelyThree Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net income $ 54 $ 28 $ 128 $ 51 Other comprehensive income (loss): Fair value change - derivatives, net of tax benefit (expense) of $—, $(16), $(2), and $(27), respectively 1 51 7 82 Foreign currency translation adjustment (63) (86) (22) (311) Comprehensive income (loss) $ (8) $ (7) $ 113 $ (178)
and Outstanding
and Outstanding
Paid-In
Other
Comprehensive
Shareholders’Preferred Stock Issued
and OutstandingCommon Stock Issued
and OutstandingAdditional
Paid-In
CapitalAccumulated
DeficitAccumulated
Other
Comprehensive
LossTotal
Shareholders’
EquityShares Amount Shares Amount Balance, December 31, 2022 4,000,000 $ — 233,403,912 $ — $ 2,558 $ (164) $ (267) $ 2,127 Net income — — — — — 26 — 26 Fair value change - derivatives — — — — — — (9) (9) Foreign currency translation adjustment — — — — — — 14 14 Gain on dedesignated derivatives amortized from AOCI into income — — — — — — (4) (4) Series B Preferred Stock dividend — — 1,082,877 — — — — — Share repurchases — — (541,316) — (12) — — (12) Profit sharing plan contributions — — 631,194 — 14 — — 14 Share-based compensation and other, net — — 636,233 — 9 — — 9 Balance, March 31, 2023 4,000,000 $ — 235,212,900 $ — $ 2,569 $ (138) $ (266) $ 2,165 Net income — — — — — 48 — 48 Fair value change - derivatives — — — — — — 15 15 Foreign currency translation adjustment — — — — — — 27 27 Gain on dedesignated derivatives amortized from AOCI into income — — — — — — (4) (4) Series B Preferred Stock dividend — — 436,992 — — — — — Share repurchases — — (428,688) — (11) — — (11) Share-based compensation and other, net — — 49,201 — 7 — — 7 Balance, June 30, 2023 4,000,000 $ — 235,270,405 $ — $ 2,565 $ (90) $ (228) $ 2,247 Net income — — — — — 54 — 54 Fair value change - derivatives — — — — — — 1 1 Foreign currency translation adjustment — — — — — — (63) (63) Gain on dedesignated derivatives amortized from AOCI into income — — — — — — (4) (4) Share repurchases — — (656,489) — (18) — — (18) Share-based compensation and other, net — — 532,119 — 15 — — 15 Balance, September 30, 2023 4,000,000 $ — 235,146,035 $ — $ 2,562 $ (36) $ (294) $ 2,232
and Outstanding
and Outstanding
Paid-In
Other
Comprehensive
Shareholders’Preferred Stock Issued
and OutstandingCommon Stock Issued
and OutstandingAdditional
Paid-In
CapitalAccumulated
DeficitAccumulated
Other
Comprehensive
LossTotal
Shareholders’
EquityShares Amount Shares Amount Balance, December 31, 2021 4,000,000 $ — 224,625,193 $ — $ 2,560 $ (237) $ — $ 2,323 Net loss — — — — — (7) — (7) Fair value change - derivatives — — — — — — 9 9 Foreign currency translation adjustment — — — — — — (59) (59) Series A Preferred Stock dividend — — 7,539,697 — — — — — Series B Preferred Stock dividend — — 519,469 — — — — — Share repurchases — — (531,431) — (11) — — (11) Profit sharing plan contributions — — 622,655 — 15 — — 15 Share-based compensation and other, net — — 413,029 — 8 — — 8 Balance, March 31, 2022 4,000,000 $ — 233,188,612 $ — $ 2,572 $ (244) $ (50) $ 2,278 Net income — — — — — 30 — 30 Fair value change - derivatives — — — — — — 22 22 Foreign currency translation adjustment — — — — — — (166) (166) Series B Preferred Stock dividend — — 686,455 — — — — — Share repurchases — — (681,329) — (11) — — (11) Share-based compensation and other, net — — 24,584 — 3 — — 3 Balance, June 30, 2022 4,000,000 — 233,218,322 — 2,564 (214) (194) 2,156 Net income — — — — — 28 — 28 Fair value change - derivatives — — — — — — 51 51 Foreign currency translation adjustment — — — — — — (86) (86) Series B Preferred Stock dividend — — 739,015 — — — — — Share repurchases — — (738,572) — (11) — — (11) Share-based compensation and other, net — — 567,370 — 12 — — 12 Balance, September 30, 2022 4,000,000 $ — 233,786,135 $ — $ 2,565 $ (186) $ (229) $ 2,150 Nine Months Ended September 30, 2023 2022 Cash flows from operating activities: Net income $ 128 $ 51 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 59 60 Amortization 167 165 Restructuring charges, net of cash paid 17 12 Deferred taxes 5 (9) Share-based compensation expense 19 14 Profit-sharing expense 14 10 Non-cash lease expense 55 49 Net periodic pension benefit (9) (32) Loss (gain) on extinguishment of debt, net 3 (5) Other, net 3 13 Pension contributions (3) (27) Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable 23 (104) Contract assets (78) (134) Inventories 2 (25) Prepaid expenses and other current assets (62) (25) Accounts payable (47) 68 Accrued liabilities and income taxes payable (27) (6) Contract liabilities 9 46 Other assets and liabilities (61) (39) Net cash provided by operating activities 217 82 Cash flows from investing activities: Acquisitions, net of cash acquired (57) (2,881) Purchases of property and equipment (64) (60) Proceeds from sales of property and equipment 13 10 Net cash used in investing activities (108) (2,931) Cash flows from financing activities: Proceeds from long-term borrowings — 1,104 Payments on long-term borrowings (206) (33) Repurchases of long-term borrowings — (30) Payments of debt issuance costs — (25) Repurchases of common stock (41) (33) Proceeds from equity issuances — 797 Payments of acquisition-related consideration (4) (6) Restricted shares tendered for taxes (2) (1) Net cash (used in) provided by financing activities (253) 1,773 Effect of foreign currency exchange rate change on cash, cash equivalents, and restricted cash (1) (17) Net decrease in cash, cash equivalents, and restricted cash (145) (1,093) Cash, cash equivalents, and restricted cash, beginning of period 607 1,491 Cash, cash equivalents, and restricted cash, end of period $ 462 $ 398 Supplemental cash flow disclosures: Cash paid for interest $ 119 $ 81 Cash paid for income taxes, net of refunds 70 24 Accrued consideration issued in business combinations 5 1 Shares of common stock issued to profit sharing plan 14 13 NOTE 1. NATURE OF BUSINESSAPi Group Corporation (the “Company” or “APG”) is a global, market-leading business services provider of safety and specialty services in over 500 locations in approximately 20 countries.2.1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES20212022, were derived from audited financial statements for the year then ended but do not include all of the information and footnotes required by U.S. GAAP with respect to annual financial statements. In the opinion of management, the Interim Statements include all adjustments (including normal recurring accruals) necessary for a fair presentation of the Company’s consolidated financial position, results of operations, and cash flows for the dates and periods presented. The Company revised its Condensed Consolidated Statements of Shareholders’ Equity for the three-month period ended March 31, 2022 to reclassify the Series B Preferred Stock dividend from Accumulated Deficit to Additional Paid-In Capital. It is recommended that these Interim Statements be read in conjunction with the Company’s audited annual consolidated financial statements and accompanying footnotes thereto for the year ended December 31, 2021.2022. Results for interim periods are not necessarily indicative of the results to be expected for a full fiscal year or for any future period.ResegmentationThe Company has combined the leadership responsibility and full accountability for the Industrial Services and Specialty Services operating segments. As a result, beginning in 2022, the information for the legacy Industrial Services segment was combined with the legacy Specialty Services segment to form a new operating and reportable segment called Specialty Services. Accordingly, the Company presents financial information for the Safety Services and Specialty Services segments, the two operating segments and also the reportable segments. The Company's chief operating decision maker regularly reviews financial information to allocate resources and assess performance utilizing these reorganized segments.Certain prior year amounts have been recast to conform to the current year presentation. Throughout these Interim Statements, unless otherwise indicated, amounts and activity reflect reclassifications related to the Company's resegmentation, as described in Note 21 - "Segment Information."restricted cash and other current assets in the condensed consolidated balance sheets. Restricted cash reflects collateral against certain bank guarantees and amounts held in escrow.guarantees.8$2$1 and $1$2 during the three months ended September 30, 20222023 and 2021,2022, respectively, and $3$5 and $3 during the nine months ended September 30, 2023 and 2022, and 2021.respectively. The earnings are recorded within investment income and other, net in the condensed consolidated statements of operations. The investment balances were $4$6 and $4 as of September 30, 20222023 and December 31, 2021,2022, respectively, and are recorded within other assets in the condensed consolidated balance sheets.Pension and post-retirement obligationsThe Company's accounting policies related to pension and post-retirement obligations are disclosed in Note 15 - "Pension".3.2. RECENT ACCOUNTING PRONOUNCEMENTS recent accounting pronouncements discussion below for information pertaining to the effects of recently adopted and other recent accounting pronouncements as updated from the discussion in the Company’s 20212022 audited consolidated financial statements included in the Company’s Annual Report on Form 10-K filed on March 1, 2022.2023.Accounting standards issued and adoptedMarch 2020,August 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04,2023-05, Reference Rate Reform (Topic 848)Business Combinations— Joint Venture Formations (Subtopic 805-60): Facilitation of the Effects of Reference Rate Reform on Financial ReportingRecognition and Initial Measurement, which helps limit therequires that a joint venture apply a new basis of accounting impact from contract modifications, including hedging relationships, due to the transition from the London Interbank Offered Rate ("LIBOR") to alternative reference rates, such as the Secured Overnight Financing Rate, that are completed by December 31, 2022.upon formation. As a result, a newly formed joint venture would initially measure its assets and liabilities at fair value. ASU 2023-05 is effective for joint ventures with a formation date on or after January 1, 2025, with earlyadoptedis currently evaluating the potential effect of this standardASU on January 1, 2022, and it did not have an impact on theits consolidated financial statements. The Company will continue to use the one-month LIBOR until it is phased out on June 30, 2023 andstatements, but does not expect the transition from LIBOR to alternative reference interest rates to have a significant impact to operating results, financial position or cash flows, but will continue to monitor the impact of this transition until it is completed.be material.August 2020,October 2023, the FASB issued ASU 2020-06,2023-06, Debt – Debt ConversionDisclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Other Options (Subtopic 470-20)Simplification Initiative, which incorporates certain SEC disclosure requirements into the FASB Accounting Standards Codification. This update will improve disclosure and Derivativespresentation requirements of a variety of topics and Hedging – Contractsalign the requirements in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for certain convertible instruments, amends guidance on derivative scope exceptions for contracts in an entity's own equity, and modifiesFASB codification with the guidance on diluted earnings per share ("EPS") calculations as a result of these changes.SEC’s regulations. The Company adoptedis currently evaluating the potential effect of this ASU on January 1, 2022 and it did not have a material impact on its consolidated financial statements.statements, but does not expect the impact to be material.4.3. BUSINESS COMBINATIONScontinuallyregularly evaluates potential acquisitions that strategically fit with the Company’s existing portfolio or expand the Company’s portfolio into a new and attractive business area. Acquisitions are accounted for as business combinations using the acquisition method of accounting. As such, the Company makes a preliminary allocation of the purchase price to the tangible assets, and identifiable intangible assets acquired, and liabilities assumed. In the months after closing, as the Company obtains additional information about the acquired assets and liabilities and learns more about the newly acquired business, it is able to refine the estimates of fair value and more accurately allocate the purchase price. PurchaseThe purchase price is allocated to acquired assets and liabilities assumed based upon their estimated fair values, with limited exceptions as permitted pursuant to U.S. GAAP, as determined based on estimates and assumptions deemed reasonable by the Company. The Company engages third-party valuation specialists to assist with the preparation of critical assumptions and calculations of the fair value of acquired tangible and intangible assets in connection with significant acquisitions. The excess of the purchase price over the tangible and intangible assets acquired and liabilities assumed is recorded as goodwill. Goodwill is attributable to the workforce of the acquired businesses, the complementary strategic fit and resulting synergies these businesses bring to existing operations, and the opportunities in new markets expected to be achieved from the expanded platform.Acquisition A23 Other 2023 acquisitions Cash paid at closing $ 30 $ 22 Cash deposited into escrow 5 — Accrued consideration 3 2 Total net consideration $ 38 $ 24 Accounts receivable $ 8 $ — Contract assets 1 — Intangible assets 13 5 Goodwill 20 19 Accounts payable (1) — Contract liabilities (3) — Net assets acquired $ 38 $ 24 9On January 3,approximately over 20 countries. The results of the Chubb business are reported within the Company's Safety Services segment.The consideration paid by the Company for the stock purchaseChubb business was funded through a combinationtotal amount of cash on hand and net proceeds from the private placement of Series B Preferred Stock (as defined in Note 16 - "Related-Party Transactions"), the offering of the 4.750% Senior Notes, and the 2021 Term Loan (both defined in Note 12 - "Debt").During the three and nine months ended September 30, 2022, the Company incurred transaction costs of $0 and $24, respectively, which were expensed and included as a component of selling, general, and administrative expenses in the condensed consolidated statements of operations.The Chubb Acquisition was accountedgoodwill is deductible for as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The purchase price has been preliminarily allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based upon their estimated fair values, with the exception of the following: (1) pre-acquisition contingencies which are recognized and measured in accordance with ASC 450, Contingencies, if fair value cannot be determined; (2) deferredU.S. income tax assets acquired and liabilities assumed are recognized and measured in accordance with ASC 740, Income Taxes; (3) pensions and other post-retirement benefits other than pensions are recognized and measured in accordance with ASC 715, Compensation – Retirement Benefits; (4) contract assets and liabilities are measured and recognized in accordance with ASC 606, Revenue from Contracts with Customers ("ASC 606"); and (5) certain lease related assets and liabilities which are measured and recognized in accordance with ASC 842, Leases ("ASC 842").preliminary estimatedfinal fair values of the assets acquired and liabilities assumed at the date of the Chubb Acquisition:Cash paid at closing $ 2,935 Working capital and net indebtedness adjustment (42) Total net consideration $ 2,893 Cash $ 60 Accounts receivable 426 Inventories 68 Contract assets 183 Other current assets 25 Property and equipment 73 Operating lease right of use assets 146 Pension and post-retirement assets 626 Other noncurrent assets 8 Intangible assets 1,200 Goodwill 1,367 Accounts payable (192) Contract liabilities (162) Accrued expenses (255) Finance and operating lease liabilities (148) Pension and post-retirement obligations (56) Deferred tax liabilities (383) Other noncurrent liabilities (93) Net assets acquired $ 2,893 10Since the Chubb Acquisition occurred on January 3, 2022, the Company has not finalized its accounting for any areasTable of purchase price allocation related to the Chubb Acquisition. The Company anticipates that it will finalize its accounting for the Chubb Acquisition during the fourth quarter of 2022. During the nine months ended September 30, 2022, the Company recorded measurement period adjustments, primarily related to working capital balances, property and equipment, and intangible assets. The Company will make appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required.ContentsThe excess of the purchase price over the tangible and intangible assets acquired and liabilities assumed has been recorded as goodwill. The Company has assigned the provisional goodwill of $1,412 to its Safety Services reportable segment (see Note 7 - "Goodwill and Intangibles"). Based on U.S. income tax principles related to acquisitions of non-U.S. entities, the Company does not expect any of the provisional amount of goodwill to be deductible for U.S. income tax purposes.The Company has identified the following significant intangible assets: customer relationships, trade names and trademarks, and contractual backlog. As of the effective date of the Chubb Acquisition, identifiable intangible assets are required to be measured at fair value, and these assets could include assets that are not intended to be used or sold or that are intended to be used in a manner other than their highest and best use. For purposes of these condensed consolidated financial statements, the fair value and weighted-average useful lives of these intangible assets have been estimated using variations of the income approach. Specifically, the excess earnings method was utilized to estimate the fair value of the customer relationships and the contractual backlog. The relief from royalty method was utilized to estimate the fair value of the trade names and trademarks. Significant inputs used to value these intangible assets include projections of future cash flows, long-term growth rates, customer attrition rates, discount rates, royalty rates, and applicable income tax rates.The following table summarizes the preliminary fair value of the identifiable intangible assets:The estimated useful lives over which the intangible assets will be amortized are as follows: customer relationships (fifteen years), trade names and trademarks (fifteen years), and contractual backlog (two years).The results of operations for the Chubb business are included in the consolidated financial statements of the Company from the date of acquisition.Pro forma consolidated financial informationThe following pro forma consolidated financial information reflects the results of operations of the Company for the three and nine months ended September 30, 2021 as if the Chubb Acquisition and related financing had occurred as of January 1, 2021, after giving effect to certain purchase accounting and financing adjustments. These amounts are based on financial information of the Chubb business and are not necessarily indicative of what the Company’s operating results would have been had the Chubb Acquisition and related financing taken place on January 1, 2021.
