UNITED STATES
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 June 30, December 31, Assets Current assets: Cash and cash equivalents $ 368 $ 605 Accounts receivable, net of allowances of $4 and $3 at June 30, 2023 1,318 1,313 Inventories 170 163 Contract assets 509 459 Prepaid expenses and other current assets 167 112 Total current assets 2,532 2,652 Property and equipment, net 418 407 Operating lease right of use assets 221 222 Goodwill 2,444 2,382 Intangible assets, net 1,703 1,784 Deferred tax assets 106 108 Pension and post-retirement assets 420 392 Other assets 130 144 Total assets $ 7,974 $ 8,091 Liabilities, Redeemable Convertible Preferred Stock, and Shareholders’ Equity Current liabilities: Short-term and current portion of long-term debt $ 6 $ 206 Accounts payable 473 490 Contingent consideration and compensation liabilities 17 27 Accrued salaries and wages 296 337 Contract liabilities 491 463 Operating and finance leases 73 73 Other accrued liabilities 295 325 Total current liabilities 1,651 1,921 Long-term debt, less current portion 2,590 2,583 Pension and post-retirement obligations 38 40 Contingent consideration and compensation liabilities 8 6 Operating and finance leases 168 166 Deferred tax liabilities 351 340 Other noncurrent liabilities 124 111 Total liabilities 4,930 5,167 Commitments and contingencies (Note 14) 5.5% Series B Redeemable Convertible Preferred Stock, $0.0001 par value, 800,000 authorized shares, 797 797 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, 235,270,405 shares and 233,403,912 — — Additional paid-in capital 2,565 2,558 Accumulated deficit (90 ) (164 ) Accumulated other comprehensive loss (228 ) (267 ) Total shareholders’ equity 2,247 2,127 Total liabilities, redeemable convertible preferred stock, and shareholders’ equity $ 7,974 $ 8,091 Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net revenues $ 1,771 $ 1,649 $ 3,385 $ 3,120 Cost of revenues 1,275 1,214 2,464 2,309 Gross profit 496 435 921 811 Selling, general, and administrative expenses 389 376 741 759 Operating income 107 59 180 52 Interest expense, net 38 28 75 55 Loss on extinguishment of debt, net — — 3 — Non-service pension benefit (3 ) (11 ) (6 ) (22 ) Investment income and other, net (3 ) (2 ) (5 ) (2 ) Other expense, net 32 15 67 31 Income before income taxes 75 44 113 21 Income tax provision (benefit) 27 14 39 (2 ) Net income $ 48 $ 30 $ 74 $ 23 Net income attributable to common shareholders: Stock dividend on Series B Preferred Stock (11 ) (11 ) (22 ) (22 ) Net income attributable to common shareholders $ 37 $ 19 $ 52 $ 1 Net income per common share: Basic $ 0.12 $ 0.06 $ 0.17 $ 0.01 Diluted 0.12 0.06 0.17 0.01 Weighted average shares outstanding: Basic 235 233 235 233 Diluted 270 266 268 266 Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net income $ 48 $ 30 $ 74 $ 23 Other comprehensive income (loss): Fair value change - derivatives, net of tax benefit (expense) of ($5), ($8), ($2), and ($11), respectively 15 22 6 31 Foreign currency translation adjustment 27 (166 ) 41 (225 ) Comprehensive income (loss) $ 90 $ (114 ) $ 121 $ (171 ) Preferred Stock Issued Common Stock Issued Additional Accumulated Accumulated Total Shares Amount Shares Amount Capital Deficit Loss Equity 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) loss 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) loss 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 Preferred Stock Issued Common Stock Issued Additional Accumulated Accumulated Total Shares Amount Shares Amount Capital Deficit 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 Six Months Ended June 30, 2023 2022 Cash flows from operating activities: Net income $ 74 $ 23 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 38 38 Amortization 111 114 Restructuring charges 4 8 Deferred taxes 3 (11 ) Share-based compensation expense 11 9 Profit-sharing expense 10 6 Non-cash lease expense 36 33 Net periodic pension benefit (6 ) (22 ) Loss on extinguishment of debt, net 3 — Other, net (7 ) 12 Pension contributions (2 ) (27 ) Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable 12 (57 ) Contract assets (47 ) (91 ) Inventories (6 ) (19 ) Prepaid expenses and other current assets (50 ) (25 ) Accounts payable (18 ) 34 Accrued liabilities and income taxes payable (63 ) (49 ) Contract liabilities 21 29 Other assets and liabilities (51 ) (69 ) Net cash provided by (used in) operating activities 73 (64 ) Cash flows from investing activities: Acquisitions, net of cash acquired (45 ) (2,875 ) Purchases of property and equipment (46 ) (34 ) Proceeds from sales of property, equipment, and businesses 9 6 Net cash used in investing activities (82 ) (2,903 ) Cash flows from financing activities: Proceeds from long-term borrowings — 1,101 Payments on long-term borrowings (204 ) (31 ) Payments of debt issuance costs — (25 ) Repurchases of common stock (23 ) (22 ) Proceeds from equity issuances — 797 Payments of acquisition-related consideration (3 ) (1 ) Restricted shares tendered for taxes (2 ) (1 ) Net cash (used in) provided by financing activities (232 ) 1,818 Effect of foreign currency exchange rate change on cash, cash equivalents, and restricted cash 4 (9 ) Net decrease in cash, cash equivalents, and restricted cash (237 ) (1,158 ) Cash, cash equivalents, and restricted cash, beginning of period 607 1,491 Cash, cash equivalents, and restricted cash, end of period $ 370 $ 333 Supplemental cash flow disclosures: Cash paid for interest $ 79 $ 48 Cash paid for income taxes, net of refunds 48 16 Accrued consideration issued in business combinations 4 — Shares of common stock issued to profit sharing plan 14 13 Nature of business Principles of consolidation Cash, cash equivalents, and restricted cash Investments Business Combinations— Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, which requires that a joint venture apply a new basis of accounting 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 early $3. The results of operations of this acquisition are included in the Company’s condensed consolidated statements of operations from the date of acquisition. The following table summarizes the final 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 For the restructuring program, employee-related costs consist of termination benefits provided to employees who have been involuntarily terminated and voluntary early retirement benefits. Program related costs include costs incurred as a direct result of the restructuring program such as consulting fees and facility relocation costs. Six Months Ended Six Months Ended Balance at the beginning of the period $ 22 $ — Charged