September 30, 2021
September 30, 2021Pro forma financial information is presented as if the operations of the Chubb business had been included in the consolidated results of the Company since January 1, 2021, and gives effect to transactions that are directly attributable to the Chubb Acquisition and related financing. Adjustments, net of related tax impacts, include: additional depreciation and amortization expense related to the fair value of acquired property and equipment and intangible assets as if such assets were acquired on January 1, 2021; costs related to the fair value step-up of acquired inventory; interest expense under the Company’s 2021 Term Loan and 4.750% Senior Notes (both defined in Note 12 - "Debt") as if the amounts borrowed to partially finance the purchase price were borrowed on January 1, 2021.Total cumulative transaction-related costs of $44 were expensed and have been included as a component of selling, general, and administrative expenses, were reflected as if the transaction occurred as of January 1, 2021.112021 AcquisitionsThe Company completed the acquisitions of Premier Fire & Security, Inc. ("Premier Fire") in July 2021, and Northern Air Corporation ("NAC") in November 2021, both included in the Safety Services segment, as well as several other individually immaterial acquisitions. Total purchase consideration for all of the completed acquisitions of $113 consisted of cash paid at closing of $93, gross cash acquired of $7, and accrued consideration of $20. The results of operations of these acquisitions are included in the Company’s condensed consolidated statements of operations from their respective dates of acquisition.The Company has not finalized its accounting for the NAC acquisition. The area of the purchase price allocation that is not yet finalized for the NAC acquisition is the valuation of income tax related matters. During the nine months ended September 30, 2022, the Company recorded a measurement period adjustment, primarily related to a reclassification between intangible assets and goodwill for the NAC acquisition. The Company will make appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required. Based on preliminary estimates, the total amount of goodwill from the 2021 acquisitions expected to be deductible for tax purposes is $48. See Note 7 – “Goodwill and Intangibles” for the provisional goodwill assigned to each segment.The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the dates of acquisition:
AcquisitionsFor the three months ended September 30, 2022, net revenues and operating loss from the Company's material acquisitions that closed over the previous twelve months was $526 and $7, respectively. For the nine months ended September 30, 2022, net revenues and operating income from the material acquisitions that closed over the previous twelve months was $1,603 and $4, respectively.three to five years.four years. Contingent consideration arrangements are not contingent on employment and are included as part of purchase consideration at the time of the initial acquisition and are paid over a onethree to fivefour year period. The liability for deferred payments is recognized at the date of acquisition based on the Company’s best estimate and is typically payable over a one to twothree year period. Deferred payments are not contingent on any future performance or employment obligations and can be offset for working capital true-ups, and representations and warranty items.$17$7 and $12$19 at September 30, 20222023, and December 31, 2021,2022, respectively. The maximum payout of these arrangements upon completion of the future performance periods was $19$15 and $57,$25, inclusive of the $17$7 and $12,$19, accrued as of September 30, 20222023, and December 31, 2021,2022, respectively. The contingent compensation liability is included in contingent consideration and compensation liabilities in the condensed consolidated balance sheets for all periods presented. The Company primarily determines the contingent compensation liability based on forecasted cumulative earnings compared to the cumulative earnings target set forth in the arrangement. Compensation expense associated with these arrangements is recognized ratably over the required employment period.12$12$14 and $15$9 at September 30, 20222023 and December 31, 2021,2022, respectively, and is included in contingent consideration and compensation liabilities in the condensed consolidated balance sheets for all periods presented.September 30, 2023 Accounts receivable $ 14 Inventories 2 Contract assets 6 Property and equipment, net 27 Operating lease right of use assets 2 Accounts payable (8) Other current liabilities (3) Noncurrent operating and finance leases (3) Total assets and liabilities held for sale $ 37 Restructuringinitiated aannounced its multi-year Chubb restructuring program designed to drive efficiencies and synergies and optimize operating margin. The Company expects to incurChubb restructuring program includes expenses related to workforce reductions, lease termination costs, and other facility rationalization costs overthrough fiscal year 2024.next three years. Thenine months ended September 30, 2023, the Company recorded totalincurred pre-tax restructuring costs within the Safety Services segment of $7 and $18,$21 in connection with the Chubb restructuring program. Since the Chubb Acquisition, the Company has incurred aggregate restructuring costs of which $2 and $4 was recorded in cost of revenues and $5 and $14 in selling, general, and administrative expenses on the condensed consolidated statements of operations for the three and nine months ended September 30, 2022, respectively. The amounts recognized in the nine months ended September 30, 2022 relate to costs associated with workforce reductions.$51. As of September 30, 2022,2023, the Company had $11$23 in restructuring liabilities recorded in other accrued liabilities on the condensed consolidated balance sheets for this plan, which are expectedplan.be paid within the next threeChubb restructuring program by the end of fiscal year 2024.six months. The Company continues to evaluate operating efficienciesemployees who have been involuntarily terminated and anticipates incurring additionalvoluntary early retirement benefits. Program related costs ininclude costs incurred as a direct result of the coming quarters in connection with these activities, but is unable to estimate those amounts at this timerestructuring program such as such plans are not yet finalized.consulting fees and facility relocation costs.2022 restructuring program for the nine month periodmonths ended September 30, 2023 and 2022:
September 30, 2022Employee termination benefits Program related costs Asset write-downs Total December 31, 2022 $ 22 $ — $ — $ 22 Charges 21 1 4 26 Payments (18) — — (18) Reversals (1) — — (1) Currency translation adjustment (1) — — (1) September 30, 2023 $ 23 $ 1 $ 4 $ 28 Employee termination benefits Program related costs Asset write-downs Total December 31, 2021 $ — $ — $ — $ — Charges 18 — — 18 Payments (6) — — (6) Currency translation adjustment (1) — — (1) September 30, 2022 $ 11 $ — $ — $ 11 Under ASC 606, revenue is recognized whenas control of promised goods and services is transferred to customers and the amount of revenue recognized reflects the consideration to which an entity expects to be entitled in exchange for the goods and services transferred.cost plus a markup. Net revenues are primarily recognized by the Company over time utilizing the cost-to-cost measure of progress. Net revenues recognized at a point in time primarily relate to distribution contracts and short-term time and materialsmaterial contracts.Contracts with customersThe Company derives net revenues primarily from contracts with a duration of less than one week to three years (with the majority of contracts with durations of less than six months) which are subject to multiple pricing options including fixed price, unit price, time and material, or cost plus a markup. The Company also enters into fixed pricefixed-price service contracts related to monitoring, maintenance, and inspection of safety systems. The Company may utilize subcontractors in the fulfillment of its performance obligations. When doing so, the Company is considered the principal in these transactions and revenues are recognized on a gross basis.Net revenues for fixed price agreements are generally recognized over time using the cost-to-cost method of accounting, which measures progress based on the cost incurred relative to total expected cost in satisfying its performance obligation. The cost-to-cost method is used as it best depicts the continuous transfer of control of goods or services to the customer. Costs incurred include direct materials, labor and subcontract costs, and indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. These contract costs are included in the results of operations under cost of revenues. Labor and subcontractor labor costs are considered to be incurred and recognized as the work is performed.13Net revenues from time and material contracts are generally recognized as the services are provided and is equal to the sum of the contract costs incurred plus an agreed upon markup. Net revenues earned from distribution contracts are recognized upon shipment or performance of the service.The cost estimation process for recognizing net revenues over time under the cost-to-cost method is based on the professional knowledge and experience of the Company’s project managers, engineers, and finance professionals. Management reviews estimates of total contract transaction price and total project costs on an ongoing basis. Changes in job performance, job conditions, and management’s assessment of expected variable consideration are factors that influence estimates of the total contract transaction price, total costs to complete those contracts, and the Company’s profit recognition. Changes in these factors could result in cumulative revisions to net revenues in the period in which the revisions are determined, which could materially affect the Company’s consolidated results of operations for that period. Provisions for estimated losses on uncompleted contracts are recorded in the period in which such estimated losses are determined.20222023, and 2021. Prior2022. During 2023, the Company moved an immaterial business component within the Safetybalancesamounts in this table have been recast to reflect the current period presentation, as described in Note 2 - "Basis of Presentation and Significant Accounting Policies."presentation. Disaggregated net revenues information is as follows:Three Months Ended September 30, 2023 Safety
ServicesSpecialty
ServicesConsolidated Life Safety $ 1,084 $ — $ 1,084 Heating, Ventilation, and Air Conditioning ("HVAC") 133 — 133 Infrastructure/Utility — 360 360 Fabrication — 42 42 Specialty Contracting — 167 167 Corporate and Eliminations — — (2) Net revenues $ 1,217 $ 569 $ 1,784 Three Months Ended September 30, 2022 Safety
ServicesSpecialty
ServicesConsolidated Life Safety $ 1,021 $ — $ 1,021 HVAC 133 — 133 Infrastructure/Utility — 341 341 Fabrication — 87 87 Specialty Contracting — 162 162 Corporate and Eliminations — — (9) Net revenues $ 1,154 $ 590 $ 1,735 Nine Months Ended September 30, 2023 Safety
ServicesSpecialty
ServicesConsolidated Life Safety $ 3,250 $ — $ 3,250 HVAC 383 — 383 Infrastructure/Utility — 907 907 Fabrication — 155 155 Specialty Contracting — 492 492 Corporate and Eliminations — — (18) Net revenues $ 3,633 $ 1,554 $ 5,169 Nine Months Ended September 30, 2022 Safety
ServicesSpecialty
ServicesConsolidated Life Safety $ 3,003 $ — $ 3,003 HVAC 371 — 371 Infrastructure/Utility — 849 849 Fabrication — 194 194 Specialty Contracting — 477 477 Corporate and Eliminations — — (39) Net revenues $ 3,374 $ 1,520 $ 4,855
Services
Services
Eliminations
Services
Services
Eliminations
Services
Services
Eliminations14
Services
Services
Eliminations
Services
Services
Eliminations
Services
Services
Eliminations
Services
Services
Eliminations
Services
Services
EliminationsThe Company’s contracts with its customers generally require significant services to integrate complex activities and equipment into a single deliverable and are, therefore, generally accounted for as a single performance obligation to provide a single contracted service for the durationTable of the project. ContentsThree Months Ended September 30, 2023 Safety
ServicesSpecialty
ServicesCorporate and
EliminationsConsolidated United States $ 595 $ 559 $ (2) $ 1,152 France 140 — — 140 Other 482 10 — 492 Net revenues $ 1,217 $ 569 $ (2) $ 1,784 Three Months Ended September 30, 2022 Safety
ServicesSpecialty
ServicesCorporate and
EliminationsConsolidated United States $ 568 $ 565 $ (9) $ 1,124 France 125 — — 125 Other 461 25 — 486 Net revenues $ 1,154 $ 590 $ (9) $ 1,735 Nine Months Ended September 30, 2023 Safety
ServicesSpecialty
ServicesCorporate and
EliminationsConsolidated United States $ 1,738 $ 1,525 $ (18) $ 3,245 France 446 — — 446 Other 1,449 29 — 1,478 Net revenues $ 3,633 $ 1,554 $ (18) $ 5,169 Nine Months Ended September 30, 2022 Safety
ServicesSpecialty
ServicesCorporate and
EliminationsConsolidated United States $ 1,576 $ 1,481 $ (39) $ 3,018 France 417 — — 417 Other 1,381 39 — 1,420 Net revenues $ 3,374 $ 1,520 $ (39) $ 4,855 contracts with multiple performance obligations, the transaction price of a contract is allocated to each performance obligation and recognized as net revenues when or as the performance obligation is satisfied using the estimated stand-alone selling price of each distinct good or service. The stand-alone selling price is estimated using the expected cost plus a margin approach for each performance obligation. The Company utilizes the practical expedient under ASC 606 and does not disclose unsatisfied performance obligations for service contracts as these contracts generally have an original duration of less than one year. For those in-process contracts, with an original duration exceeding one year, the aggregate amount of transaction price allocated to the unsatisfied performance obligations unsatisfied at September 30, 20222023 was $567.$2,732. The Company expects to recognize revenue on approximately 65%87% of the remaining performance obligations over the next twelve months.15When more than one contract is entered into with a customer on or close to the same date, management evaluates whether those contracts should be combined and accounted for as a single contract as well as whether those contracts should be accounted for as one, or more than one, performance obligation. This evaluation requires significant judgment and is based on the facts and circumstances of the various contracts.Contracts are often modified through change orders to account for changes in the scope and price of the goods or services being provided. Although the Company evaluates each change order to determine whether such modification creates a separate performance obligation, the majority of change orders are for goods or services not distinct within the context of the original contract and, therefore, not treated as a separate performance obligation but rather as a modification of the existing contract and performance obligation.Variable considerationTransaction prices for customer contracts may include variable consideration which comprises items such as early completion bonuses and liquidated damages provisions. Management estimates variable consideration for a performance obligation utilizing estimation methods believed to best predict the amount of consideration to which the Company will be entitled. Variable consideration is included in the transaction price only to the extent it is probable, in the Company’s judgment, that a significant future reversal in the amount of cumulative revenue recognized under the contract will not occur when the uncertainty associated with the variable consideration is subsequently resolved.Changes in the estimates of transaction prices are recognized in net revenues on a cumulative catch-up basis in the period in which the revisions to the estimates are made. Such changes in estimates may also result in the reversal of previously recognized net revenues if the ultimate outcome differs from the Company’s previous estimate. For the three and nine months ended September 30, 2022 and 2021, there were no significant reversals of net revenues recognized associated with the revision of transaction prices. The Company typically does not incur any returns, refunds or similar obligations after the completion of the performance obligation since any deficiencies are corrected during the course of performance.The Company typically invoices customers with payment terms of net due in 30 days. It is also common for contracts in the Company’s industries to specify a general contractor is not required to submit payments to a subcontractor until it has received those funds from the owner or funding source. In most instances, the Company receives payment of invoices between 30 to 90 days from the date of the invoice.The timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets include unbilled amounts from the Company’s projects when revenues are recognized under the cost-to-cost measure of progress and exceed the amounts invoiced to the Company’s customers, as the amounts cannot be billed under the terms of the Company’s contracts. In addition, many of the Company’s time and material arrangements are billed in arrears pursuant to contract terms, resulting in contract assets being recorded as net revenues are recognized in advance of billings.Contract liabilities from the Company’s contracts arise when amounts invoiced to the Company’s customers exceed net revenues recognized under the cost-to-cost measure of progress. Contract liabilities also include advance payments from the Company’s customers on certain contracts. Contract liabilities decrease as the Company recognizes net revenues from the satisfaction of the related performance obligation.The Company utilizes the practical expedient under ASC 606 and does not adjust for a significant financing component if the time between payment and the transfer of the related good or service is expected to be one year or less. The Company’s revenue arrangements are typically accounted for under such expedient as payments are within one year of performance for the Company’s services. As of September 30, 2022, none of the Company’s contracts contained a significant financing component.20222023 and December 31, 20212022 are as follows:16
receivable,
net of
allowances
assets
liabilitiesAccounts
receivable,
net of
allowancesContract
assetsContract
liabilitiesBalance at September 30, 2023 $ 1,280 $ 530 $ 474 Balance at December 31, 2022 1,313 459 463 20222023 and December 31, 2021,2022, retentions receivable were $134$159 and $117,$150, respectively, while the portions that may not be received within one year were $20$27 and $$35, respectively.25, respectively. There were no other significant changes due to business acquisitions or significant changes in estimatesTable of contract progress or transaction price. There were Contentsno significant impairments of contract assets recognized during the period.Costs to obtain or fulfill a contractThe Company generally does not incur significant incremental costs related to obtaining or fulfilling a contract prior to the start of a project. The Company may incur certain fulfilment costs such as initial design or mobilization costs which are capitalized if: (i) they relate directly to the contract; (ii) are expected to generate resources that will be used to satisfy the Company’s performance obligation under the contract; and (iii) are expected to be recovered through revenues generated under the contract. Such costs, which are amortized over the life of the respective project, were not material for any period presented.20222023 and December 31, 2021. Prior period balances in this table have been recast to reflect current period presentation, as described in Note 2 - "Basis of Presentation and Significant Accounting Policies."2022. The changes in the carrying amount of goodwill by reportable segment for the nine months ended September 30, 20222023 are as follows:
Services
Services
GoodwillSafety
ServicesSpecialty
ServicesTotal
GoodwillGoodwill as of December 31, 2022 $ 2,201 $ 181 $ 2,382 Acquisitions 39 — 39 — (4) (4) Foreign currency translation (13) — (13) Goodwill as of September 30, 2023 $ 2,227 $ 177 $ 2,404 Other includes measurement period adjustments recorded duringDuring the ninethree months ended September 30, 2022 related2023, the Company determined its intent to acquisitions completed duringsell the previous twelve monthsOperating Company (see Note 4 - "Business Combinations"– “Assets Held for Sale”). Pursuant to the authoritative literature, the Company evaluated the recoverability of the carrying value of the assets and liabilities held for sale and recorded a goodwill impairment charge of $4.17Intangibles20222023 and December 31, 2021:2022:September 30, 2023 Weighted Average Remaining
Useful Lives
(in Years)Gross
Carrying
AmountAccumulated
AmortizationNet Carrying
AmountAmortized intangibles: Contractual backlog 0.3 $ 154 $ (146) $ 8 Customer relationships 9.5 1,513 (477) 1,036 Trade names and trademarks 12.4 702 (122) 580 Total $ 2,369 $ (745) $ 1,624 December 31, 2022 Weighted Average Remaining
Useful Lives
(in Years)Gross
Carrying
AmountAccumulated
AmortizationNet Carrying
AmountAmortized intangibles: Contractual backlog 0.9 $ 153 $ (126) $ 27 Customer relationships 10.0 1,508 (367) 1,141 Trade names and trademarks 13.2 704 (88) 616 Total $ 2,365 $ (581) $ 1,784
Remaining Useful Lives
(in Years)
Carrying
Amount
Amortization
Amount
Remaining Useful Lives
(in Years)
Carrying
Amount
Amortization
AmountDuring the three months ended September 30, 2022, the Company recorded measurement period adjustments for the Chubb Acquisition. The measurement period adjustments resulted in a decrease in amortization expense that had been recorded earlier in the year. If the intangible assets fair values had been known at the date of the Chubb Acquisition, amortization expense would have decreased by $2 to $55 for the three months ended March 31, 2022 and June 30, 2022, respectively.Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Cost of revenues $ 7 $ 15 $ 20 $ 22 Selling, general, and administrative expenses 49 36 147 143 Total intangible asset amortization expense $ 56 $ 51 $ 167 $ 165 18Level 1:Observable inputs such as quoted prices for identical assets or liabilities in active markets.Level 2:Observable inputs other than quoted prices that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.Level 3:Unobservable inputs that reflect the Company's own assumptions.20222023 and December 31, 2021:19Fair Value Measurements at September 30, 2023 Financial assets: Level 1 Level 2 Level 3 Total Derivatives designated as hedge instruments Cash flow hedges - interest rate swaps $ — $ 36 $ — $ 36 Cash flow hedges - cross currency contracts — 15 — 15 Cash flow hedges - foreign currency forward contracts — — — — Net investment hedges - cross currency contracts — 27 — 27 Fair value hedges - cross currency contracts — 47 — 47 Derivatives not designated as hedge instruments Foreign currency forward contracts — 1 — 1 Total $ — $ 126 $ — $ 126 Financial liabilities: Derivatives not designated as hedge instruments Foreign currency forward contracts — (1) — (1) Contingent consideration obligations — — (6) (6) Total $ — $ (1) $ (6) $ (7) Fair Value Measurements at December 31, 2022 Financial assets: Level 1 Level 2 Level 3 Total Derivatives designated as hedge instruments Cash flow hedges - interest rate swaps $ — $ 14 $ — $ 14 Cash flow hedges - cross currency contracts — 17 — 17 Cash flow hedges - foreign currency forward contracts — — — — Net investment hedges - cross currency contracts — 32 — 32 Fair value hedges - cross currency contracts — 50 — 50 Derivatives not designated as hedge instruments Foreign currency forward contracts — — — — Total $ — $ 113 $ — $ 113 Financial liabilities: Derivatives not designated as hedge instruments Foreign currency forward contracts — — — — Contingent consideration obligations — — (4) (4) Total $ — $ — $ (4) $ (4)
September 30, 2022Nine Months Ended,
September 30, 2023Balance as of December 31, 2022 $ 4 Issuances 3 Settlements (1) Adjustments to fair value — Balance as of September 30, 2023 $ 6 Number of open contingent consideration arrangements at the end of the period 2 Maximum potential payout at the end of the period $ 6 2022,2023, the remaining open contingent consideration arrangements are set to expire at various dates through 2023.2025. Level 3 unobservable inputs were used to calculate the fair value adjustments shown in the table above. The fair value adjustments and the related unobservable inputs were not considered significant for the three and nine months ended September 30, 2022.20non-variable interest rate debt (4.125% Senior Notesterm loans and 4.750% Senior Notes, assenior notes (instruments defined in Note 1211 – “Debt”), including current portions and excluding unamortized debt issuance costs, whichcosts. The fair values are estimated by discounting future cash flows at currently availablecurrent interest rates for borrowing arrangements with similar terms and conditions, whichconditions. The inputs used to calculated fair value are considered to be Level 2 inputs under the fair value hierarchy. The carrying valuesDuring the first quarter of variable interest rate long-term debt, including current portions and excluding accrued interest, approximate their fair values because2023, the Company repaid an aggregate amount of $200, $100 to each of the variable interest rates of these instruments, which are generally reset monthly. During the three months ended September 30, 2022, the Company repurchased $132019 Term Loan and $2021 Term Loan.September 30, 2023 December 31, 2022 Carrying Value Fair Value Carrying Value Fair Value 2019 Term Loan $ 1,027 $ 1,027 $ 1,127 $ 1,120 2021 Term Loan 985 986 1,085 1,075 4.125% Senior Notes 337 285 337 284 4.750% Senior Notes 277 242 277 243 234.125% Senior NotesOctober 2023 repricing of the 2019 Term Loan and 4.750% Senior Notes, respectively.hedge.hedge under ASC 815, Derivatives and Hedging. Cash flows from derivatives are classified in the condensed consolidated statements of cash flows in the same category as the cash flows from the items subject to designated hedge or undesignated (economic) hedge relationships. The Company evaluates hedge effectiveness at inception and on an ongoing basis. If a derivative is no longer expected to be effective, hedge accounting is discontinued.September 30, 2023 December 31, 2022 Outstanding Gross
Notional AmountOther Assets Other
Noncurrent liabilitiesOutstanding Gross
Notional AmountOther Assets Other
Noncurrent liabilitiesDerivatives designated as hedging instruments: Cash flow hedges: Interest rate swaps $ 1,120 $ 36 $ — $ 1,120 $ 14 $ — Cross currency contracts 120 15 — 120 17 — Foreign currency forward contracts 2 — — — — — Fair value hedges: Cross currency contracts 721 47 — 721 50 — Net investment hedges: Cross currency contracts 230 27 — 230 32 — Total derivatives designated as hedging instruments 2,193 125 — 2,191 113 — Derivatives not designated as hedging instruments: Foreign currency forward contracts 103 1 (1) 118 — — Total derivatives not designated as hedging instruments 103 1 (1) 118 — — Total derivatives $ 2,296 $ 126 $ (1) $ 2,309 $ 113 $ — Amount of income (expense) recognized in income Derivatives Location of income (expense)
recognized in incomeThree Months Ended September 30, 2023 2022 Cash flow hedging relationships: Interest rate swaps Interest expense, net $ 8 $ 1 Cross currency contracts Investment income and other, net 3 7 Cross currency contracts Interest expense, net 1 1 Foreign currency forward contracts Investment income and other, net — — Fair value hedging relationships: Cross currency contracts Investment income and other, net 22 49 Cross currency contracts Interest expense, net 1 1 Net investment hedging relationships: Cross currency contracts Interest expense, net 1 1 Not designated as hedging instruments: Foreign currency forward contracts Investment income and other, net — 2 Amount of income (expense) recognized in income Derivatives Location of income (expense)
recognized in incomeNine Months Ended September 30, 2023 2022 Cash flow hedging relationships: Interest rate swaps Interest expense, net $ 23 $ (3) Cross currency contracts Investment income and other, net 1 15 Cross currency contracts Interest expense, net 2 2 Foreign currency forward contracts Investment income and other, net — — Fair value hedging relationships: Cross currency contracts Investment income and other, net 1 92 Cross currency contracts Interest expense, net 2 3 Net investment hedging relationships: Cross currency contracts Interest expense, net 3 3 Not designated as hedging instruments: Foreign currency forward contracts Investment income and other, net — 5 Amount of gain (loss)
recognized in other
comprehensive incomeLocation of gain (loss) reclassified from
AOCI into incomeAmount of gain (loss)
reclassified from
AOCI into incomeThree Months Ended September 30, Three Months Ended September 30, Derivatives 2023 2022 2023 2022 Cash flow hedging relationships: Interest rate swaps $ 8 $ 35 Interest expense, net $ 4 $ 1 Cross currency contracts (2) — Investment income and other, net 3 7 Forward currency forward contracts — — Investment income and other, net — — Fair value hedging relationships: Cross currency contracts (7) 6 Investment income and other, net 23 51 Net investment hedging relationships: Cross currency contracts 2 10 Interest expense, net (1) (1) Amount of gain (loss)
recognized in other
comprehensive incomeLocation of gain (loss) reclassified from
AOCI into incomeAmount of gain (loss)
reclassified from
AOCI into incomeNine Months Ended September 30, Nine Months Ended September 30, Derivatives 2023 2022 2023 2022 Cash flow hedging relationships: Interest rate swaps $ 16 $ 54 Interest expense, net $ 12 $ 1 Cross currency contracts (3) 3 Investment income and other, net 1 15 Forward currency forward contracts — — Investment income and other, net — — Fair value hedging relationships: Cross currency contracts (3) 1 Investment income and other, net 1 94 Net investment hedging relationships: Cross currency contracts (3) 25 Interest expense, net — (1) cash paid and received from the settlement of interest rate swaps is included in interest expense in the condensed consolidated statements of operations. The Company elected a method that does not require continuous evaluation of hedge effectiveness. the three months ended September 30, 2022, the Company terminated the previously outstanding $720$720 notional amount interest rate swap with a maturity date in October 2024 ("2024 Interest Rate Swap"). The present value as of the date of termination of the 2024 Interest Rate Swap is recorded in accumulated other comprehensive income (loss) ("AOCI")AOCI on the condensed consolidated balance sheets. The fair value previously recognized in AOCI related to interest rate movements of the 2024 Interest Rate Swap is being amortized to interest expense on a straight-line basis through October 2024. The amount amortized from AOCI into interest expense during the three and nine months ended September 30, 2022 was $1. As of September 30, 2022,2023, approximately $33$18 of unrealized pre-tax gains remained in AOCI. the three months ended September 30, 2022, the Company entered into an aggregate $720$720 notional amount interest rate swap ("2026 Interest Rate Swap") that, as amended on May 19, 2023 in connection with the transition to the Secured Overnight Financing Rate ("SOFR"). Refer to Note 11 - "Debt" for additional information. The 2026 Interest Rate Swap exchanges a variable rate of interest (LIBOR)(SOFR) for an average fixed rate of interest of approximately 3.64%3.59% over the term of the agreement, which matures in October 2026.21three months ended June 30, 2022,first quarter of 2023, the Company entered into an aggregate $400$400 notional amount offorward-starting swaps became effective ("2028 Interest Rate Swap"), as amended on May 19, 2023 in connection with the transition to SOFR. Refer to Note 11 - "Debt" for additional information. These interest rate swaps that exchange a variable rate of interest (LIBOR)(SOFR) for an average fixed rate of interest of approximately 3.46%3.41% over the term of the agreements, which mature in January 2028. These swaps are forward-starting and are effective commencing January 2023.2022,2023, the Company had $1,120$1,120 notional amount outstanding in swap agreements, which includes the aggregate $400$400 notional amount of forward-starting swaps,2028 Interest Rate Swap, and the four-year $720$720 notional 2026 Interest Rate Swap. The Company has designated these swaps as cash flow hedges of the interest rate risk attributable to forecasted variable interest (LIBOR) payments.(SOFR) payments for its SOFR based term loans of $2,012. As of September 30, 2022,2023, the weighted average fixed rate of interest on these swaps excluding the forward-starting swap, was approximately 3.64%3.52%. The effective portion of the after tax fair value gains or losses on these swaps is included as a component of AOCI.LIBOR. The fair value of the effective interest rate swaps designated as hedging instruments was an asset of $9 and a liability of $11 as of September 30, 2022 and December 31, 2021, respectively. The fair value of the forward-starting interest rate swaps designated as hedging instruments was an asset of $8 as of September 30, 2022.The Company recorded interest expense (income) of ($1) and $3 during the three months ended September 30, 2022 and 2021, respectively, and $3 and $8 of interest expense during the nine months ended September 30, 2022 and 2021, respectively, related to interest rate swaps.cross currencycross-currency exchange contracts utilized to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies. These transactions are designated as cash flow hedges. The settlement or extensioncurrencies and to hedge exposures of these derivatives will resultcertain intercompany loans subject to changes in reclassifications (from AOCI) to earnings in the period during which the hedged transactions affect earnings.foreign currency exchange rates. The Company periodically assesses whether its currency exchange contracts are effective, and when a contract is determined to be no longer effective as a hedge, the Company discontinues hedge accounting prospectively.$26$26 and $94$94 with maturity dates of September 2027 and 2030, respectively. The total fair value of the cross-currency hedges was an asset of $25 and $6 as of September 30, 2022 and December 31, 2021, respectively. recognized incomeutilizes foreign currency forward contracts to hedge the effect of $7 and $17 in investment income and other, net, during the three and nine months ended September 30, 2022, respectively, and income of $3 in investment income and other, net, during the three and nine months ended September 30, 2021, respectively.Net investment hedgesThe Company has net investments in foreign subsidiaries subject to changes in foreign currency exchange rates. During 2021, the Company entered into a $230 notionalrate fluctuations on forecasted foreign currency swaptransactions, including inventory purchases and intercompany charges and other payments. These forward contracts are designated as a net investment hedge for a portion of the Company’s net investments in Euro-denominated subsidiaries. Gains and losses resulting from a changecash flow hedges. The changes in fair value of these contracts are recorded in other comprehensive income until the net investmenthedged items affect earnings, at which time the hedge gain or loss is reclassified into current earnings.offset by gainseffective, and losses on the underlying foreign currency exposure and are included in AOCI in the condensed consolidated balance sheets.During 2021,when a contract is determined to be no longer effective as a hedge, the Company amended the critical terms of the foreign currency swap by extending the maturity date and modifying the U.S. dollar and Euro coupons. The amended swap was redesignated as a net investmentdiscontinues hedge as a result of the amendment, recorded at fair value with changes recorded in AOCI, and the initial net investment hedge was dedesignated. The amended net investment hedge reduces the Company’s interest expense by approximately $3 annually and reduces its overall effective interest rate by approximately 24 basis points, and will mature in July 2029.The fair value previously recognized in AOCI related to interest rate movements of the dedesignated swap is being amortized to interest expense on a straight-line basis through the third quarter 2029. The Company recorded interest income of $1 and $3 during the three and nine months ended September 30, 2022, respectively.The fair value of the foreign currency swaps designated as net investment hedges was an asset of $45 and $12 as of September 30, 2022 and December 31, 2021, respectively.22the first quarter of 2022, the Company entered into three cross currencycross-currency swaps each with maturity dates of January 2027. These contracts are designated as fair value hedges with gross notional U.S. dollar equivalents of $271, $241,$271, $241, and $209$209 in GBP, CAD, and EUR, respectively. The Company measures the effectiveness of fair value hedges of anticipated transactions on a spot-to-spot basis. Accordingly, the spot-to-spot change in the derivative fair values are recorded in the condensed consolidated statements of operations and perfectly offset the spot-to-spot change in the underlying intercompany loans, and as such, these hedges are deemed highly effective. The excluded component of the fair values of these derivatives is reported in AOCI within shareholders’ equity in the condensed consolidated balance sheets. Any cash flows associated with these instruments are included in operating activities in the condensed consolidated statements of cash flows.these hedges were an asset of $95 as of September 30, 2022the net investment hedge are offset by gains and losses on the underlying foreign currency exposure and are included in AOCI in the condensed consolidated balance sheets.Companyamended swap was redesignated as a net investment hedge as a result of the amendment, recorded at fair value with changes recorded in AOCI, and the initial net investment hedge was dedesignated. The amended net investment hedge reduces the Company’s interest expense by approximately $3 annually and reduces its overall effective interest rate by approximately 24 basis points and will mature in July 2029.incomein AOCI related to interest rate movements of $51 and $95 in investment income and other, net, during the three and nine months ended September 30, 2022, respectively.useduses foreign currency contracts, primarily forward foreign currency contracts to mitigate the foreign currency exposure of certain foreign currency transactions. Fair market value gains or losses on foreign currency forward contracts not designated as hedging instruments were included in the results of operations and are classified in investment income and other, net in the condensed consolidated statements of operations.Certain of the Company’s derivative transactions are subject to master netting arrangements that allow the Company to net settle contracts with the same counterparties. These arrangements generally do not call for collateral and no cash collateral had been received or pledged related to the underlying derivatives.The Company recognized income of $6 and $9 in investment income and other, net, during the three and nine months ended September 30, 2022, respectively, and an immaterial amount during the three and nine months ended September 30, 2021.As of September 30, 2022, foreign currency contracts carried balances of $2 in other noncurrent liabilities and less than $1 in other assets. As of December 31, 2021, foreign currency contracts carried immaterial balances.20222023, and December 31, 20212022 are as follows:
Useful Lives
(In Years)
2022
2021Estimated
Useful Lives
(In Years)September 30,
2023December 31,