to cost of revenues - employee related — 2 Charged to selling, general, and administrative expenses - employee related 4 9 Payments (11 ) (3 ) Currency translation adjustment — — Balance at the end of the period $ 15 $ 8 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 Three Months Ended June 30, 2023 Safety Specialty Corporate and Consolidated Life Safety $ 1,098 $ — $ — $ 1,098 Heating, Ventilation, and Air Conditioning ("HVAC") 127 — — 127 Infrastructure/Utility — 307 — 307 Fabrication — 58 — 58 Specialty Contracting — 190 — 190 Corporate and Eliminations — — (9 ) (9 ) Net revenues $ 1,225 $ 555 $ (9 ) $ 1,771 Three Months Ended June 30, 2022 Safety Specialty Corporate and Consolidated Life Safety $ 1,019 $ — $ — $ 1,019 HVAC 127 — — 127 Infrastructure/Utility — 292 — 292 Fabrication — 53 — 53 Specialty Contracting — 173 — 173 Corporate and Eliminations — — (15 ) (15 ) Net revenues $ 1,146 $ 518 $ (15 ) $ 1,649 Six Months Ended June 30, 2023 Safety Specialty Corporate and Consolidated Life Safety $ 2,166 $ — $ — $ 2,166 HVAC 250 — — 250 Infrastructure/Utility — 547 — 547 Fabrication — 113 — 113 Specialty Contracting — 325 — 325 Corporate and Eliminations — — (16 ) (16 ) Net revenues $ 2,416 $ 985 $ (16 ) $ 3,385 Six Months Ended June 30, 2022 Safety Specialty Corporate and Consolidated Life Safety $ 1,982 $ — $ — $ 1,982 HVAC 238 — — 238 Infrastructure/Utility — 508 — 508 Fabrication — 107 — 107 Specialty Contracting — 315 — 315 Corporate and Eliminations — — (30 ) (30 ) Net revenues $ 2,220 $ 930 $ (30 ) $ 3,120 Three Months Ended June 30, 2023 Safety Specialty Corporate and Consolidated United States $ 583 $ 549 $ (9 ) $ 1,123 France 150 — — 150 Other 492 6 — 498 Net revenues $ 1,225 $ 555 $ (9 ) $ 1,771 Three Months Ended June 30, 2022 Safety Specialty Corporate and Consolidated United States $ 534 $ 507 $ (15 ) $ 1,026 France 144 — — 144 Other 468 11 — 479 Net revenues $ 1,146 $ 518 $ (15 ) $ 1,649 Six Months Ended June 30, 2023 Safety Specialty Corporate and Consolidated United States $ 1,143 $ 966 $ (16 ) $ 2,093 France 306 — — 306 Other 967 19 — 986 Net revenues $ 2,416 $ 985 $ (16 ) $ 3,385 Six Months Ended June 30, 2022 Safety Specialty Corporate and Consolidated United States $ 1,008 $ 916 $ (30 ) $ 1,894 France 292 — — 292 Other 920 14 — 934 Net revenues $ 2,220 $ 930 $ (30 ) $ 3,120 months. Accounts Contract Contract Balance at June 30, 2023 $ 1,318 $ 509 $ 491 Balance at December 31, 2022 1,313 459 463 The following table provides disclosure of goodwill by segment as of Safety Specialty Total Goodwill as of December 31, 2022 $ 2,201 $ 181 $ 2,382 Acquisitions 31 — 31 Foreign currency translation 31 — 31 Goodwill as of June 30, 2023 $ 2,263 $ 181 $ 2,444 Intangibles June 30, 2023 Weighted Average Remaining Useful Lives Gross Accumulated Net Carrying Amortized intangibles: Contractual backlog 0.5 $ 155 $ (141 ) $ 14 Customer relationships 9.7 1,529 (442 ) 1,087 Trade names and trademarks 12.7 714 (112 ) 602 Total $ 2,398 $ (695 ) $ 1,703 December 31, 2022 Weighted Average Remaining Useful Lives Gross Accumulated Net Carrying Amortized 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 Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Cost of revenues $ 6 $ 4 $ 13 $ 7 Selling, general, and administrative expenses 50 53 98 107 Total intangible asset amortization expense $ 56 $ 57 $ 111 $ 114 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 Fair Value Measurements at June 30, 2023 Financial assets: Level 1 Level 2 Level 3 Total Derivatives designated as hedge instruments Cash flow hedges - interest rate swaps $ — $ 25 $ — $ 25 Cash flow hedges - cross currency contracts — 14 — 14 Cash flow hedges - foreign currency forward contracts — — — — Net investment hedges - cross currency contracts — 26 — 26 Fair value hedges - cross currency contracts — 33 — 33 Derivatives not designated as hedge instruments Foreign currency forward contracts — 1 — 1 Total $ — $ 99 $ — $ 99 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 ) 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: Six Months Ended, Balance as of December 31, 2022 $ 4 Issuances 3 Settlements (1 ) Adjustments to fair value — Balance as of June 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 The following table presents the carrying amount and fair value of the Company’s term loans and senior notes (instruments defined in Note June 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 337 290 337 284 4.750% Senior Notes 277 248 277 243 The following table presents the fair value of derivative instruments: June 30, 2023 December 31, 2022 Outstanding Gross Other Outstanding Gross Other Notional Amount Other Assets Noncurrent liabilities Notional Amount Other Assets Noncurrent liabilities Derivatives designated as hedging instruments: Cash flow hedges: Interest rate swaps $ 1,120 $ 25 $ — $ 1,120 $ 14 $ — Cross currency contracts 120 14 — 120 17 — Foreign currency forward contracts 12 — — — — — Fair value hedges: Cross currency contracts 721 33 — 721 50 — Net investment hedges: Cross currency contracts 230 26 — 230 32 — Total derivatives designated as hedging instruments 2,203 98 — 2,191 113 — Derivatives not designated as hedging instruments: Foreign currency forward contracts 102 1 1 118 — — Total derivatives not designated as hedging instruments 102 1 1 118 — — Total derivatives $ 2,305 $ 99 $ 1 $ 2,309 $ 113 $ — Amount of income (expense) recognized in income Location of income (expense) Three Months Ended June 30, Derivatives recognized in income 2023 2022 Cash flow hedging relationships: Interest rate swaps Interest expense, net $ 7 $ (2 ) Cross currency contracts Investment income and other, net (1 ) 6 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 (13 ) 37 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 (1 ) 2 Amount of income (expense) recognized in income Location of income (expense) Six Months Ended June 30, Derivatives recognized in income 2023 2022 Cash flow hedging relationships: Interest rate swaps Interest expense, net $ 15 $ (4 ) Cross currency contracts Investment income and other, net (2 ) 9 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 ) 43 Cross currency contracts Interest expense, net 1 1 Net investment hedging relationships: Cross currency contracts Interest expense, net 2 2 Not designated as hedging instruments: Foreign currency forward contracts Investment income and other, net (1 ) 3 The following table presents the effect of cash flow and fair value hedge accounting on accumulated other comprehensive income (loss) ("AOCI"): Amount of gain (loss) Amount of gain (loss) recognized in other reclassified from comprehensive income AOCI into income Three Months Ended June 30, Location of gain (loss) reclassified from Three Months Ended June 30, Derivatives 2023 2022 AOCI into income 2023 2022 Cash flow hedging relationships: Interest rate swaps $ 17 $ 8 Interest expense, net $ 4 $ — Cross currency contracts (2 ) 3 Investment income and other, net (1 ) 6 Forward currency forward contracts — — Investment income and other, net — — Fair value hedging relationships: Cross currency contracts 4 8 Investment income and other, net (14 ) 37 Net investment hedging relationships: Cross currency contracts (4 ) 13 Investment income and other, net 1 — Amount of gain (loss) Amount of gain (loss) recognized in other reclassified from comprehensive income AOCI into income Six Months Ended June 30, Location of gain (loss) reclassified from Six Months Ended June 30, Derivatives 2023 2022 AOCI into income 2023 2022 Cash flow hedging relationships: Interest rate swaps $ 8 $ 28 Interest expense, net $ 8 $ — Cross currency contracts (1 ) 2 Investment income and other, net (2 ) 9 Forward currency forward contracts — — Investment income and other, net — — Fair value hedging relationships: Cross currency contracts 4 (4 ) Investment income and other, net (22 ) 43 Net investment hedging relationships: Cross currency contracts (5 ) 15 Investment income and other, net — — 2026. 2028. The components of property and equipment as of Estimated June 30, December 31, Land N/A $ 31 $ 30 Building 39 99 98 Machinery and equipment 1-20 334 313 Autos and trucks 4-10 118 116 Office equipment 5-7 58 35 Leasehold improvements 1-15 36 33 Total cost 676 625 Accumulated depreciation (258 ) (218 ) Property and equipment, net $ 418 $ 407 NOTE Debt obligations consist of the following: Maturity Date June 30, December 31, Term 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 (36 ) (43 ) Total debt, net of deferred financing costs 2,596 2,789 Less: short-term and current portion of long-term debt (6 ) (206 ) Long-term debt, less current portion $ 2,590 $ 2,583 term loans. $277. 2036. December 31, 2022 of The components of the net periodic pension benefit for the defined benefit pension plans are as follows: Three Months Ended June 30, 2023 2022 Service cost $ 1 $ 4 Interest cost 16 8 Expected return on plan assets (19 ) (18 ) Net periodic pension benefit $ (2 ) $ (6 ) Six Months Ended June 30, 2023 2022 Service cost $ 2 $ 6 Interest cost 31 17 Expected return on plan assets (37 ) (38 ) Net periodic pension benefit $ (4 ) $ (15 ) respectively. 15. COMMITMENTS AND CONTINGENCIES AND REDEEMABLE CONVERTIBLE PREFERRED STOCK The following table sets forth the computation of EPS using the two-class method. The dilutive effect of outstanding Series A Preferred Stock, Series B Preferred Stock, the Series A Preferred Stock dividend, and the Series B Preferred Stock dividend 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. (Amounts in millions, except share and per share amounts.) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Basic earnings per common share: Net income $ 48 $ 30 $ 74 $ 23 Less income allocable to Series A Preferred Stock (4 ) (2 ) (6 ) — Less income allocable to Series B Preferred Stock (5 ) (2 ) (6 ) — Less stock dividend attributable to Series B Preferred Stock (11 ) (11 ) (22 ) (22 ) Net income attributable to common shareholders $ 28 $ 15 $ 40 $ 1 Weighted average shares outstanding - basic 235,182,839 233,104,873 234,784,799 232,670,986 Income per common share - basic $ 0.12 $ 0.06 $ 0.17 $ 0.01 Diluted earnings per common share: Net income $ 48 $ 30 $ 74 $ 23 Less income allocable to Series A Preferred Stock (5 ) (2 ) (6 ) — Less stock dividend attributable to Series B Preferred Stock (11 ) (11 ) (22 ) (22 ) Net income attributable to common shareholders - diluted $ 32 $ 17 $ 46 $ 1 Weighted average shares outstanding - basic 235,182,839 233,104,873 234,784,799 232,670,986 Dilutive securities: (1) Restricted stock units, warrants, and stock options 240,255 297,797 252,885 367,863 Shares issuable upon conversion of Series B Preferred Shares 32,520,000 32,520,000 32,520,000 32,520,000 Shares issuable pursuant to the Series A Preferred Stock dividend (2) 1,618,596 — 809,298 — Weighted average shares outstanding - diluted 269,561,690 265,922,670 268,366,982 265,558,849 Income per common share - diluted $ 0.12 $ 0.06 $ 0.17 $ 0.01 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. 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 June 30, 2023 Safety Specialty Corporate and Consolidated Net revenues $ 1,225 $ 555 $ (9 ) $ 1,771 EBITDA Reconciliation Operating income (loss) $ 98 $ 41 $ (32 ) $ 107 Plus: Investment income and other, net — 3 — 3 Non-service pension benefit 3 — — 3 Loss on extinguishment of debt, net — — — — Depreciation 7 12 — 19 Amortization 42 13 1 56 EBITDA $ 150 $ 69 $ (31 ) $ 188 Total assets $ 6,107 $ 1,328 $ 539 $ 7,974 Capital expenditures 9 16 — 25 Three Months Ended June 30, 2022 Safety Specialty Corporate and Consolidated Net revenues $ 1,146 $ 518 $ (15 ) $ 1,649 EBITDA Reconciliation Operating income (loss) $ 63 $ 32 $ (36 ) $ 59 Plus: Investment income and other, net 1 2 (1 ) 2 Non-service pension benefit 11 — — 11 Depreciation 5 11 3 19 Amortization 41 15 1 57 EBITDA $ 121 $ 60 $ (33 ) $ 148 Total assets $ 6,156 $ 1,305 $ 593 $ 8,054 Capital expenditures 5 15 2 22 Six Months Ended June 30, 2023 Safety Specialty Corporate and Consolidated Net revenues $ 2,416 $ 985 $ (16 ) $ 3,385 EBITDA Reconciliation Operating income (loss) $ 194 $ 41 $ (55 ) $ 180 Plus: Investment income and other, net — 5 — 5 Non-service pension benefit 6 — — 6 Loss on extinguishment of debt, net — — (3 ) (3 ) Depreciation 13 24 1 38 Amortization 83 26 2 111 EBITDA $ 296 $ 96 $ (55 ) $ 337 Total assets $ 6,107 $ 1,328 $ 539 $ 7,974 Capital expenditures 14 31 1 46 Six Months Ended June 30, 2022 Safety Specialty Corporate and Consolidated Net revenues $ 2,220 $ 930 $ (30 ) $ 3,120 EBITDA Reconciliation Operating income (loss) $ 126 $ 25 $ (99 ) $ 52 Plus: Investment income and other, net 1 3 (2 ) 2 Non-service pension benefit 22 — — 22 Depreciation 12 23 3 38 Amortization 83 29 2 114 EBITDA $ 244 $ 80 $ (96 ) $ 228 Total assets $ 6,156 $ 1,305 $ 593 $ 8,054 Capital expenditures 11 21 2 34 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ECENT D EVELOPMENTS A CERTAIN FACTORS AND TRENDS AFFECTING OUR RESULTS OF OPERATIONS O F K LINE ITEMS A CCOUNTING P AND ESTIMATES F OPERATIONS Three Months Ended June 30, Change ($ in millions) 2023 2022 $ % Net revenues $ 1,771 $ 1,649 $ 122 7.4 % Cost of revenues 1,275 1,214 61 5.0 % Gross profit 496 435 61 14.0 % Selling, general, and