2022Land N/A $ 26 $ 30 Building 39 83 98 Machinery and equipment 1-20 268 313 Autos and trucks 4-10 112 116 Office equipment 5-7 86 35 Leasehold improvements 1-15 33 33 Total cost 608 625 Accumulated depreciation (231) (218) Property and equipment, net $ 377 $ 407 $22$21 and $20$22 during the three months ended September 30, 2023 and 2022, and 2021, respectively,$59 and $60 and $59$60 during the nine months ended September 30, 20222023 and 2021,2022, respectively. Depreciation expense is included within cost of revenues and selling, general, and administrative expenses in the condensed consolidated statements of operations.LEASESThe Company determines if an arrangement is or contains a lease at inception, which is the date on which the terms of the contract are agreed to and the agreement creates enforceable rights and obligations. Under ASC 842, a contract is or contains a lease when (i) explicitly or implicitly identified assets have been deployed in the contract and (ii) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract. The Company also considers whether its service arrangements include the right to control the use of an asset.The Company leases various facilities, equipment, and vehicles from unrelated parties, which are primarily classified and accounted for as operating leases. The facility leases are primarily for office space with initial terms extending up to ten years. The equipment leases are primarily related to heavy equipment utilized in the completion of construction jobs and the terms of the agreements range from one to seven years. Vehicle leases have a minimum lease term ranging from one to seven years. Some leases include one or more options to renew, generally at the Company’s sole discretion, with renewal terms that can extend the lease term by one to twelve years or more.In addition, certain leases contain termination options, where the rights to terminate are held by either the Company, the lessor, or both parties. These options to extend or terminate a lease are included in the lease terms when it is reasonably certain that the Company will exercise that option. The Company’s leases generally do not contain any material restrictive covenants.See the table below for information pertaining to the effects of recently acquired leases as updated from the discussion in the Company’s 2021 audited consolidated financial statements included in the Company’s Form 10-K filed on March 1, 2022. There were no other material impacts to the lease disclosures contained in the Company's Form 10-K.The future undiscounted cash flows for each of the next five years and thereafter and reconciliation to the lease liabilities recognized on the condensed consolidated balance sheets as of September 30, 2022 is as follows:
Leases
LeasesSupplemental condensed consolidated balance sheets information related to leases is as follows:
2022
202124NOTE 12. DEBT
2022
2021Maturity Date September 30,
2023December 31,
2022Term loan facility 2019 Term Loan October 1, 2026 $ 1,027 $ 1,127 2021 Term Loan January 3, 2029 985 1,085 Revolving Credit Facility October 1, 2026 — — Senior notes 4.125% Senior Notes July 15, 2029 337 337 4.750% Senior Notes October 15, 2029 277 277 Other obligations 6 6 Total debt obligations 2,632 2,832 Less: unamortized deferred financing costs (34) (43) Total debt, net of deferred financing costs 2,598 2,789 Less: short-term and current portion of long-term debt (256) (206) Long-term debt, less current portion $ 2,342 $ 2,583 2022,2023, the Company had $1,127$1,027 of principal outstanding under the 2019$1,200 term loan (the "2019 Term Loan.Loan") with a maturity date of October 1, 2026. During the nine months ended September 30, 2022,2023, the Company made paymentsa payment of $13$100 on the 2019 Term Loan. As of September 30, 2022, the Company had a four-yearThe interest rate swap with respectapplicable to $720 of notional value of the 2019 Term Loan, exchanging one-month LIBOR for a fixed rate of 3.64% per annum. Accordingly, the Company's fixed interest rate per annum on the swapped $720 notional value of the 2019 Term Loan is, 3.64% through its maturity. The remaining $407at the Company's option, either (a) a base rate plus an applicable margin equal to 1.50% or (b) Term SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.50% plus a credit spread adjustment ("CSA").2019 Term Loan balance will bear interest at 6.25% per annum based on one-month LIBOR plus 250 basis points, butCompany had $985 of principal outstanding under the rate will fluctuate as LIBOR fluctuates. Refer to Note 9 - "Derivatives" for additional information.The Company completed an amendment to its credit agreement during the first quarter of 2022 ("2022 Incremental Amendment") and entered into an incremental $1,100$1,100 term loan ("2021(the "2021 Term Loan"), with a maturity date of January 3, 2029.2029. During the nine months ended September 30, 2023, the Company made a payment of $100 on the 2021 Term Loan. The interest rate applicable to the 2021 Term Loan is, at the Company's option, either (1) a base rate plus an applicable margin equal to 1.75%1.75% or (2) Stock EurocurrencyTerm SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.75%. The 2021 Term Loan balance will bear interest at 6.50% per annum based on one-month LIBOR2.75% plus 275 basis points, but the rate will fluctuate as LIBOR fluctuates. During the nine months ended September 30, 2022, the Company made payments of $15 on the 2021 Term Loan.Under the 2022 Incremental Amendment, the Company increased the revolving credit facility capacity by an additional aggregate principal amount of $200 to $500 and extended the maturity date to 2026. a CSA.$500$500 five-year senior secured revolving credit facility (the “Revolving Credit Facility”) is, at the Company’s option, either (1) a base rate plus an applicable margin equal to 1.25%1.25%, or (2) a EurocurrencyTerm SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.25% plus a CSA.2.25%.At20222023, the Company amended its existing interest rate swaps in connection with the transition to SOFR for the term loans.2021,2022, the Company had no amounts outstanding under the Revolving Credit Facility, and $424$484 and $227$446 was available at September 30, 20222023 and December 31, 2021,2022, respectively, after giving effect to $76$16 and $73$54 of outstanding letters of credit.20222023 and December 31, 2021,2022, the Company was in compliance with all applicable debt covenants.Information related to 2021 issuances and extinguishments of long-term debt are described in Note 11 - "Debt" in the Company’s 2021 Annual Report on Form 10-K.25During the three months ended September 30, 2022, the Company repurchased on the open market $13 and $23 of the 4.125% and 4.750% Senior Notes, respectively (the "Repurchases"). In connection with the Repurchases, the Company recognized a net gain on debt extinguishment of $5.4.125% Senior Notes$350$350 aggregate principal amount of 4.125%4.125% Senior Notes (“4.125%(the “4.125% Senior Notes”) issued under an indenture dated June 22, 2021. The 4.125%4.125% Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by the Company and certain of the Company’s subsidiaries. The Company used the net proceeds from the salerepurchased $13 of the 4.125%4.125% Senior Notes to prepay a portionin September 2022 and the balance as of the 2019 Term Loan, repay a previously outstanding term loan of $250, and fund general corporate purposes.4.750%September 30, 2023 was $337.$300$300 aggregate principal amount of 4.750%4.750% Senior Notes due 2029 (the "4.750%"4.750% Senior Notes") issued under an indenture dated October 21, 2021, as supplemented by a supplemental indenture dated January 3, 2022. The gross proceeds from the offering were held in an escrow account as of December 31, 2021 and classified within restricted cash on the condensed consolidated balance sheets. Upon closing of the Chubb Acquisition, the funds were released from escrow and at that time the 4.750%4.750% Senior Notes wereare fully and unconditionally guaranteed on a senior unsecured basis by the Company and certain of the Company's subsidiaries.4.125%4.125% Senior Notes and 4.750%4.750% Senior Notes as of September 30, 20222023, and December 31, 2021.20222023 and December 31, 2021,2022, the Company had $7 and $1$6 in notes outstanding respectively, for working capital purposes and the acquisition of equipment and vehicles, and working capital purposes.Approximate annual maturities, excluding amortization of debt issuance costs, of the Company's financing arrangements for the periods subsequent to September 30, 2022 are as follows:Note 13. Income Taxes40.5%25.5% and 38.5%40.5% for the three months ended September 30, 2023 and 2022, and 2021, respectively,31.3% and 24.2% and 31.3%24.2% for the nine months ended September 30, 20222023, and 2021,2022, respectively. The difference between the effective tax rate and the statutory U.S. Federalfederal income tax rate of 21.0%21.0% for the three and nine months ended September 30, 20222023 and 20212022 is due to nondeductible permanent items, state taxes, taxes on foreign earnings in jurisdictions that have higher tax rates, and the reversal of the Company’s indefinite reinvestment assertion.262022,2023, the Company’s deferred tax assets included a valuation allowance of $92$105 primarily related to certain deferrednet operating loss, capital loss, and tax assetscredit carryforwards of the Company’s foreign subsidiaries and a capital loss carryforward in the U.S.subsidiaries. The factors used to assess the likelihood of realization were the past performance of the related entities, forecasts of future taxable income, future reversals of existing taxable temporary differences, and available tax planning strategies that could be implemented to realize the deferred tax assets. The ability or failure to achieve the forecasted taxable income in these entities could affect the ultimate realization of deferred tax assets.2022,2023, the Company had gross federal, state, and foreign net operating loss carryforwards of approximately $0, $32$0, $21, and $80,$104, respectively. The state net operating losses have carryforward periods of five to twentytwenty Table of Contents2027.2027. The foreign net operating losses generally have carryback periods of three years,, carryforward periods of twenty years,, or are indefinite, and begin to expire in 2036.non-currentnoncurrent liabilities in the condensed consolidated balance sheets and recognizes interest and penalties accrued related to unrecognized tax benefits in the provision for income taxes in the condensed consolidated statements of operations. As of September 30, 20222023, and December 31, 2021,2022, the total gross unrecognized tax benefits were $2$6 and $2,$8, respectively. The Company had accrued gross interest and penalties as of each of September 30, 20222023 and December 31, 20212022 of $0 and $1, respectively.$2. During the three and nine months ended September 30, 20222023 and 2021,2022, the Company recognizeddid not recognize net interest expense of less than $1 for all periods.20222023, were recognized, $2$8 would impact the Company’s effective tax rate. The Company expects $1 ofdoes not expect any unrecognized tax benefits to expire in the next twelve months due to lapsesmonths.statute of limitations.2022,2023, with few exceptions, neither the Company nor its subsidiaries are subject to examination prior to tax year 2014. There are various other audits in state and foreign jurisdictions.jurisdictions, including an ongoing IRS exam related to the 2019 final S Corporation return. No adjustments have been proposed and the Company does not expect the results of the audits to have a material impact on the consolidatedInterim Statements.statements.On December 27, 2020, the Consolidated Appropriations Act was signed into law,statement income” for certain large corporations which included a temporary provision that allowsis effective for a 100 percent deduction for business meals expenses purchased from a restaurant betweentaxable years beginning after December 31, 20202022, and January 1, 2023. Thea 1% excise tax on share repurchases after December 31, 2022. While these tax law changes in the Consolidated Appropriations Act didare not expected to have a material impactadverse effect on the Company’s quarterly incomeCompany's results of operations going forward, it is unclear how this legislation will be implemented by the U.S. Department of Treasury and what, if any, impact it will have on the Company's effective tax provision.Three Months Ended September 30, 2023 2022 Service cost $ 1 $ 3 Interest cost 16 7 Expected return on plan assets (19) (18) Net periodic pension benefit $ (2) $ (8) Note 14. Employee Benefit PlansTable of ContentsNine Months Ended September 30, 2023 2022 Service cost $ 3 $ 9 Interest cost 47 24 Expected return on plan assets (56) (56) Net periodic pension benefit $ (6) $ (23) Company subsidiaries including certain subsidiaries in Canada,of the Company contribute amounts to multiemployer pension plans and other multiemployer benefit plans and trusts, which are recorded as a component of employee wages and salaries within costs of revenues.revenues on the condensed consolidated statements of operations. Contributions are generally based on fixed amounts per hour per employee for employees covered under these plans. Multiemployer plan contribution rates are determined annually and assessed on a pay-as-you-go basis based on union employee payrolls. Union payrolls cannot be determined for future periods because the number of union employees employed at a given time and the plans in which they participate vary depending upon the location, the number of ongoing projects, and the need for union resources in connection with those projects. Total consolidated contributions to multiemployer plans were $26$25 and $26$26 during the three months ended September 30, 20222023 and 2021,2022, respectively, and $77$75 and $69$77 during the nine months ended September 30, 2023 and 2022, and 2021, respectively.Defined benefit pension plansThe Company assumed both funded and unfunded foreign defined benefit pension plans that cover a portion of the Company's employees, and the largest plans are closed to new participants. Refer to Note 15 - "Pension" for more information on these plans.27profit sharingprofit-sharing retirement plan covering substantially all of the Company's employees in the U.S. not covered by collective bargaining agreements and also adopted a profit sharing plan for employees in Canada (collectively, “Profit Sharing Plans”). The Profit SharingProfit-Sharing Plans provide for annual discretionary contributions in amounts based on a performance grid as determined by the Company’s directors.directors, which may be settled in shares of the Company's common stock or in cash. In connection with these plans, the Company recognized $4$4 and $4 in expense during the three months ended September 30, 2023 and 2022, respectively, and 2021,$14 and $10 and $11$10 in expense during the nine months ended September 30, 2023 and 2022, and 2021, respectively.85%85% of the lesser of (i) the market value of the common stock on the first day of the offering period, or (ii) the market value of the common stock on the purchase date, whichever is lower. Participants are subject to eligibility requirements and may not purchase more than 500 shares in any offering period or more than ten thousand dollars of common stock in a year under the ESPP. The Company recognized $1$1 of expense during each of the three months ended September 30, 2023 and 2022 and 2021,$4 and $3$3 of expense during the nine months ended September 30, 2023 and 2022, and 2021.Post-retirement benefit plansAs part of the Chubb Acquisition, the Company assumed an unfunded post-retirement benefit plan that provides life benefits to certain eligible retirees in Canada. As of September 30, 2022, the benefit obligation was $4. The PBO discount rate was 3.0% at September 30, 2022.Benefit payments, including amounts to be paid from corporate assets and reflecting expected future service, as appropriate, are expected to be less than $1 for 2023 through 2028 and thereafter.Note 15. PENSIONThe Company sponsors both funded and unfunded foreign defined benefit pension plans that cover a portion the Company's employees, and the largest plans are closed to new participants. The Company assumed the pension plans as part of the Chubb Acquisition on January 3, 2022, therefore, the plans used a January 3, 2022 measurement date to determine the Company's preliminary valuation of the pension plans in the purchase price allocation.Guidance under FASB ASC Topic 715, Compensation – Retirement Benefits, requires balance sheet recognition of the overfunded or underfunded status of pension and postretirement benefit plans. Under this guidance, actuarial gains and losses, prior service costs or credits, and any remaining transition assets or obligations that have not been recognized under previous accounting standards must be recognized in other comprehensive income (loss), net of tax effects, until they are amortized as a component of net periodic benefit cost. Pension and post-retirement obligation balances and related costs reflected within the condensed consolidated balance sheets include costs directly attributable to plans dedicated to the Company.Supplemental condensed consolidated balance sheets information related to pension is as follows:28Information for pension plans with accumulated benefit obligations in excess of plan assets:Information for pension plans with projected benefit obligations in excess of plan assets:The components of the net periodic pension benefit for the defined benefit pension plans are as follows:
September 30, 2022
September 30, 2022Major assumptions used in determining the benefit obligation and net periodic benefit cost for pension plans are presented in the following table as weighted averages:
Benefit CostNon-U.S. pension plan assets are typically managed by decentralized fiduciary committees. The disclosure below of asset categories is presented in aggregate for 12 defined benefit plans in 7 countries; however, there is variation in asset allocation policy from country to country. Local regulations, local funding rules, and local financial and tax considerations are part of the funding and investment allocation process in each country. Each plan has its own strategic asset allocation. The asset allocations are reviewed periodically and rebalanced when necessary.The fair values of the pension plan assets by asset category are as follows:29(1)In accordance with ASU 2015-07 Fair Value Measurement (Topic 820), certain investments that are measured at fair value using net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total pension assets.(2)Represents investments in real estate, including commingled funds and directly held properties.(3)Represents insurance contracts and global risk balanced commingled funds consisting mainly of equity, bonds, and some commodities.(4)Represents short-term commercial paper, bonds, and other cash or cash-like investments.(5)Represents trust receivables and payables that are not leveled.Derivatives in the plan are primarily used to manage risk and gain asset class exposure while still maintaining liquidity. Derivative instruments mainly consist of equity futures, interest rate futures, interest rate swaps, and currency forward contracts.The plans review assets at least quarterly to ensure they are within the targeted asset allocation ranges and, if necessary, asset balances are adjusted back within target allocations. The plans generally employ a broadly diversified investment manager structure that includes diversification by active and passive management, style, capitalization, country, sector, industry, and number of investment managers.Quoted market prices are used to value investments when available. Investments in securities traded on exchanges, including listed futures and options, are valued at the last reported sale prices on the last business day of the year or, if not available, the last reported bid prices. Fixed income securities are primarily measured using a market approach pricing methodology, where observable prices are obtained by market transactions involving identical or comparable securities of issuers with similar credit ratings. Mortgages have been valued on the basis of their future principal and interest payments discounted at prevailing interest rates for similar investments. Investment contracts are valued at fair value by discounting the related cash flows based on current yields of similar instruments with comparable durations. Real estate investments are valued on a quarterly basis using discounted cash flow models which consider long-term lease estimates, future rental receipts, and estimated residual values. Valuation estimates are supplemented by third-party appraisals on an annual basis.Over-the-counter securities and government obligations are valued at the bid prices or the average of the bid and ask prices on the last business day of the year from published sources or, if not available, from other sources considered reliable, generally broker quotes. Temporary cash investments are stated at cost, which approximates fair value.The Company expects to make total contributions of approximately $33 to the global defined benefit pension plans in 2022, of which a one-time contribution of $27 was made during the first quarter of 2022. Contributions do not reflect benefits to be paid directly from corporate assets.Benefit payments, including amounts to be paid from the plans and corporate assets, and reflecting expected future service, as appropriate, are expected to be paid as follows: $94 in 2022, $94 in 2023, $95 in 2024, $96 in 2025, $95 in 2026, and $502 from 2027 through 2030.30Note 16. Related-Party TransactionsAnnualCompany’sCompany's Board of Directors. In addition, the Company incurred advisory fees of $1 during the three months ended September 30, 2022 and 2021, and $3 during the nine months ended September 30, 2022 and 2021, payable to Mariposa Capital, LLC, an entity owned by a co-chair of the Company’s Board of Directors.On January 3,5.5%5.5% Series B Redeemable Convertible Preferred Stock, par value $0.0001$0.0001 per share (the “Series B Preferred Stock”) for an aggregate purchase price of $800.$800. Of the 800,000 shares issued and sold, 200,000 shares were sold to Viking Global Equities Master Ltd. and Viking Global Equities II LP ("Viking Purchasers"), which is the aggregate owner of more than 5%5% of the Company's outstanding stock. The Company declared dividends of 103,283 and 184,754 shares of common stock for an aggregate purchase priceon the Series B Preferred Stock held by the Viking Purchasers during the three months ended September 30, 2023, and 2022, respectively. The Company declared$3$1 and $8$3 in net revenues for the three and nine months ended September 30, 2022, respectively, and as of September 30, 2022 had $3 in accounts receivable, net of allowances.into other immaterial related partyrelated-party transactions.17. Commitments and contingenciesunableinvolved in various litigation matters and is subject to predictclaims from time to time from customers and various government entities. While it is not feasible to determine the final outcome of the following matters based on the information currently available except otherwise noted. However, the Company does not believe that the resolution of any of these mattersuncertainties, it is the opinion of management that their outcomes will not have a material adverse effect uponon the Company'sfinancial position, results of operations, or cash flows or financial condition.and asset retirement obligations The Company has recorded the fair value associated with the retirement of these obligations. Over time, the liability is increased for changes in its present value and the capitalized cost is depreciated over the useful life of the related asset.$19$17 and $6,$16, and was included in other noncurrent liabilities on the condensed consolidated balance sheets as of September 30, 20222023 and December 31, 2021,2022, respectively.Legal proceedingsFrom time to time, the Company is subject to workmanship warranty, casualty, negligence, construction defect, breach of contract, product liability, wage and hour, and other claims and legal proceedings in the ordinary course of business relating to the products the Company installs that, if adversely determined, could adversely affect the Company's consolidated financial condition, results of operations, and cash flows. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on the Company's business, financial condition, results of operations, or liquidity.18.16. SHAREHOLDERS’ EQUITY and REdeemable convertible preferred stockhas had 4,000,000 shares of Series A Preferred Stock issued and outstanding as of September 30, 20222023 ("Series A Preferred Stock"). The Series A Preferred Stock will be automatically converted into shares of common stock on a one for oneone-for-one basis uponon the last day of 2026. The holders of the Series A Preferred Stock are entitled to receive an annual dividend in the form of common stock or cash, at the Company’s sole option, based on the increase in the market price of the Company’s common stock.31repurchases$250$250 of shares of the Company’s common stock pursuant to the stock repurchase program ("SRP"), which will expire on February 29, 2024, unless otherwise modified or terminated by the Company's Board of Directors. The SRP authorizes open market, private, and accelerated share repurchase transactions. During the three months ended September 30, 2023, and 2022, the Company repurchased 656,489 and 738,572 shares of common stock for aggregate payments of approximately $11.$18 and $11, respectively. During the nine months ended September 30, 2023 and 2022, the Company repurchased 1,626,493 and 1,951,332 shares of common stock for approximately $33.$41 and $33, respectively. As of September 30, 2022,2023, the Company had approximately $217$166 of authorized repurchases remaining under the SRP. the first quarter of 2022, the Company authorized, issued, and sold, for an aggregate purchase price of $800, $800, 800,000 shares of the Company’s 5.5%5.5% Series B Preferred Stock, par value $0.0001$0.0001 per share. The holders of the Series B Preferred Stock are entitled to dividends at the rate of 5.5%5.5% per annum, payable in cash or the Company’s common stock, at the Company's election. The Series B Preferred Stock ranks senior to the Company's common stock and Series A Preferred Stock with the voluntary or involuntary liquidation, dissolution, or winding up of the affairs of the Company. The Series B Preferred Stock is classified as redeemable convertible preferred stock on the condensed consolidated balance sheets due to a provision that a change in control or de-listing of the Company could require the Company to redeem the Series B Preferred Stock for cash at the election of the holder.$24.60$24.60 per share, subject to certain customary adjustments. The holders of Series B Preferred Stock have certain other rights including voting rights on an as converted basis, certain pre-emptive rights on private equity offerings by the Company, certain registration rights, and, in the case of certain holders, certain director designation rights, as provided in the certificate of designation governing the Series B Preferred Stock.$36.90$36.90 per share for 15 consecutive trading days.5.5%5.5% as and when declared by the Board of Directors, prior and in preference to any declaration or payment of any dividend on the Company's common stock and Series A Preferred Stock. Series B Preferred Stock dividends are cumulative and accrued quarterly, in cash or in common stock, based on an annual 5.5%5.5% dividend rate. The Company declared a Series B Preferred Stock dividend of $11, or 584,584 shares of common stock, in December 2022 and issued $11the shares in January 2023. The Company declared a Series B Preferred Stock dividend of $11, or 739,015413,135 shares of common stock, and $33$11, or 1,944,939739,015 shares of common stock, during the three months ended September 30, 2023, and 2022, respectively. The Company declared and issued a Series B Preferred Stock dividend of $11, or 739,015 shares of common stock, during the three months ended September 30, 2022. The Company declared and issued a Series B Preferred Stock dividend of $22, or 935,285 shares of common stock, and $33, or 1,944,939 shares of common stock, during the nine months ended September 30, 2023, and 2022, respectively. If regular dividends are to be paid in shares of common stock, then each holder shall be entitled to receive such number of whole shares of common stock as is determined by dividing the pro rata amount of regular dividends to which a holder is entitled by the average price per share of common stock over the dividend determination period from dividend notice until the payment date.Note 19. Share-based compensationThe Company maintains a 2019 Equity Incentive Plan (the “2019 Plan”), which allows for grants of share-based awards. The Company has issued Time-Based Restricted Stock Units ("RSUs"), Performance-Based Restricted Stock Units with EBITDA-based performance conditions (“PSUs”), and Performance-Based Restricted Stock Units with share-price targets ("MSUs"), which are all generally subject to forfeiture if employment terminates prior to vesting. Forfeitures are estimated and recorded using historical forfeiture rates. During the nine months ended September 30, 2022, the Company awarded new RSUs, PSUs, and MSUs, detailed below.Time-Based Restricted Stock Units32The RSUs entitle recipients to shares of the Company’s common stock and primarily vest in equal installments over a three-year service period from date of grant. The RSUs granted to the Company’s recipients vest ratably over the service period, generally on the anniversary date of their grant date. During the nine months ended September 30, 2022, the Company granted 505,609 RSUs at a weighted average grant-date fair value of $19.41 per share. A total of 227,294 shares vested at a weighted average fair value of $14.35 per share during the nine months ended September 30, 2022.Performance-Based Restricted Stock UnitsEBITDA-basedThe PSUs entitle the recipient to shares of the Company's common stock if specified performance conditions are achieved. During the nine months ended September 30, 2022, the Company approved and granted PSUs with EBITDA-based financial performance conditions. PSUs vest, if at all, following a three-year performance period. If the performance conditions are not met, no compensation cost is recognized and any recognized compensation cost is reversed. During the nine months ended September 30, 2022, the Company granted 545,122 PSUs at a weighted-average grant date fair value of $20.77.Market-basedThe MSUs entitle the recipient to shares of the Company's common stock if specified market conditions are achieved. During the nine months ended September 30, 2022, the Company approved and granted 444,926 MSUs with certain share-price targets. Total MSUs granted during the nine months ended September 30, 2022 had a weighted-average grant date fair value of $16.31. The MSUs will vest 100%, if at all, on the later of March 9, 2025, the third anniversary of the grant date, and the date that such performance condition is satisfied (but no later than March 9, 2027). For awards subject to a market condition, the grant-date fair value is estimated using a Monte Carlo valuation model. The Company recognizes stock-based compensation expense for awards subject to market-based vesting conditions regardless of whether it becomes probable that these conditions will be achieved or not, and stock-based compensation expense for any such awards is not reversed if vesting does not actually occur. The Monte Carlo model is based on random projections of stock price paths and must be repeated numerous times to achieve a probabilistic assessment. Expected volatility is calculated based on the historical volatility and implied volatility of the Company's common stock, and the risk-free interest rate is based on U.S. Treasury yield curve rates with maturities consistent with the three-year vesting period. The key assumptions used in valuing these market-based awards were as follows:Risk-free interest rate1.85%Dividend yield —Expected volatility45%The Company recognized compensation expense of $3 and $2 during the three months ended September 30, 2022 and 2021, respectively, and $10 and $6 during the nine months ended September 30, 2022 and 2021, respectively, for the RSUs, PSUs, and MSUs in total. Total unrecognized compensation related to unvested RSUs, PSUs and MSUs as of September 30, 2022 was approximately $29, which is expected to be recognized over a weighted average period of approximately 0.9 years, 1.7 years, and 2.4 years, respectively. The Company's actual tax benefits realized from the tax deductions related to the vesting of RSUs for the three and nine months ended September 30, 2022 was less than $1 and $2, respectively. The Company's actual tax benefits realized from the tax deductions related to the vesting of RSUs was less than $1 and $1, for the three and nine months ended September 30, 2021 respectively.33Note 20. Earnings Per Shareearnings per common shareEPS using the two-class method. The dilutive effect of outstanding Series A Preferred Stock, the Series B Preferred Stock, the Series A Preferred Stock dividend, and the Series B Preferred Stock Dividenddividend is reflected in diluted EPS using the if-converted method and options, restricted shares, and performance shares are reflected using the treasury stock method. For periods of net loss, basic and diluted EPS are the same, as the assumed exercise of Series A Preferred Stock, Series B Preferred Stock, restricted and performance shares, and stock options are anti-dilutive (amountsanti-dilutive. (Amounts in millions, except share and per share amounts):
September 30,
September 30,Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Basic earnings per common share: Net income $ 54 $ 28 $ 128 $ 51 Less income allocable to Series A Preferred Stock (4) (2) (10) (2) Less income allocable to Series B Preferred Stock (4) (2) (10) (2) Less stock dividend attributable to Series B Preferred Stock (11) (11) (33) (33) Net income attributable to common shareholders $ 35 $ 13 $ 75 $ 14 Weighted average shares outstanding - basic 235,418,566 233,605,429 234,996,055 232,982,467 Income per common share - basic $ 0.15 $ 0.06 $ 0.32 $ 0.06 Diluted earnings per common share: Net income $ 54 $ 28 $ 128 $ 51 Less income allocable to Series A Preferred Stock (4) (2) (10) (2) Less stock dividend attributable to Series B Preferred Stock (11) (11) (33) (33) Net income attributable to common shareholders - diluted $ 39 $ 15 $ 85 $ 16 Weighted average shares outstanding - basic 235,418,566 233,605,429 234,996,055 232,982,467 Restricted stock units, warrants, and stock options 420,465 336,325 308,745 357,350 Shares issuable upon conversion of Series B Preferred Shares 32,520,000 32,520,000 32,520,000 32,520,000 1,679,291 — 1,099,296 — Weighted average shares outstanding - diluted 270,038,322 266,461,754 268,924,096 265,859,817 Income per common share - diluted $ 0.15 $ 0.06 $ 0.32 $ 0.06 (1)1.34(2)2.2021,2023, dilutive securities include common share equivalents which represent the annual dividend, payable in the form of common shares or cash at the Company's sole option, that Series A Preferred Shares would be entitled to receive assuming that the volume weighted average price of the Company’s common shares for the last ten trading days of the period would be the same average price during the last ten trading days of the calendar year. The holders of the Series A Preferred Stock are entitled to receive an annual dividend based on the increase in the market price of the Company’s common stock (the "Annual Dividend Amount"). The Annual Dividend Amount is equal to 20%20% of the increase in the volume-weighted average market price per share of the Company’s common shares for the last ten trading days of the calendar year, multiplied by 141,194,638 shares. During 2021,2023, the Annual Dividend Amount was calculated based on the appreciation of the Company’s share price over the highest previously used share price of $17.8829. For the three and nine months ended September 30, 2022, the Series A Preferred Shares would not be entitled to an annual dividend because the volume weighted average price of the Company’s common shares for the last ten trading days of the period did not exceed the highest previously used share price of $24.3968.$24.3968.Note 21. SEgment informationThe Company has combined the leadership responsibility and full accountability for two of its operating segments. As a result, beginning in 2022, the information for the legacy Industrial Services segment was combined with the legacy Specialty Services segment to form a new operating and reportable segment called Specialty Services. Accordingly, the Company presents financial information for the Safety Services and Specialty Services segments, the two operating segments and also the reportable segments. Refer to Note 2 - "Basis of Presentation and Significant Accounting Policies" for more information. The information in the tables below has been retroactively adjusted to reflect these changes in reporting segments.approximately over 20 countries.high tech,high-tech, industrial and special-hazard settings.includesinclude maintenance and repair of critical infrastructure such as underground electric, gas, water, sewer, and telecommunications infrastructure. This segment’s services include engineering and design, fabrication, installation, maintenance service and repair, retrofitting and upgrading, pipeline infrastructure, access and road construction, supporting facilities, and performing ongoing integrity management and maintenance to customers within the energy industry. Customers within this segment vary from private and public utilities, communications, healthcare, education, transportation, manufacturing, industrial plants, and governmental agencies throughout North America.21 – “Basis of Presentation and Significant Accounting Policies.” All intercompany transactions and balances are eliminated in consolidation. Intercompany revenues and costs between entities within a reportable segment are eliminated to arrive at segment totals and eliminations between segments are separately presented. Corporate results include amounts related to corporate functions such as administrative costs, professional fees, acquisition-related transaction costs (exclusive of acquisition integration costs, which are included within the segment results of the acquired businesses), and other discrete items.35
Services
Services
Eliminations
Services
Services
Eliminations
Services
Services
Eliminations36
Services
Services
EliminationsThree Months Ended September 30, 2023 Safety
ServicesSpecialty
ServicesCorporate and
EliminationsConsolidated Net revenues $ 1,217 $ 569 $ (2) $ 1,784 EBITDA Reconciliation Operating income (loss) $ 98 $ 43 $ (37) $ 104 Plus: Investment income and other, net 2 1 1 4 Non-service pension benefit 3 — — 3 Depreciation 8 13 — 21 Amortization 42 13 1 56 EBITDA $ 153 $ 70 $ (35) $ 188 Total assets $ 5,983 $ 1,315 $ 651 $ 7,949 Capital expenditures 5 10 3 18 Three Months Ended September 30, 2022 Safety
ServicesSpecialty
ServicesCorporate and
EliminationsConsolidated Net revenues $ 1,154 $ 590 $ (9) $ 1,735 EBITDA Reconciliation Operating income (loss) $ 60 $ 45 $ (44) $ 61 Plus: Investment income and other, net 1 2 — 3 Non-service pension benefit 10 — — 10 Gain on extinguishment of debt, net — — 5 5 Depreciation 8 12 2 22 Amortization 37 14 — 51 EBITDA $ 116 $ 73 $ (37) $ 152 Total assets $ 5,879 $ 1,357 $ 705 $ 7,941 Capital expenditures 5 16 5 26 Nine Months Ended September 30, 2023 Safety
ServicesSpecialty
ServicesCorporate and
EliminationsConsolidated Net revenues $ 3,633 $ 1,554 $ (18) $ 5,169 EBITDA Reconciliation Operating income (loss) $ 292 $ 84 $ (92) $ 284 Plus: Investment income and other, net 2 6 1 9 Non-service pension benefit 9 — — 9 Loss on extinguishment of debt, net — — (3) (3) Depreciation 21 37 1 59 Amortization 125 39 3 167 EBITDA $ 449 $ 166 $ (90) $ 525 Total assets $ 5,983 $ 1,315 $ 651 $ 7,949 Capital expenditures 19 41 4 64 Nine Months Ended September 30, 2022 Safety
ServicesSpecialty
ServicesCorporate and