administrative expenses 389 376 13 3.5 % Operating income 107 59 48 81.4 % Interest expense, net 38 28 10 35.7 % Non-service pension benefit (3 ) (11 ) (8 ) (72.7 )% Investment income and other, net (3 ) (2 ) 1 50.0 % Other expense, net 32 15 17 113.3 % Income before income taxes 75 44 31 70.5 % Income tax provision 27 14 13 92.9 % Net income $ 48 $ 30 $ 18 60.0 % Three Months Ended June 30, Change ($ in millions) 2023 2022 $ % Gross profit $ 496 $ 435 $ 61 14.0 % Gross margin 28.0 % 26.4 % monitoring revenue, which generates higher margins. Three Months Ended June 30, Change ($ in millions) 2023 2022 $ % Selling, general, and administrative expenses $ 389 $ 376 $ 13 3.5 % SG&A expenses as a % of net revenues 22.0 % 22.8 % Operating margin 6.0 % 3.6 % SG&A expenses (excluding amortization) (Non-GAAP) $ 339 $ 323 $ 16 5.0 % SG&A expenses (excluding amortization) as a % of net revenues (Non-GAAP) 19.1 % 19.6 % Three Months Ended June 30, Change ($ in millions) 2023 2022 $ % Net income $ 48 $ 30 $ 18 60.0 % EBITDA (non-GAAP) 188 148 40 27.0 % Net income as a % of net revenues 2.7 % 1.8 % EBITDA as a % of net revenues 10.6 % 9.0 % Net Revenues Three Months Ended June 30, Change ($ in millions) 2023 2022 $ % Safety Services $ 1,225 $ 1,146 $ 79 6.9 % Specialty Services 555 518 37 7.1 % Corporate and Eliminations (9 ) (15 ) NM NM $ 1,771 $ 1,649 $ 122 7.4 % Operating Income (Loss) Three Months Ended June 30, Change ($ in millions) 2023 2022 $ % Safety Services $ 98 $ 63 $ 35 55.6 % Safety Services operating margin 8.0 % 5.5 % Specialty Services $ 41 $ 32 $ 9 28.1 % Specialty Services operating margin 7.4 % 6.2 % Corporate and Eliminations $ (32 ) $ (36 ) NM NM $ 107 $ 59 $ 48 81.4 % EBITDA Three Months Ended June 30, Change ($ in millions) 2023 2022 $ % Safety Services $ 150 $ 121 $ 29 24.0 % Safety Services EBITDA as a % of net revenues 12.2 % 10.6 % Specialty Services $ 69 $ 60 $ 9 15.0 % Specialty Services EBITDA as a % of net revenues 12.4 % 11.6 % Corporate and Eliminations $ (31 ) $ (33 ) NM NM $ 188 $ 148 $ 40 27.0 % 2022. Six Months Ended June 30, Change ($ in millions) 2023 2022 $ % Net revenues $ 3,385 $ 3,120 $ 265 8.5 % Cost of revenues 2,464 2,309 155 6.7 % Gross profit 921 811 110 13.6 % Selling, general, and administrative expenses 741 759 (18 ) (2.4 )% Operating income 180 52 128 246.2 % Interest expense, net 75 55 20 36.4 % Loss on extinguishment of debt, net 3 — 3 NM Non-service pension benefit (6 ) (22 ) (16 ) (72.7 )% Investment income and other, net (5 ) (2 ) 3 150.0 % Other expense, net 67 31 36 116.1 % Income before income taxes 113 21 92 438.1 % Income tax provision (benefit) 39 (2 ) 41 NM Net income $ 74 $ 23 $ 51 221.7 % Six Months Ended June 30, Change ($ in millions) 2023 2022 $ % Gross profit $ 921 $ 811 $ 110 13.6 % Gross margin 27.2 % 26.0 % Six Months Ended June 30, Change ($ in millions) 2023 2022 $ % Selling, general, and administrative expenses $ 741 $ 759 $ (18 ) (2.4 )% SG&A expense as a % of net revenues 21.9 % 24.3 % Operating margin 5.3 % 1.7 % SG&A expenses (excluding amortization) (Non-GAAP) $ 643 $ 652 $ (9 ) (1.4 )% SG&A expenses (excluding amortization) as a % of net revenues 19.0 % 20.9 % Six Months Ended June 30, Change ($ in millions) 2023 2022 $ % Net income $ 74 $ 23 $ 51 221.7 % EBITDA (non-GAAP) 337 228 109 47.8 % Net income as a % of net revenues 2.2 % 0.7 % EBITDA as a % of net revenues 10.0 % 7.3 % Net Revenues Six Months Ended June 30, Change ($ in millions) 2023 2022 $ % Safety Services $ 2,416 $ 2,220 $ 196 8.8 % Specialty Services 985 930 55 5.9 % Corporate and Eliminations (16 ) (30 ) NM NM $ 3,385 $ 3,120 $ 265 8.5 % Operating Income (Loss) Six Months Ended June 30, Change ($ in millions) 2023 2022 $ % Safety Services $ 194 $ 126 $ 68 54.0 % Safety Services operating margin 8.0 % 5.7 % Specialty Services $ 41 $ 25 $ 16 64.0 % Specialty Services operating margin 4.2 % 2.7 % Corporate and Eliminations $ (55 ) $ (99 ) NM NM $ 180 $ 52 $ 128 246.2 % EBITDA Six Months Ended June 30, Change ($ in millions) 2023 2022 $ % Safety Services $ 296 $ 244 $ 52 21.3 % Safety Services EBITDA as a % of net revenues 12.3 % 11.0 % Specialty Services $ 96 $ 80 $ 16 20.0 % Specialty Services EBITDA as a % of net revenues 9.7 % 8.6 % Corporate and Eliminations $ (55 ) $ (96 ) NM NM $ 337 $ 228 $ 109 47.8 % 2022. amortization and impairment) Three Months Ended June 30, ($ in millions) 2023 2022 Reported SG&A expenses $ 389 $ 376 Adjustments to reconcile to SG&A expenses to SG&A expenses (excluding amortization) Amortization expense (50 ) (53 ) SG&A expenses (excluding amortization) $ 339 $ 323 Six Months Ended June 30, ($ in millions) 2023 2022 Reported SG&A expenses $ 741 $ 759 Adjustments to reconcile to SG&A expenses to SG&A expenses (excluding amortization) Amortization expense (98 ) (107 ) SG&A expenses (excluding amortization) $ 643 $ 652 Three Months Ended June 30, ($ in millions) 2023 2022 Reported net income (loss) $ 48 $ 30 Adjustments to reconcile net income (loss) to EBITDA: Interest expense, net 38 28 Income tax provision 27 14 Depreciation 19 19 Amortization 56 57 EBITDA $ 188 $ 148 ND C Six Months Ended June 30, ($ in millions) 2023 2022 Reported net income $ 74 $ 23 Adjustments to reconcile net income to EBITDA: Interest expense, net 75 55 Income tax provision (benefit) 39 (2 ) Depreciation 38 38 Amortization 111 114 EBITDA $ 337 $ 228 RESOURCES Six Months Ended June 30, ($ in millions) 2023 2022 Net cash provided by (used in) operating activities $ 73 $ (64 ) Net cash used in investing activities (82 ) (2,903 ) Net cash (used in) provided by financing activities (232 ) 1,818 Effect of foreign currency exchange rate change on cash, cash equivalents, 4 (9 ) Net decrease in cash, cash equivalents, and restricted cash $ (237 ) $ (1,158 ) Cash, cash equivalents, and restricted cash, end of period $ 370 $ 333 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK chain can occur due to market inefficiencies but can also be driven by other events, like cybersecurity breaches, pandemics, or similar disruptive events. While we believe we can increase our contract prices to adjust for some price increases in commodities, there can be no assurance that such price increases, if they were to occur, would be recoverable. Additionally, some of our fixed price contracts do not allow us to adjust prices and, as a result, increases in material costs could reduce profitability with respect to projects in progress. CONTROLS AND PROCEDURES RISK FACTORS AND ISSUER PURCHASES OF EQUITY SECURITIES During the Three Months Ended June 30, 2023 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) April 1, 2023 - April 30, 2023 — $ — — $ — May 1, 2023 - May 31, 2023 — — — — June 1, 2023 - June 30, 2023 428,688 25.66 428,688 184 Total 428,688 $ 25.66 428,688 $ 184 MINE SAFETY DISCLOSURES OTHER INFORMATION 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 /s/ Russell A. Becker Russell A. Becker Chief Executive Officer (Duly Authorized Officer) /s/ Kevin S. Krumm Kevin S. Krumm Chief Financial Officer (Principal Financial Officer)☒xJuneSeptember 30, 2023☐o
incorporation or organization)
Identification No.), Minnesota(651) (651) 636-4320Yesx ☒ No ☐Yesx ☒ No ☐☒☐☐☐☐☐☐o No ☒x235,785,994235,559,170 shares of common stock as of July 27,October 26, 2023.TABLE OF CONTENTS3334495052525252525354September 30,
2023December 31,
2022Assets Current assets: Cash and cash equivalents $ 461 $ 605 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) 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: 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) — — 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
2023
2022
and December 31, 2022, respectively
800,000 shares issued and outstanding at June 30, 2023 and December 31, 2022;
aggregate liquidation preference of $840
issued and outstanding at June 30, 2023 and December 31, 2022
shares issued at June 30, 2023 and December 31, 2022, respectively (excluding
584,584 shares declared for stock dividend at December 31, 2022)3Three 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 Three 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) 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’
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 $2$1 and $1$2 during the three months ended JuneSeptember 30, 2023 and 2022, respectively, and $4$5 and $1$3 during the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively. The earnings are recorded within investment income and other, net in the condensed consolidated statements of operations. The investment balances were $6$6 and $4$4 as of JuneSeptember 30, 2023 and December 31, 2022, respectively, and are recorded within other assets in the condensed consolidated balance sheets.The Company has not adopted any additional accounting pronouncements since the 2022 audited annual consolidated financial statements. Company's Form 10-K filed on March 1, 2023discussion below for information pertaining to the effects of recently adopted and other recent accounting pronouncements.pronouncements as updated from the discussion in the Company’s 2022 audited consolidated financial statements included in the Company’s Annual Report on Form 10-K filed on March 1, 2023.8In August 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-05, On June 30, 2023, thesegment.segment on June 30, 2023 ("Acquisition A23"). Consideration for the acquisitionAcquisition A23 included cash paid at closing of $30,$30, cash deposited into escrow for future deferred payments of $5,$5, and accrued consideration of $3.this acquisition remains preliminary. The Companythe acquisitions and will make appropriate adjustments to the purchase price allocation prior to completion of the measurement period,periods, as required. Based on preliminary estimates, the total amount of goodwill from acquisitions expected to be deductible for tax purposes is $38.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 9Cash 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 years.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 one to four 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 three 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.$5$7 and $19$19 at JuneSeptember 30, 2023, and December 31, 2022, respectively. The maximum payout of these arrangements upon completion of the future performance periods was $14$15 and $25,$25, inclusive of the $5$7 and $19,$19, accrued as of JuneSeptember 30, 2023, and December 31, 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.78 - "Fair Value of Financial Instruments."10$13$14 and $9$9 at JuneSeptember 30, 2023 and December 31, 2022, respectively, and is included in contingent consideration and compensation liabilities in the condensed consolidated balance sheets for all periods presented.RestructuringASSETS HELD FOR SALESeptember 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 sixnine months ended JuneSeptember 30, 2023, the Company incurred pre-tax restructuring costs within the Safety Services segment of $4$21 in connection with the Chubb restructuring program. Since the Chubb Acquisition, through Junethe Company has incurred aggregate restructuring costs of $51. As of September 30, 2023, the Company had incurred aggregate restructuring costs of $34. In total, the Company estimates that it will recognize approximately $105 of restructuring costs related to the Chubb restructuring program by the end of fiscal year 2024. As of June 30, 2023, the Company had $15$23 in restructuring liabilities recorded in other accrued liabilities on the condensed consolidated balance sheets for this plan.sixnine months ended JuneSeptember 30, 2023 and 2022:
June 30, 2023
June 30, 2022Additionally, the Company incurred $3 of related costs as part of the overall Chubb restructuring program, including right of use asset impairment charges related to the abandonment of leases.Employee 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 5.6. NET REVENUES11sixnine months ended JuneSeptember 30, 2023, and 2022. During 2023, the Company moved an immaterial business component within the SafetyThe Company also recorded an immaterial revision of $74 for the three-month period ended June 30, 2022, to reclassify revenues from the Infrastructure/Utility service type to the Specialty Contracting service type within its Specialty Services segment. The revision of service type revenues did not impact the Specialty Services segment disaggregated revenues for the six months ended June 30, 2022. 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
Eliminations
Services
Services
Eliminations12
Services
Services
Eliminations
Services
Services
Eliminations
Services
Services
Eliminations
Services
Services
EliminationsThree 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 JuneSeptember 30, 2023 was $2,401.$2,732. The Company expects to recognize revenue on approximately 88%87% of the remaining performance obligations over the next twelve months.JuneSeptember 30, 2023 and December 31, 2022 are as follows:
receivable,
net of
allowances
assets
liabilitiesAccounts
receivable,
net of
allowancesContract
assetsContract