EliminationsConsolidated Net revenues $ 3,374 $ 1,520 $ (39) $ 4,855 EBITDA Reconciliation Operating income (loss) $ 186 $ 70 $ (143) $ 113 Plus: Investment income and other, net 2 5 (2) 5 Non-service pension benefit 32 — — 32 Gain on extinguishment of debt, net — — 5 5 Depreciation 20 35 5 60 Amortization 120 43 2 165 EBITDA $ 360 $ 153 $ (133) $ 380 Total assets $ 5,879 $ 1,357 $ 705 $ 7,941 Capital expenditures 16 37 7 60 37renewalsrenewal rates and their impact on our future financial results;expectations regarding the future impact of the COVID-19 pandemic on our business, including our beliefbeliefs regarding the future demand for our services, the seasonal and cyclical volatility of our business, financial condition, results of operations, and future financial results;our belief regarding the impact of the conflict between Russia and Ukraine on our business, customers, suppliers and vendors; and•382022,2023, including those described under “Cautionary Note Regarding Forward Looking Statements” and “Risk Factors” in such Form•the impact of the COVID-19 pandemic on our business, markets, supply chain, customers and workforce, on the credit and financial markets, and on the global economy generally;the impact of the COVID-19 pandemic on our accounting estimates and assumptions;• fire and security business, including the expected benefits of the acquisition and future value creation opportunities;the impact of the conflict between Russia and Ukraine; and•39thatwhich could cause actual results to differ materially from those expressed in any forward-looking statement made by us. Other factors not discussed herein could also have a material adverse effect on us. You should not rely upon forward-looking statements as predictions of future events. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. These forward-looking statements speak only as of the date of this quarterly report. We assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future, except as required by applicable law.ItemManagement’s Discussion and Analysis of Financial Condition and Results of OperationsInterim Statementsinterim unaudited condensed consolidated financial statements (the "Interim Statements") and related notes included in this quarterly report, and the Consolidated Financial Statements,Company's 2023 audited annual consolidated financial statements, the related notes thereto and under the MD&A sectionheading "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and other disclosures contained in our Annual Report on Form 10-K, including financial results for the year ended December 31, 2021.2022. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those discussed in these forward-looking statements. Factors that might cause a difference include, but are not limited to, those discussed under the “Cautionary Note Regarding Forward Looking Statements” section of this quarterly report.APG ishigh tech,high-tech, industrial and special-hazard settings.2118 – “Segment Information” to our condensed consolidated financial statements included herein.41Recent Developments and Certain Factors and Trends Affecting our ResultsTable of OperationsContentsinitiated aannounced our multi-year Chubb restructuring program designed to drive efficiencies and synergies and optimize operating margin. We recorded totalThe Chubb restructuring program includes expenses related to workforce reductions, lease termination costs, and other facility rationalization costs through fiscal year 2024.$7 and $18, of which $2 and $4 million was recorded in cost of revenues and $5 and $14$21 million in selling, general, and administrative expenses onconnection with the condensed consolidated statementsChubb restructuring program. In total, we estimate that we will recognize approximately $105 million of operations forrestructuring costs related to the three and nine months ended September 30, 2022, respectively. The amounts recognized inChubb restructuring program by the period primarily relate to costs associated with workforce reductions. Asend of September 30, 2022, we had $11 million in restructuring liabilities recorded in other accrued liabilities on the condensed consolidated balance sheets for this plan, which we expect to pay within the next three to six months.AcquisitionsOn January 3, 2022,completed the acquisition of the Chubb fire and security business (the "Chubb Acquisition"). The total net consideration for the Chubb Acquisition was $2,893 million for the stock purchase of the Chubb fire and security business (the "Chubb business"). The Chubb business is a globally recognized fire safety and security services provider, offering customers complete and reliable services from design and installationdetermined our intent to monitoring and on-going maintenance and recurring services. We expect the Chubb business will be a core asset withinsell an infrastructure/utility operating company in our Safety Services segment, and will provide meaningful opportunities for future value creation through providing complementary revenue growth by expanding our opportunities for cross-selling products and services across our key end markets.For additional information about our acquisition activity, see Note 4 – “Business Combinations" to our condensed consolidated financial statements included herein.ResegmentationWe have combined the leadership responsibility and full accountability for our Industrial Services and Specialty Services operating segments. As a result, beginning in 2022, the information for our legacy Industrial Services segment was combined with the legacy Specialty Services segment to form a new operating(the "Operating Company"). We classified the net book value of the Operating Company as held for sale in the condensed consolidated balance sheets with the assets recorded in prepaid expenses and reportable segment called Specialty Services. Accordingly, we present financial informationother current assets and liabilities recorded in other accrued liabilities. As of September 30, 2023, the Operating Company remains classified as held for the Safety Services and Specialty Services segments, our two operating segments and also our reportable segments. Our chief operating decision maker regularly reviews financial information to allocate resources and assess performance utilizing these reorganized segments.Certain prior year amounts have been recast to conformsale. Pursuant to the current year presentationauthoritative literature, we evaluated the recoverability of the carrying value of the assets and liabilities held for sale. During the information in the tables below has been retroactively adjusted to reflect these changes in reporting segments.42Additionally, the COVID-19 pandemic has impacted the availability of skilled labor resources, particularly in our international businesses, interrupting our ability to perform our services and execute our jobs. In addition, fluctuations in foreign currencies may have an impact on our financial position and the results of operations. However, we believe that our exposure to transactional gains or losses resulting from changes in foreign currencies is limited because our foreign operations primarily invoice and collect receivables in their respective local or functional currencies, and the expenses associated with these transactions are generally contracted and paid for in the same local currencies. In cases where operational transactions represent a material currency risk, we generally enter into cross-currency swaps. Refer to Note 9 -– "Derivatives" to our condensed consolidated financial statements included in this quarterly report for additional information on our hedging activities. While we actively monitor economic, industry, and market factors that could affect our business, we cannot predict the effect that changes in such factors may have on our future consolidated results of operations, liquidity, and cash flows, and we may be unable to fully mitigate, or benefit from such changes.Russia-Ukraine conflictWhile we continue to monitor the conflict in Ukraine, there has not been any direct, material impact on our operations as we do not have any customers or operations in Russia or Ukraine. Should the conflict escalate beyond its current scope, the precise impacts on our business are difficult to predict but could include increased direct costs of materials and labor; increased credit or other capital costs; and impacts on demand for our services, which could include increased demand for our services related to energy production outside of the conflict area but that could also include a reduction in demand in other geographies or markets.seasonalityseasonal and industry cyclicality.other variations. Seasonal variations are primarily related to large, non-recurring projects that can be influenced by weather conditions impacting customer spending patterns, contract award seasons, and project schedules, as well as the timing of holidays. Consequently, net revenues for our businesses are typically lower during the first and second quartersquarter due to the prevalence of unfavorable weather conditions within our North American operations, which can cause project delays and affect productivity.32 – “Recent Accounting Pronouncements” to our condensed consolidated financial statements included herein.43ESCRIPTIONDescription of Key Line Items KLabor intensiveLabor-intensive contracts usually drive higher margins than those contracts that include material, subcontract, and equipment costs.and risk management, and overhead associated with these functions. General and administrative expenses also include outside professional fees and other corporate expenses.(Gain) loss(Gain) loss44 ACritical Accounting Policies and EstimatesOLICIES2021.2022.Results of Operations O20222023 and the three and nine months ended September 30, 2021.20222023 compared to the three months ended September 30, 2021NM = Not meaningfulThree Months Ended September 30, Change ($ in millions) 2023 2022 $ % Net revenues $ 1,784 $ 1,735 $ 49 2.8 % Cost of revenues 1,273 1,295 (22) (1.7) % Gross profit 511 440 71 16.1 % Selling, general, and administrative expenses 407 379 28 7.4 % Operating income 104 61 43 70.5 % Interest expense, net 37 33 4 12.1 % Gain on extinguishment of debt, net — (5) 5 (100.0) % Non-service pension benefit (3) (10) 7 (70.0) % Investment income and other, net (4) (3) (1) 33.3 % Other expense, net 30 15 15 100.0 % Income before income taxes 74 46 28 60.9 % Income tax provision 20 18 2 11.1 % Net income $ 54 $ 28 $ 26 92.9 % 20222023 were $1,735$1,784 million compared to $1,047$1,735 million for the same period in 2021,2022, an increase of $688$49 million or 65.7%2.8%. The increase in net revenues was primarily driven by acquisitions completed during the previous twelve months withinoccurred in the Safety Services segment. In addition, the increase in net revenues was due tosegment, driven by growth in inspection, service, and monitoring revenue and our ability to pass through inflationary increases in costs through project pricing.and 2021, respectively:Three Months Ended September 30, Change ($ in millions) 2023 2022 $ % Gross profit $ 511 $ 440 $ 71 16.1 % Gross margin 28.6 % 25.4 % 20222023 was $440$511 million compared to $252$440 million for the same period in 2021,2022, an increase of $188$71 million, or 74.6%16.1%. Gross margin was 25.4%28.6%, an increase of 130320 basis points compared to the prior year period, primarily due to acquisitions completed during the previous twelve months within thedisciplined project and customer selection, and pricing improvements insegment,and Specialty Services segments, as well as an improved mix of inspection, service, and monitoring revenue, which generates higher margins, and growth within the Safety Services segment. These improvements were partially offset by supply chain disruptions and inflation causing downward pressure on margins.45 (loss) as a percentage of net revenues) for the three months ended September 30, 2023 and 2022, and 2021, respectively:Three Months Ended September 30, Change ($ in millions) 2023 2022 $ % Selling, general, and administrative expenses $ 407 $ 379 $ 28 7.4 % SG&A expenses as a % of net revenues 22.8 % 21.8 % Operating margin 5.8 % 3.5 % SG&A expenses (excluding amortization and impairment) (Non-GAAP) $ 345 $ 343 $ 2 0.6 % SG&A expenses (excluding amortization and impairment) as a % of net revenues (Non-GAAP) 19.3 % 19.8 % 20222023 were $379$407 million compared to $211$379 million for the same period in 2021,2022, an increase of $168$28 million. SG&A expenses as a percentage of net revenues was 21.8%22.8% during the three months ended September 30, 20222023 compared to 20.2%21.8% for the same period in 2021.2022. The primary drivers for the increase in SG&A expenses include additional SG&A expenses contributed by acquisitions completedwas primarily attributable to an impairment charge of $13 million related to assets held for sale and increased amortization expense in the prior twelvethree months as well as higher levels of spending associated with acquisitions, including integration, transformation, and reorganization expenses and an increase in amortization expense of $6 millionended September 30, 2023 compared to the same period in 2021.2022. Our SG&A expenses excluding amortization and impairment for the three months ended September 30, 20222023 were $343$345 million, or 19.8%19.3% of net revenues, compared to $181$343 million, or 17.3%19.8% of net revenues, for the same period of 2021 primarily due2022. The decrease in SG&A expenses excluding amortization and impairment as a percentage of net revenues was driven by lower acquisition and integration related expenses incurred in three months ended September 30, 2023 compared to the factors discussed above.same period in 2022 and better leverage of SG&A expenses across a growing revenue base, partially offset by investments to support growth in our Safety Services segment. See the discussion and reconciliation of our non-U.S. GAAP financial measures below.$33$37 million and $14$33 million for the three months ended September 30, 20222023 and 2021,2022, respectively. The increase in interest expense was primarily due to increased debt used for financing the Chubb Acquisition and higher interest rates due to a larger proportion ofon our floating interest rate debt in the current year.$(10)$3 million and $0$10 million for the three months ended September 30, 20222023 and 2021,2022, respectively. The higher year-on-year benefit in 2022change was solely due to higher interest costs due to higher discount rates and lower expected return on asset benefit compared to the acquisition of pension plans as partsame period of the Chubb Acquisition during 2022.remained consistent at $(3)was $4 million and $(3)$3 million for the three months ended September 30, 2023 and 2022, and 2021, respectively. The increase in investment income was primarily due to an increase in other miscellaneous income.expenseprovision for the three months ended September 30, 20222023 was $18$20 million compared to $11$18 million infor the same period of the prior year.three months ended September 30, 2022. This change was driven by higherincreased generated income before taxes in the three months ended September 30, 20222023 compared to the same period in 2021.2022. The effective tax rate for the three months ended September 30, 20222023 was 40.5%25.5%, compared to 38.5%40.5% in the same period of 2021.2022. The difference in the effective tax rate was driven by discrete and nondeductible permanent items. The difference between the effective tax rate and the statutory U.S. federal income tax rate of 21.0% is due to the nondeductible permanent items, taxes on foreign earnings in jurisdictions that have higher tax rates, and state taxes, and the reversal of our indefinite reinvestment assertion.and 2021, respectively:Three Months Ended September 30, Change ($ in millions) 2023 2022 $ % Net income $ 54 $ 28 $ 26 92.9 % EBITDA (non-GAAP) 188 152 36 23.7 % Net income as a % of net revenues 3.0 % 1.6 % EBITDA as a % of net revenues 10.5 % 8.8 % 20222023 was $28$54 million compared to $19$28 million for the same period in 2021,2022, an increase of $9$26 million. The improvement primarily resulted from additional revenuedisciplined project and profit contributed by acquisitions completed in the previous twelve monthscustomer selection, pricing improvements within our Safety Services and Specialty Services segments, and an improved mix ofincrease in inspection, service, and monitoring revenue. These increases were largelyThe net income increase was partially offset by higher levelsan impairment charge of spending$13 million related to integration of recently acquired businesses, increased interest costs associated with newly issued term loan debt, and increased amortization expense of $19 million compared to the same period in the prior year.assets held for sale. Net income as a percentage of net revenues for the three months ended September 30, 2023 and 2022 was 3.0% and 2021 was 1.6% and 1.8%, respectively. EBITDA for the three months ended September 30, 20222023 was $152$188 million compared to $96$152 million for the same period in 2021,2022, an increase of $56$36 million. The increase in EBITDA was primarily driven by the factors previously discussed. See the discussion and reconciliation of our non-U.S. GAAP financial measures below.20222023 compared to the three months ended September 30, 20212022Net Revenues Three Months Ended September 30, Change ($ in millions) 2023 2022 $ % Safety Services $ 1,217 $ 1,154 $ 63 5.5 % Specialty Services 569 590 (21) (3.6) % Corporate and Eliminations (2) (9) NM NM $ 1,784 $ 1,735 $ 49 2.8 % Operating Income (Loss) Three Months Ended September 30, Change ($ in millions) 2023 2022 $ % Safety Services $ 98 $ 60 $ 38 63.3 % Safety Services operating margin 8.1 % 5.2 % Specialty Services $ 43 $ 45 $ (2) (4.4 %) Specialty Services operating margin 7.6 % 7.6 % Corporate and Eliminations $ (37) $ (44) NM NM $ 104 $ 61 $ 43 70.5 % 47EBITDA Three Months Ended September 30, Change ($ in millions) 2023 2022 $ % Safety Services $ 153 $ 116 $ 37 31.9 % Safety Services EBITDA as a % of net revenues 12.6 % 10.1 % Specialty Services $ 70 $ 73 $ (3) (4.1 %) Specialty Services EBITDA as a % of net revenues 12.3 % 12.4 % Corporate and Eliminations $ (35) $ (37) NM NM $ 188 $ 152 $ 36 23.7 % 20222023 compared to the three months ended September 30, 2021.20222023 increased by $621$63 million or 116.5%5.5% compared to the same period in the prior year.2022. The increase was primarily driven by acquisitions completed in the prior twelve months and increased inspection, service, and monitoring revenue withinrevenue. This increase was also due to continued strength in our Life Safetyend markets and HVAC services businesses.20222023 and 20212022 was approximately 5.2%8.1% and 10.5%5.2%, respectively. The declineincrease was primarily the result of increased spendinggrowth in inspection, service, and monitoring revenue, disciplined project and customer selection, and pricing improvements across the segment. The increase was also driven by lower acquisition and integration related toexpenses incurred in the integration of recently acquired businesses, supply chain disruptions and inflation causing downward pressure on margins, and increased amortization expense of $21 millionthree months ended September 30, 2023 compared to the same period in the prior year, partially offset by an increase in inspection, service, and monitoring revenue.2022. Safety Services EBITDA as a percentage of net revenues for the three months ended September 30, 20222023 and 20212022 was approximately 10.1%12.6% and 14.1%10.1%, respectively. This declineincrease was primarily related to the factors discussed above.2022 increased2023 decreased by $63$21 million or 12.0%3.6% compared to the same period in the prior year.2022. The increasedecrease was primarily driven by increased activitydue to continued disciplined customer and project selection and customer project delays in the infrastructure, fabrication and utility marketsbusiness, partially offset by strong growth in the service business during the three months ended September 30, 20222023 compared to the same period in the prior year. Additionally, we have been able to offset some2022.inflationary increasesthree months ended September 30, 2023 and 2022. The consistency in costoperating margin despite lower revenues was primarily the result of goods sold through strategic pricing improvementsdisciplined project and contract negotiations, resulting in increased net revenuescustomer selection offsetting lower volume leverage during the three months ended September 30, 2022 compared to the same period of the prior year.Specialty Services operating margin for the three months ended September 30, 2022 and 2021 was approximately 7.6% and 5.9%, respectively. The improvement was primarily driven by higher levels of productivity in the execution of specialty contracting work during the three months ended September 30, 2022 compared to the same period during the prior year. The improvement was also due to decreased depreciation expense of $4 million in the three months ended September 30, 2022 compared to the same period in the prior year. Comparatively, during the three months ended September 30, 2022, margins increased due to the growth in sales volumes. These improvements were partially offset by supply chain disruptions and inflationary pressures on margins.2023. Specialty Services EBITDA as a percentage of net revenues for the three months ended September 30, 20222023 and 20212022 was approximately 12.4%12.3% and 12.3%12.4%, respectively, due to the factors discussed above.20222023 compared to the nine months ended September 30, 20212022Nine Months Ended September 30, Change ($ in millions) 2023 2022 $ % Net revenues $ 5,169 $ 4,855 $ 314 6.5 % Cost of revenues 3,737 3,604 133 3.7 % Gross profit 1,432 1,251 181 14.5 % Selling, general, and administrative expenses 1,148 1,138 10 0.9 % Operating income 284 113 171 151.3 % Interest expense, net 112 88 24 27.3 % Loss (gain) on extinguishment of debt, net 3 (5) 8 (160.0) % Non-service pension benefit (9) (32) 23 (71.9) % Investment income and other, net (9) (5) (4) 80.0 % Other expense, net 97 46 51 110.9 % Income before income taxes 187 67 120 179.1 % Income tax provision 59 16 43 268.8 % Net income $ 128 $ 51 $ 77 151.0 % NM = Not meaningful20222023 were $4,855$5,169 million compared to $2,828$4,855 million for the same period in 2021,2022, an increase of $2,027$314 million or 71.7%6.5%. The increase in net revenues was primarily attributable to revenues contributed by acquisitions completed withinoccurred in both the Safety Services segment during the past twelve months. The increase in net revenuesand Specialty Services segments and was also due todriven by growth in inspection, service, and monitoring revenue, our ability to pass through inflationary increases in costs through project pricing, and continued market recoveries from the COVID-19 pandemic within our Safety Services and Specialty Services segments.and 2021, respectively:Nine Months Ended September 30, Change ($ in millions) 2023 2022 $ % Gross profit $ 1,432 $ 1,251 $ 181 14.5 % Gross margin 27.7 % 25.8 % 20222023 was $1,251$1,432 million compared to $665$1,251 million for the same period in 2021,2022, an increase of $586$181 million, or 88.1%14.5%. Gross margin was 25.8%27.7%, an increase of 230190 basis points compared to the prior year period, primarily due to acquisitions completeddisciplined project and customer selection within theour Safety Services segment during the past twelve months. Additionally, the increase was driven byand Specialty Services segments and pricing improvements, as well as an improved mix of inspection, service, and monitoring revenue, which generates higher margins, and growth within the Safety Services segment. These improvements were partially offset by supply chain disruptions and inflation causing downward pressure on margins.and 2021, respectively:Nine Months Ended September 30, Change ($ in millions) 2023 2022 $ % Selling, general, and administrative expenses $ 1,148 $ 1,138 $ 10 0.9 % SG&A expense as a % of net revenues 22.2 % 23.4 % Operating margin 5.5 % 2.3 % SG&A expenses (excluding amortization and impairment) (Non-GAAP) $ 988 $ 995 $ (7) (0.7 %) SG&A expenses (excluding amortization and impairment) as a % of net revenues 19.1 % 20.5 % 20222023 were $1,138$1,148 million compared to $579$1,138 million for the same period in 2021,2022, an increase of $559$10 million. SG&A expenses as a percentage of net revenues were 23.4%was 22.2% during the nine months ended September 30, 20222023 compared to 20.5%23.4% for the same period in 2021.2022. The increasedecrease in expenses as a percentage of net revenues was driven by lower acquisition and integration related expenses incurred, better leverage of SG&A expenses was primarily driven by additional SG&A expenses contributed by acquisitions completedacross a growing revenue base, and changes in estimates to acquired liabilities in the prior twelve months. Also driving the increase was higher levels of spending associated with acquisitions, including integration, transition, and reorganization expenses and an increase in amortization expense of $53 millionnine months ended September 30, 2023 compared to the same period in 2021.the prior year, partially offset by an impairment charge of $13 million related to assets held for sale and investments to support growth in our Safety Services segment. Our SG&A expenses excluding amortization and impairment for the nine months ended September 30, 20222023 were $995$988 million, or 20.5%19.1% of net revenues, compared to $489$995 million, or 17.3%20.5% of net revenues, for the same period of 20212022 primarily due to the factors discussed above. See the discussion and reconciliation of our non-U.S. GAAP financial measures below.$88$112 million and $43$88 million for the nine months ended September 30, 20222023 and 2021,2022, respectively. The increase in interest expense was primarily due to increased debt related to the financing of the Chubb Acquisition and higher interest rates due to a larger proportion ofon our floating interest rate debt in the current year.(Gain) lossyear, partially offset by a decrease in the outstanding principal amounts of our floating rate debt.2022,the nine months ended September 30, 2023, we repurchased $13made payments of $100 million and $23$100 million of the outstanding principal amount of the 4.125% Senior Notes2019 Term Loan and 4.750% Senior Notes,2021 Term Loan, respectively. In connection with the repurchases,payments, we recognized a net gainloss on debt extinguishment of $5$3 million. During 2021, in connection with the repayment of the previously outstanding term loan and prepayment on a portion of the 2019 Term Loan using proceeds from the private offering of $350 million aggregate principal amount of senior notes (4.125% Senior Notes), we incurred a loss on extinguishment of debt of $9 million related to unamortized debt issuance costs.$(32)$9 million and $0$32 million for the nine months ended September 30, 20222023 and 2021,2022, respectively. The higher year-on-year benefit in 2022change was solely due to higher interest costs due to higher discount rates and lower expected return on asset benefit compared to the acquisition of pension plans as partsame period of the Chubb Acquisition during the nine months ended September 30, 2022.$(5)$9 million and $(12)$5 million for the nine months ended September 30, 20222023 and 2021,2022, respectively. The declineincrease in investment income and other, net was primarily due to COVID-19 relief at Canadian subsidiariesan increase in earnings from joint ventures.expenseprovision for the nine months ended September 30, 20222023 was $16an expense of $59 million compared to $14$16 million in the same period of the prior year.2022. This change was driven by unfavorable discrete itemsincreased generated income before taxes in the nine months ended September 30, 20222023 compared to the same period of the prior year, and the reversal of the permanent reinvestment assertion, which was $9 million of benefit in 2021.2022. The effective tax rate for the nine months ended September 30, 20222023 was 24.2%31.3%, compared to 31.3%24.2% in the same period of 2021.2022. The difference in the effective tax rate was driven by discrete and nondeductible permanent items.items, primarily the reversal of our indefinite reinvestment assertion in 2022. The difference between the effective tax rate and the statutory U.S. federal income tax rate of 21.0% is due to the nondeductible permanent items, taxes on foreign earnings in jurisdictions that have higher tax rates, state taxes, and the reversal of our indefinite reinvestment assertion.and 2021, respectively:Nine Months Ended September 30, Change ($ in millions) 2023 2022 $ % Net income $ 128 $ 51 $ 77 151.0 % EBITDA (non-GAAP) 525 380 145 38.2 % Net income as a % of net revenues 2.5 % 1.1 % EBITDA as a % of net revenues 10.2 % 7.8 % 20222023 was $51$128 million compared to $32$51 million for the same period in 2021,2022, an increase of $19$77 million. The improvement is primarily attributable to additional revenueresulted from disciplined project and profit contributed by acquisitions completedcustomer selection, pricing improvements within our Safety Services and Specialty Services segments, and growth in the previous twelve months. The increase was also driven by an improved mix of inspection, service, and monitoring revenue. These increasesThe increase was also due to a decrease in revenues were partially offsetoperating expenses driven by increasedlower acquisition and integration related expenses, increased interest costs associated with newly issued term loan debt, and increased amortization expenseexpenses. The increase in net income was partially offset by an impairment charge of $70 million.$13 million related to assets held for sale. Net income as a percentage of net revenues for the nine months ended September 30, 2023 and 2022 and 2021 was 1.1%2.5% and 1.1%, respectively. EBITDA for the nine months ended September 30, 20222023 was $380$525 million compared to $243$380 million for the same period in 2021,2022, an increase of $137$145 million. The increase in EBITDA was primarily driven by the factors previously discussed. See the discussion and reconciliation of our non-U.S. GAAP financial measures below.20222023 compared to the nine months ended September 30, 20212022Net Revenues Nine Months Ended September 30, Change ($ in millions) 2023 2022 $ % Safety Services $ 3,633 $ 3,374 $ 259 7.7 % Specialty Services 1,554 1,520 34 2.2 % Corporate and Eliminations (18) (39) NM NM $ 5,169 $ 4,855 $ 314 6.5 % Operating Income (Loss) Nine Months Ended September 30, Change ($ in millions) 2023 2022 $ % Safety Services $ 292 $ 186 $ 106 57.0 % Safety Services operating margin 8.0 % 5.5 % Specialty Services $ 84 $ 70 $ 14 20.0 % Specialty Services operating margin 5.4 % 4.6 % Corporate and Eliminations $ (92) $ (143) NM NM $ 284 $ 113 $ 171 151.3 % 51EBITDA Nine Months Ended September 30, Change ($ in millions) 2023 2022 $ % Safety Services $ 449 $ 360 $ 89 24.7 % Safety Services EBITDA as a % of net revenues 12.4 % 10.7 % Specialty Services $ 166 $ 153 $ 13 8.5 % Specialty Services EBITDA as a % of net revenues 10.7 % 10.1 % Corporate and Eliminations $ (90) $ (133) NM NM $ 525 $ 380 $ 145 38.2 % 20222023 compared to the nine months ended September 30, 2021.20222023 increased by $1,863$259 million or 123.3%7.7% compared to the same period in the prior year.2022. The increase was primarily attributable to acquisitions completed in the past twelve months. The increase was also driven by general market recoveries in both our Life Safety and HVAC services businesses and increased inspection, service, and monitoring revenue withinrevenue. This increase was also due to continued strength in our Life Safety businesses.20222023 and 20212022 was approximately 5.5%8.0% and 10.1%5.5%, respectively. The declineincrease was primarily the result of increased spending related to the integrationdisciplined project and customer selection, pricing improvements, and improved mix of recently acquired businesses. Additionally, the declineinspection, service, and monitoring revenue, which generates higher margins. The increase was partiallyalso driven by supply chain disruptionslower acquisition and inflation causing downward pressure on margins, and increased amortization expense of $71 millionintegration related expenses incurred in the nine months ended September 30, 2023 compared to the same period in the prior year, partially offset by an increase in inspection, service, and monitoring revenue.2022. Safety Services EBITDA as a percentage of net revenues for the nine months ended September 30, 20222023 and 20212022 was approximately 10.7%12.4% and 14.1%10.7%, respectively. This declineincrease was primarily related to the factors discussed above.20222023 increased by $173$34 million or 12.8%2.2% compared to the same period in the prior year.2022. The increase was primarily attributable to increased activitydriven by an increase in service revenue in the infrastructure, utility, and specialty contracting infrastructure, and utility markets during the nine months ended September 30, 20222023 compared to the same period in the prior year. Additionally, the increase was driven by general market recoveries driving a resumption in the demand for our services when compared to the prior year, which was negatively impacted by the COVID-19 pandemic. We have also been able to offset some of the inflationary increases in cost of revenues through strategic pricing improvements and contract negotiations, resulting in increased net revenues during the nine months ended September 30, 2022 compared to the same period on the prior year.20222023 and 20212022 was approximately 4.6%5.4% and 2.7%4.6%, respectively. The improvementincrease was primarily attributable to higher levelsthe result of productivity in the execution of specialty contracting workdisciplined project and customer selection during the nine months ended September 30, 2022 compared to the same period in 2021. During the nine months ended September 30, 2022, margins increased due to growth in sales volumes. Comparatively, during the nine months ended September 30, 2021, we experienced margin contractions as a result of lower sales volumes but consistent indirect costs. These margin improvements were partially offset by supply chain disruptions and inflationary pressures on margins.2023. Specialty Services EBITDA as a percentage of net revenues for the nine months ended September 30, 20222023 and 20212022 was approximately 10.1%10.7% and 10.2%10.1%, respectively, due to the factors discussed above.amortization)amortization and impairment) and EBITDA (defined below), which are non-U.S. GAAP financial measures. We use these non-U.S. GAAP financial measures to evaluate our performance, both internally and as compared with our peers because they exclude certain items that may not be indicative of our core operating results. Management believes these measures are useful to investors since they (a) permit investors to view our performance using the same tools that management uses to evaluate our past performance, reportable business segments, and prospects for future performance, (b) permit investors to compare us with our peers, and (c) in the case of EBITDA, determines certain elements of management’s incentive compensation.52measuremeasures is that they exclude significant expenses required by U.S. GAAP to be recorded in our financial statements and may not be comparable to similarly titled measures of other companies due to potential differences in calculation methods. In addition, these measures are subject to inherentamortization)amortization)amortization and impairment) is a measure of operating costs used by management to manage the business and its segments. We believe this non-U.S. GAAP measure provides meaningful information and helps investors understand our core selling, general, and administrative expenses excluding acquisition-related amortization expense and impairment charges to better enable investors to understand our financial results and assess our prospects for future performance.amortization)amortization and impairment) for the periods indicated:Three Months Ended September 30, ($ in millions) 2023 2022 Reported SG&A expenses $ 407 $ 379 Adjustments to reconcile to SG&A expenses to SG&A expenses (excluding amortization and impairment) Amortization expense (49) (36) Impairment of goodwill, intangibles, and other assets (13) — SG&A expenses (excluding amortization and impairment) $ 345 $ 343 Nine Months Ended September 30, ($ in millions) 2023 2022 Reported SG&A expenses $ 1,148 $ 1,138 Adjustments to reconcile to SG&A expenses to SG&A expenses (excluding amortization and impairment) Amortization expense (147) (143) Impairment of goodwill, intangibles, and other assets (13) — SG&A expenses (excluding amortization and impairment) $ 988 $ 995 (loss) to EBITDA for the periods indicated:Three Months Ended September 30, ($ in millions) 2023 2022 Reported net income $ 54 $ 28 Adjustments to reconcile net income to EBITDA: Interest expense, net 37 33 Income tax provision 20 18 Depreciation 21 22 Amortization 56 51 EBITDA $ 188 $ 152 Nine Months Ended September 30, ($ in millions) 2023 2022 Reported net income $ 128 $ 51 Adjustments to reconcile net income to EBITDA: Interest expense, net 112 88 Income tax provision 59 16 Depreciation 59 60 Amortization 167 165 EBITDA $ 525 $ 380 53 ALiquidity and Capital Resources Rour access to our Revolving$500 million five-year senior secured revolving credit facility (the "Revolving Credit FacilityFacility") and the proceeds from debt offerings. We believe these sources will be sufficient to fund our liquidity requirements for at least the next twelve months. Although we believe we have sufficient resources to fund our future cash requirements, there are many factors with the potential to influence our cash flow position including weather, seasonality, commodity prices, market conditions, and inflation, over which we have no control.2022,2023, we had $819$945 million of total liquidity, comprising $395$461 million in cash and cash equivalents and $424$484 million ($500 million less outstanding letters of credit of approximately $76$16 million, which reduce availability) of available borrowings under our Revolving Credit Facility. On January 3,incurredentered into a $1,100 million seven-year incremental term loan ("2021 Term Loan"), the Revolving Credit Facility was upsized by $200 million to $500 million, the maturity date of the Revolving Credit Facility was extended five years, and the letter of credit sublimit was increased by $100 million to $250 million.During September 2021, we issued 22,716,049 shares of our common stock in a public underwritten offering. The proceeds from this offering totaled approximately $446 million, net of related expenses. We used the net proceeds from this offering for general corporate purposes, which includes items such as other business opportunities, capital expenditures and working capital.be, any accrued consideration duecontinue to selling shareholders, including tax payments in connection therewith,be, for working capital and general corporate purposes, including capital expenditures and debt service, any accrued consideration and compensation due to selling shareholders, including tax payments in connection therewith, as well as to identify, execute, and integrate strategic acquisitions and business transformation.March 2022, we announced that our Board of Directors authorized a stock repurchase program, authorizing the purchase of up to an aggregate of $250 million of shares of common stock through February 2024. During the three and nine months ended September 30, 2022,2023, we repurchased 738,572656,489 and 1,951,3321,626,493 shares of common stock for aggregate payments of approximately $11$18 million and $33$41 million respectively, under this stock repurchase program, respectively, leaving approximately $217$166 million of authorized repurchases.54Nine Months Ended September 30, ($ in millions) 2023 2022 Net cash provided by operating activities $ 217 $ 82 Net cash used in investing activities (108) (2,931) Net cash (used in) provided by financing activities (253) 1,773 Effect of foreign currency exchange rate change on cash, cash equivalents, and restricted cash (1) (17) Net decrease in cash, cash equivalents, and restricted cash $ (145) $ (1,093) Cash, cash equivalents, and restricted cash, end of period $ 462 $ 398 $82$217 million for the nine months ended September 30, 20222023 compared to $68$82 million of cash used for the same period in 2021.2022. The increase in cash flows provided by operating activities is primarily due to an increase in net income in the period. This increase in cash provided is partially offsetalso driven by lower working capital needs associated with the various services we provided in the nine months ended September 30, 2023 compared to the same period of the prior year. Cash flow from operations is primarily driven by changes in the mix and timing of demand for our services and working capital needs associated with the various services we provide. Working capital is primarily affected by changes in total accounts receivable, accounts payable, accrued expenses, and contract assets and contract liabilities, all of which tend to be related and are affected by changes in the timing and volume of work performed. During the nine months ended September 30, 2022, operating cash flows were impacted by inflationary pressures and supply chain disruptions leading to anThe increase in the required level of working capital investment needed to ensure we have materials available to meet our growth in sales volumes, as well as higher levels of spending related to acquisition and integration costs. Further, the increasecash provided by operating activities in the cost of our debt driven by new debt issuances that occurred during the later half of 2021 and the first half of 2022, andcurrent year is also due to a one-time contribution to an assumed pension plansplan of $27 million were factors in our increased cash provided by operating activities during the nine months ended September 30, 2022 compared to the same period in the prior year.