liabilitiesBalance at September 30, 2023 Balance at September 30, 2023 $ 1,280 $ 530 $ 474 Balance at December 31, 2022 1,313 459 463 JuneSeptember 30, 2023 and December 31, 2022, retentions receivable were $140$159 and $150,$150, respectively, while the portions that may not be received within one year were $27$27 and $$35, respectively.136.7. GOODWILL AND INTANGIBLESJuneSeptember 30, 2023 and December 31, 2022. The changes in the carrying amount of goodwill by reportable segment for the sixnine months ended JuneSeptember 30, 2023 are as follows:Safety
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
Services
Services
GoodwillIntangibles(1) During the three months ended September 30, 2023, the Company determined its intent to sell the Operating Company (see Note 4 – “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.JuneSeptember 30, 2023 and December 31, 2022:
(in Years)
Carrying
Amount
Amortization
Amount
(in Years)
Carrying
Amount
Amortization
AmountSeptember 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 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 $ 165 147.8. FAIR VALUE OF FINANCIAL INSTRUMENTSLevel 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.JuneSeptember 30, 2023 and December 31, 2022:15Fair 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)
June 30, 2023Nine 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 JuneSeptember 30, 2023, the remaining open contingent consideration arrangements are set to expire at various dates through 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 sixnine months ended JuneSeptember 30, 2023.161011 – “Debt”), including current portions and excluding unamortized debt issuance costs. The fair values are estimated by discounting future cash flows at current interest rates for borrowing arrangements with similar terms and conditions. The inputs used to calculated fair value are considered to be Level 2 inputs under the fair value hierarchy. During the first quarter of 2023, the Company repaid an aggregate amount of $200, $100$200, $100 to each of the 2019 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 8.9. DERIVATIVESJuneSeptember 30, 2023.17September 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 $ — 18Amount 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 $0 million and ($1) million$0 for both the three months ended JuneSeptember 30, 2023 and 2022, respectively, and $0 million$0 and ($2) million$(2) for the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively.19Amount 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) $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 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. As of JuneSeptember 30, 2023, approximately $22$18 of unrealized pre-tax gains remained in AOCI.$720$720 notional amount interest rate swap ("2026 Interest Rate Swap"), as amended on May 19, 2023 in connection with the 2019 Term Loan transition to the Secured Overnight Financing Rate ("SOFR"). Refer to Note 1011 - "Debt" for additional information. The 2026 Interest Rate Swap exchanges a variable rate of interest (SOFR) for an average fixed rate of interest of approximately 3.59%3.59% over the term of the agreement, which matures in October 2026.$400$400 notional forward-starting swaps became effective ("2028 Interest Rate Swap"), as amended on May 19, 2023 in connection with the 2021 Term Loan transition to SOFR. Refer to Note 1011 - "Debt" for additional information. These interest rate swaps exchange a variable rate of interest (SOFR) for an average fixed rate of interest of approximately 3.41%3.41% over the term of the agreements, which mature in January 2028.JuneSeptember 30, 2023, the Company had $1,120$1,120 notional amount outstanding in swap agreements, which includes the aggregate $400$400 notional 2028 Interest Rate Swap, and the $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 (SOFR) payments.payments for its SOFR based term loans of $2,012. As of JuneSeptember 30, 2023, the weighted average fixed rate of interest on these swaps was approximately 3.52%3.52%. Variations in the assets and liability balances are primarily driven by changes in the applicable forward yield curves related to SOFR.$26$26 and $94$94 with maturity dates of September 2027 and 2030, respectively.20$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.$230$230 notional foreign currency swap 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 change in fair value of the 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.$3$3 annually and reduces its overall effective interest rate by approximately 24 basis points and will mature in July 2029.9.10. PROPERTY AND EQUIPMENT, NETJuneSeptember 30, 2023, and December 31, 2022 are as follows:
Useful Lives
(In Years)
2023
2022Estimated
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 $19$21 and $22 during the three months ended JuneSeptember 30, 2023 and 2022, and $38$59 and $60 during the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively. Depreciation expense is included within cost of revenues and selling, general, and administrative expenses in the condensed consolidated statements of operations.10.11. DEBT
2023
2022Maturity 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 three months ended June 30,second quarter of 2023, which provided for amended interest rates applicable to the Company's existing 2019 Term Loan and 2021 Term Loanterm loans and future borrowings under the revolving credit facility. In May 2023, the Company entered into an amendment to the credit agreement to replace the London Inter-Bank Offered Rate ("LIBOR") index with Term SOFR.JuneSeptember 30, 2023, the Company had $1,027$1,027 of principal outstanding under the $1,200$1,200 term loan (the "2019 Term Loan") with a maturity date of October 1, 2026.2026. During the sixnine months ended JuneSeptember 30, 2023, the Company made a payment of $100$100 on the 2019 Term Loan. The interest rate applicable to the 2019 Term Loan is, at the Company's option, either (a) a base rate plus an applicable margin equal to 1.50%1.50% or (b) Term SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.50%2.50% plus a credit spread adjustment ("CSA").JuneSeptember 30, 2023, the Company had $985$985 of principal outstanding under the $1,100$1,100 term loan (the "2021 Term Loan") with a maturity date of January 3, 2029.2029. During the sixnine months ended JuneSeptember 30, 2023, the Company made a payment of $100$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) Term SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.75%2.75% plus 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 Term SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.25%2.25% plus a CSA.JuneSeptember 30, 2023, the Company amended its existing interest rate swaps in