$(2,931)$108 million for the nine months ended September 30, 20222023 compared to $(81)$2,931 million for the same period in 2021.2022. During the current year,2022, we completed the Chubb Acquisition and other immaterial acquisition activity resulting in the use of $2,881 million for acquisitions during the nine months ended September 30, 2022 compared to $51$57 million for the same period in 2021.provided byused in financing activities was $1,773$(253) million for the nine months ended September 30, 20222023 compared to $629$1,773 million provided by financing activities for the same period in 2021.2022. The increasedecrease in cash provided by financing activities was primarily driven by equity and debt issuances in the nine months ended September 30, 2022 related to the Chubb Acquisition. In the nine months ended September 30, 2022, cash provided by financing activities was higher due to $1,104 million of proceeds from the issuance of the 2021 Term Loan and other debt, and $797 million of proceeds from the issuance of Series B Preferred Stock. The increase in cash used in financing activities in the nine months ended September 30, 2023 was partially offsetalso driven by $33$206 million of payments on long-term borrowings, $30 million of repurchases of long-term borrowings,borrowings.$33 million of repurchases of common stock. In the same period of the prior year, cash provided by financing activities was primarily driven by proceeds of $350 million from the completed offering of the 4.125% Senior Notes and $230 million from the issuance of common stock in connection with the warrant exercises. These cash inflows were partially offset by payments of $320 million on long term borrowings and $72 million for acquisition-related consideration.Financing ActivitiesCredit AgreementIn anticipation of the Chubb Acquisition, on December 16, 2021,among APi Group DE, Inc., our wholly-owned subsidiary, as borrower we,("APi Group DE"), APG as a guarantor, and ourthe subsidiary guarantors named therein entered into Amendment No. 2from time to time party thereto, the Credit Agreement ("Amendment No. 2"lenders from time to time party thereto, and Citibank N.A., as administrative agent and as collateral agent (the “Credit Agreement”). On January 3, 2022, the closing date of the Chubb Acquisition, we closed the transactions contemplated by Amendment No. 2, which provides for: (1) a term loan facility, pursuant to which (1) we incurred the $1,200 million 2019 Term Loan used to fund a part of the cash portion of the purchase price in the APi Acquisition, and a $1,100 million seven-year incremental term loan ("2021 Term Loan") used to fund a portion of the purchase price in the Chubb acquisition, and (2) thea $500 million Revolving Credit Facility was upsized by $200 million to $500 million, (3) the maturity date of the Revolving Credit Facility was extended five years, (4) the letter of credit sublimit was increased by $100 millionwhich up to $250 million (5) additional loan partiescan be used for the issuance of letters of credit.collateral in additional jurisdictions became subject2021 Term Loan. The repricing reduces the applicable margin on all outstanding amounts by 25 basis points. Additionally, $422 million of the 2019 Term Loan was extended to the Credit Agreement, (6) changes were2021 Term Loan and assumed all the same terms as the repriced 2021 Term Loan. We made a repayment of $100 million on the 2019 Term Loan concurrent with the close of this transaction. Following the repricing transaction, we have $505 million outstanding on 2019 Term Loan and $1,407 million outstanding on the 2021 Term Loan.guarantor coverage requirements under2019 Term Loan is, at our option, either (a) a base rate plus an applicable margin equal to 1.25% or (b) a Term SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.25% plus a credit spread adjustment ("CSA"). Principal payments on the Credit Agreement with respect2019 Term Loan are due in quarterly installments on the last day of each fiscal quarter, unless prepayments are made, for a total annual amount equal to consolidated EBITDA, and (7) certain other changes were made to1.00% of the Credit Agreement.1.75%1.50% or (b) a EurocurrencyTerm SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.75%.2.50% plus a CSA. Principal payments on the 2021 Term Loan will be made in quarterly installments on the last day of each fiscal quarter, for a total annual amount equal to 1.00% of the initial aggregate principal amount of the 2021 Term Loan. The 2021 Term Loan matures on January 3, 2029. The 2021 Term Loan is subject to the same mandatory prepayment provisions as the 2019 Term Loan.5520222023 was 2.72:1.92:1.00.As of2022,2023, we had $1,127repaid an aggregate amount of $200 million, and $1,085$100 million to each of indebtedness outstanding on the 2019 Term Loan and 2021 Term Loan. As a result, as of September 30, 2023, the 2019 Term Loan and the 2021 Term Loan had remaining principal amounts of $1,027 million and $985 million, respectively. On October 11, 2023, we made a repayment of $100 million on the 2019 Term Loan concurrent with the close of the repricing transaction. Following the repricing transaction, we have $505 million outstanding on 2019 Term Loan and $1,407 million outstanding on the 2021 Term Loan. We had no amounts outstanding under the Revolving Credit Facility, under which $424$484 million was available after giving effect to $76$16 million of outstanding letters of credit, which reduces availability.Wethea previously outstanding term loan, prepay a portion of the 2019 Term Loan and for general corporate purposes. During the three months ended September 30, 2022, we repurchased $13 million of outstanding principal amount of the 4.125% Senior Notes and recognized a net gain of $2 million on the debt extinguishment. As of September 30, 2022,2023, we had $337 million aggregate principal amount of 4.125% Senior Notes outstanding.WeDuring the three months ended September 30, 2022, we repurchased $23 million of outstanding principal amount of the 4.750% Senior Notes and recognized a net gain of $3 million on the debt extinguishment. As of September 30, 2022,2023, we had $277 million aggregate principal amount of 4.750% Senior Notes outstanding.20222023 and December 31, 2021.On January 3, concurrent with the closing of the Chubb Acquisition, we issued and sold 800,000 shares of our 5.5% Series B Redeemable Convertible Preferred Stock, par value $0.0001 per share (the "Series B Preferred Stock"), for an aggregate purchase price of $800 million, pursuant to securities purchase agreements entered into on July 26, 2021 with certain investors. The net proceeds from the Series B Preferred Stock issuance were used to fund a portion of the consideration for the Chubb Acquisition.56condensed consolidated financial statementsInterim Statements and expected to be satisfied using cash generated from operations:"Leases."1211 – "Debt" for future principal payments and interest rates on our debt instruments.1312 – "Income Taxes."1513 – "Pension."Employee Benefit Plans."57ItemQuantitative and Qualitative Disclosures about Market Risk2022,2023, our outstanding variable interest rate debt was primarily related to our 2019 Term Loan and our 2021 Term Loan, and our Revolving Credit Facility.Loan. As of September 30, 2022, excluding letters of credit outstanding of $76 million,2023, we had no amounts of outstanding revolving loans, $1,127$1,027 million outstanding on the 2019 Term Loan and $1,085$985 million outstanding on the 2021 Term Loan. AsOn October 11, 2023, we made a repayment of September 30, 2022,$100 million on the 2019 Term Loan concurrent with the close of the repricing transaction. Following the repricing transaction, we hadhave $505 million outstanding on 2019 Term Loan and $1,407 million outstanding on the 2021 Term Loan. To mitigate increases in variable interest rates, we have a $720 million four-year interest rate swap, with respect to $720 million of notional value of the 2019 Term Loan, exchanging one-month LIBORSOFR for a rate of 3.64%3.59% per annum and a $400 million five-year interest rate swap exchanging one-month SOFR for a rate of 3.41% per annum. ThisIn$33$18 million recognized from the termination of the previously outstanding $720 million notional amount interest rate swap resulting in an effective rate onswap. After the $720 million of notional value ofrepricing transaction, the 2019 Term Loan of 3.97%. The remaining floating $407 million of our 2019 Term Loan balancerate portfolio will bear interest at 6.25% per annum based on one-month LIBORSOFR plus CSA plus 225 basis points or one-month SOFR plus CSA plus 250 basis points. The 2021 Term Loan balance will bear interest at 6.50% per annum based on one-month LIBOR plus 275 basis points, but the rate will fluctuate as LIBOR fluctuates.Additionally, during 2021,As of September 30, 2023, excluding letters of credit outstanding of $16 million, we entered into a euro-denominated net investment hedge with a notional valuehad no amounts of $230 million. The net investment hedge reduces our overall effective interest rate by approximately 24 basis points. A 100-basis point increase in the applicable interest ratesoutstanding revolving loans under our credit facilities (including the unhedged portion of our 2019 Term Loan debt) would have increased our interest expense by approximately $11 million for the nine months ended September 30, 2022.While we cannot predict our ability to refinance existing debt or the impact interest rate movements will have on our existing debt, we continue to evaluate our financial position on an ongoing basis. The ICE Benchmark Administration intends to cease the publication of U.S. dollar LIBOR for all tenors (excluding 1 week and 2 month) on June 30, 2023. The discontinuation of the 1 month LIBOR after 2023 and the replacement with an alternative reference rate, such as the Secured Overnight Financing Rate may adversely impact interest rates and our interest expense could increase.Ourare in approximatelyover 20 countries globally. Revenues generated from foreign operations represented approximately 35% and 38%37% of our consolidated net revenues for the three and nine months ended September 30, 2022, respectively.2023. Net revenues and expenses related to our foreign operations are, for the most part, denominated in the functional currency of the foreign operation, which minimizes the impact fluctuations in exchange rates would have on net income or loss. We are subject to fluctuations in foreign currency exchange rates when transactions are denominated in currencies other than the functional currencies. Such transactions were not material to our operations during the nine months ended September 30, 2022.2023. These foreign currency transaction gains and losses, including hedging impacts, are classified in investment income and other, net, in the condensed consolidated statements of operations and were a gain (loss) of $0 million for both the three months ended September 30, 2023 and 2022, and $0 million and $(2) million for the nine months ended September 30, 2023 and 2022, respectively. These net foreign currency transaction gains and losses include derivative instruments designed to reduce foreign currency exchange rate risks. Translation gains or losses, which are recorded in accumulated other comprehensive loss in the condensed consolidated balance sheets, result from translation of the assets and liabilities of our foreign subsidiaries into U.S. dollars. Foreign currency translation lossesgains (losses) totaled approximately $86$(63) million and $9$(86) million for the three months ended September 30, 20222023 and 2021,2022, respectively, and $311$(22) million and $9$(311) million for the nine months ended September 30, 2023 and 2022, and 2021, respectively. has increased as a result of the Chubb Acquisition and may continue to increase in the future if we continue to expand our operations outside of the U.S. We seek to manage foreign currency exposure by minimizing our consolidated net assets and liability positions in currencies other than the functional currency of our foreign subsidiaries. However, we believe that our exposure to transactional gains or losses resulting from fluctuations in foreign currencies is limited because our foreign operations primarily invoice and collect receivables in their respective local or functional currencies, and the expenses associated with these transactions are generally contracted and paid for in the same local currencies. In order to manage foreign currency risk related to transactions in foreign currencies and the Chubb business intercompany financing structure, we entered into cross-currency swaps to manage the foreign currency risk of certain intercompany loans. We also occasionally use foreign currency contracts as a way to mitigate foreign currency exposure.Policies section ofEstimates" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.58 and gas, and other fuel sources may also impact our operations. Prolonged periods of low oil and gas prices may result in projects being delayed or cancelled and incanceled. In a low oil and gas price environment, certain of our businesses could become less profitable or incur losses.ItemControls and Proceduresatas of September 30, 20222023 due to the material weaknesses in internal control over financial reporting described below, which were previously disclosed in Item 9A. “Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2021.Management20222023 based on the guidelines established in Internal Control — Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of September 30, 20222023 due to the material weaknesses in internal control over financial reporting identified and further described below.Material Weaknesses in Internal Control a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis.20222023 related to user access controls related to an ineffective control environment, ineffectiveinformation technology system which resulted from insufficient risk assessment and ineffective information and communication resulting from an insufficient number of trained resources with expertise in implementation and operation of internal controlprocess level controls over financial reporting and information technology systems.revenue recognition, which resulted from insufficient training. As a result of the Company had ineffectiveuser access control activities related todeficiencies, process level controls at certain entities that use information from the design and operation of process-level controls and general information technology controls across all financial reporting processes.affected system cannot be relied upon. These control deficiencies constitute material weaknesses in our internal control over financial reporting as of September 30, 2023.59Performed weekly and monthly monitoring of privileged access activity;Overover Financial Reportingbelow. These plans include a detailed risk and controls assessment, key process walkthroughs and flowchart documentation, training, and execution of determined key controls. There wereabove. Other than changes described above, there have been no material changes to ourin the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) underof the Securities Exchange Act) that occurredAct of 1934, as amended) during the quarter ended September 30, 20222023 that have materially affected, or are reasonably likely to materially affect, ourthe Company’s internal control over financial reporting.Management’s Remediation PlansManagement has undertaken various steps to continue remediating such control deficiencies and has seen improved results versus December 31, 2021. Given an effortTable of this magnitude, management believes that full remediation will most likely continue to extend over the next couple of years. The material weaknesses will not be considered remediated until management designs and implements effective controls that operate for a sufficient period of time and management has concluded through testing that these controls are effective. We are monitoring the effectiveness of our remediation plans and will make the changes management determines to be appropriate. Steps taken by us during the three months ended September 30, 2022 include the following:Contents•internal audit continued to assess and document the adequacy of internal control over financial reporting, document steps to improve control processes, conduct testing of controls, and implement continuous reporting for internal control over financial reporting;•continued hiring additional members to our accounting and finance team with the appropriate qualified experience in financial reporting, consolidations, technical accounting, and application of U.S. GAAP;•enhanced controls, procedures, and processes in our financial consolidation and reporting processes;•enhanced controls over critical processes, including revenue recognition, purchase accounting and financial reporting, and the related information technology systems; and•identified and designed controls to address segregation of duties issues.We plan to continue our efforts to improve, design and implement integrated processes to enhance our internal control over financial reporting, including:•providing additional training and education programs for personnel responsible for the performance of newly implemented processes and controls to enhance our control environment;•adding additional qualified resources to our accounting and finance teams with appropriate qualified experience to enhance our control environment and risk assessment processes;•refining and enhancing certain existing controls and adding new controls to strengthen our risk assessment process; and•continue our efforts to improve our financial systems and enhance our information and communication controls.60ItemRisk factors2021.Item2022.AND USE OF PROCEEDS,2022:
Purchased as Part of
Publicly Announced
Plans or Programs (1)During the Three Months Ended September 30, 2023 Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or ProgramsMaximum Approximate Dollar Value of
Shares that May Yet Be Purchased Under
the Plans or Programs (in millions)July 1, 2023 - July 31, 2023 — $ — — $ — August 1, 2023 - August 31, 2023 656,489 28.00 656,489 166 September 1, 2023 - September 30, 2023 — — — Total 656,489 $ 28.00 656,489 $ 166 On March 9,During 2022, we announced that our Board of Directors authorized a stock repurchase program (“SRP”) to purchase up to an aggregate of $250 million of shares of our common stock. Acquisitions pursuant to the SRP may be made from time to time through a combination of open market repurchases in compliance with Rule 10b-18 under the Exchange Act, privately negotiated transactions, accelerated share repurchase transactions, and/or other derivative transactions, at our discretion, as permitted by securities laws and other legal requirements. In connection with the SRP, we may enter into Rule 10b5-1 trading plans which would generally permit us to repurchase shares at times when it might otherwise be prevented from doing so under the securities laws. The SRP will expire on February 29, 2024 unless otherwise modified or earlier terminated by our Board of Directors at any time in its sole discretion.ItemMine Safety DisclosuresItemExhibitsExhibit No. Description of Exhibits Exhibit No.10.253, 20222, 20233, 20222, 202363