connection with the transition to SOFR for the 2019 Term Loan and 2021 Term Loan.JuneSeptember 30, 2023, the Company had a four-year interest rate swap with respect to $720$720 of notional value, of the 2019 Term Loan, exchanging one-month SOFR for a fixed rate of 3.59%3.59% per annum. Accordingly, the Company's fixedannum, and a five-year interest rate per annum on the swapped $720 notional value of the 2019 Term Loan is 3.59% through its maturity. The remaining $307 of the 2019 Term Loan balance will bear interest based on one-month SOFR plus 250 basis points, but the rate will fluctuate as SOFR fluctuates.Duringswap, which started in the first quarter of 2023, the Company began a five-year interest rate swap on the 2021 Term Loan exchanging one-month SOFR for a rate of 3.41%3.41%. Accordingly, the Company's fixed interest rate per annum on the first swapped $400$400 notional value of the 2021 Term Loanterm loans is 3.41% and the second swapped $720 notional value ofitstheir maturity. The remaining $585$892 of the 2021 Term Loanterm loans balance will bear interest based on one-month SOFR plus CSA plus 250 basis points or SOFR plus CSA plus 275 basis points, but the rate will fluctuate as SOFR fluctuates.fluctuates. Refer to Note 89 - "Derivatives" for additional information.22JuneSeptember 30, 2023 and December 31, 2022, the Company had no amounts outstanding under the Revolving Credit Facility, and $483$484 and $446$446 was available at JuneSeptember 30, 2023 and December 31, 2022, respectively, after giving effect to $17$16 and $54$54 of outstanding letters of credit, respectively.JuneSeptember 30, 2023 and December 31, 2022, the Company was in compliance with all applicable debt covenants.4.125%$350$350 aggregate principal amount of 4.125%4.125% Senior Notes (the “4.125%“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 repurchased $13$13 of the 4.125%4.125% Senior Notes in September 2022 and the balance as of JuneSeptember 30, 2023 was $337.4.750%$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 4.750%4.750% Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by the Company and certain of the Company's subsidiaries. The Company repurchased $23$23 of the 4.750%4.750% Senior Notes in September 2022 and the balance as of JuneSeptember 30, 2023 was $277.4.125%4.125% Senior Notes and 4.750%4.750% Senior Notes as of JuneSeptember 30, 2023, and December 31, 2022.JuneSeptember 30, 2023 and December 31, 2022, the Company had $6$6 in notes outstanding for working capital purposes and the acquisition of equipment and vehicles.Note 11. Income Taxes37.2%25.5% and 31.8%40.5% for the three months ended JuneSeptember 30, 2023 and 2022, and 35.0%31.3% and (11.3%)24.2% for the sixnine months ended JuneSeptember 30, 2023, and 2022, respectively. The difference between the effective tax rate and the statutory U.S. federal income tax rate of 21.0%21.0% for the three and sixnine months ended JuneSeptember 30, 2023 and 2022 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.JuneSeptember 30, 2023, the Company’s deferred tax assets included a valuation allowance of $108$105 primarily related to certain net operating loss, capital loss, and tax credit carryforwards of the Company’s foreign 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.JuneSeptember 30, 2023, the Company had gross federal, state, and foreign net operating loss carryforwards of approximately $0, $21,$0, $21, and $105,$104, respectively. The state net operating losses have carryforward periods of five to twentytwenty Table of Contents2027.2027. The foreign net operating losses have carryback periods of three years,, carryforward periods of twenty years,, or are indefinite, and begin to expire in 2036.JuneSeptember 30, 2023, and December 31, 2022, the total gross unrecognized tax benefits were $7$6 and $8,$8, respectively. The Company had accrued gross interest and penalties as of each of JuneSeptember 30, 2023 and23$2.$2. During the three and sixnine months ended JuneSeptember 30, 2023 and 2022, the Company did notnot recognize net interest expense.JuneSeptember 30, 2023, were recognized, $8$8 would impact the Company’s effective tax rate. The Company does notnot expect any unrecognized tax benefits to expire in the next twelve months.JuneSeptember 30, 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, 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 Interim Statements.15%15% minimum tax based on “adjusted financial statement income” for certain large corporations which is effective for taxable years beginning after December 31, 2022, and a 1%1% excise tax on share repurchases after December 31, 2022. While these tax law changes are not expected to have a material adverse effect on the Company'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 rate. The Company will continue to evaluate the impact of the Inflation Reduction Act as further information becomes available.Note 12. Employee Benefit PlansOn June 20,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) 24Nine 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) $27$25 and $27$26 during the three months ended JuneSeptember 30, 2023 and 2022, respectively, and $50$75 and $51$77 during the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively.$5$4 and $4$4 in expense during the three months ended JuneSeptember 30, 2023 and 2022, respectively, and $10$14 and $6$10 in expense during the sixnine months ended JuneSeptember 30, 2023 and 2022, 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 JuneSeptember 30, 2023 and 2022 and $3$4 and $2$3 of expense during the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively.Note 13. Related-Party Transactions$1$1 during each of the three months ended JuneSeptember 30, 2023 and 2022 and $2$3 during each of the sixnine months ended JuneSeptember 30, 2023 and 2022, in each case payable to Mariposa Capital, LLC, an entity owned by a co-chair of the Company’s Board of Directors. In addition, dividends for Series A Preferred Stock were declared as of December 31, 2021 and settled in shares during January 2022. The Company issued 7,539,697 shares in January 2022 to Mariposa Acquisition IV, LLC, a related entity that is controlled by a co-chair of the Company's Board of Directors.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 109,247103,283 and 171,613184,754 shares of common stock on the Series B Preferred Stock held by the Viking Purchasers during the three months ended JuneSeptember 30, 2023, and 2022, respectively. The Company declared233,820337,103 and 301,480486,234 shares of common stock on the Series B Preferred Stock held by the Viking Purchasers during the sixnine months ended JuneSeptember 30, 2023, and 2022, respectively.less than $1$1 and $2$3 in net revenues for the three and sixnine months ended JuneSeptember 30, 2023, respectively, and as of June 30, 2023 had $2 in accounts receivable, net of allowances.2514. Commitments and contingencies$18$17 and $16,$16, and was included in other noncurrent liabilities on the condensed consolidated balance sheets as of JuneSeptember 30, 2023 and December 31, 2022, respectively.15.16. SHAREHOLDERS’ EQUITY and REdeemable convertible preferred stockJuneSeptember 30, 2023 ("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 on 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.$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 JuneSeptember 30, 2023, and 2022, the Company repurchased 428,688656,489 and 681,329738,572 shares of common stock for aggregate payments of approximately $11$18 and $11,$11, respectively. During the sixnine months ended JuneSeptember 30, 2023 and 2022, the Company repurchased 970,0041,626,493 and 1,212,7601,951,332 shares of common stock for approximately $23$41 and $22,$33, respectively. As of JuneSeptember 30, 2023, the Company had approximately $184$166 of authorized repurchases remaining under the SRP.$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$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.26$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$11, or 584,584 shares of common stock, in December 2022 and issued the shares in January 2023. The Company declared and issued a Series B Preferred Stock dividend of $11$11, or 436,992413,135 shares of common stock, and $11$11, or 686,455739,015 shares of common stock, during the three months ended JuneSeptember 30, 2023, and 2022, respectively. The Company declared and issued a Series B Preferred Stock dividend of $22$11, or 935,285 shares of common stock and $22 or 1,205,924739,015 shares of common stock, during the sixthree months ended JuneSeptember 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 16. Earnings Per Share27Three 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 JuneSeptember 30, 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 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 $24.3968.$24.3968.Note 17. SEgment information28
Services
Services
Eliminations
Services
Services
Eliminations29
Services
Services
Eliminations
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 303132ItemManagement’s Discussion and Analysis of Financial Condition and Results of Operations20222023 audited annual consolidated financial statements, the related notes thereto and under the heading "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, 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.1718 – “Segment Information” to our condensed consolidated financial statements included herein.34RRecent Developments and Certain Factors and Trends Affecting our Results of OperationsNDsixnine months ended JuneSeptember 30, 2023, we have incurred pre-tax restructuring costs within the Safety Services segment of $4$21 million in connection with the Chubb restructuring program. In total, we estimate that we will recognize approximately $105 million of restructuring costs related to the Chubb restructuring program by the end of fiscal year 2024.45 – “Restructuring" to our condensed consolidated financial statements included herein.8 -9 – "Derivatives" to our condensed consolidated financial statements included in this quarterly report for additional information on our hedging activities. While we actively monitor economic, industry, and market factors that could affect our business, we cannot predict the effect that changes in such factors may have on our future results of operations, liquidity, and cash flows, and we may be unable to fully mitigate, or benefit from such changes.35ESCRIPTIONDescription of Key Line ItemsEY36Critical Accounting Policies and EstimatesOLICIESResults of Operations Osixnine months ended JuneSeptember 30, 2023 and the three and sixnine months ended JuneSeptember 30, 2022.JuneSeptember 30, 2023 compared to the three months ended JuneSeptember 30, 2022NM = Not meaningfulThree Months Ended September 30, Change ($ 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 % JuneSeptember 30, 2023 were $1,771$1,784 million compared to $1,649$1,735 million for the same period in 2022, an increase of $122$49 million or 7.4%2.8%. The increase in net revenues was driven by growth within ouroccurred in the Safety Services and Specialty Services segments. In addition, the increase in net revenues wassegment, driven by growth in inspection, service, and monitoring revenue.JuneSeptember 30, 2023 and 2022, respectively:Three Months Ended September 30, Change ($ in millions) 2023 2022 $ % Gross profit $ 511 $ 440 $ 71 16.1 % Gross margin 28.6 % 25.4 % JuneSeptember 30, 2023 was $496$511 million compared to $435$440 million for the same period in 2022, an increase of $61$71 million, or 14.0%16.1%. Gross margin was 28.0%28.6%, an increase of 160320 basis points compared to the prior year period, primarily due to disciplined project and customer selection, and pricing improvements inpricing improvements in our Safety Services segment.37JuneSeptember 30, 2023 and 2022, respectively:Three Months Ended September 30, Change ($ 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 % JuneSeptember 30, 2023 were $389$407 million compared to $376$379 million for the same period in 2022, an increase of $13$28 million. SG&A expenses as a percentage of net revenues was 22.0%22.8% during the three months ended JuneSeptember 30, 2023 compared to 22.8%21.8% for the same period in 2022. The increase in SG&A expenses was primarily attributable to an impairment charge of $13 million related to assets held for sale and increased amortization expense in the three months ended September 30, 2023 compared to 2022. Our SG&A expenses excluding amortization and impairment for the three months ended September 30, 2023 were $345 million, or 19.3% of net revenues, compared to $343 million, or 19.8% of net revenues, for the same period of 2022. The decrease in SG&A expenses excluding amortization and impairment as a percentage of net revenues was primarily attributable todriven by lower acquisition and integration related expenses incurred in the three months ended JuneSeptember 30, 2023 compared to the same period in the prior year. Our2022 and better leverage of SG&A expenses excluding amortization for the three months ended June 30, 2023 were $339 million, or 19.1% of net revenues, comparedacross a growing revenue base, partially offset by investments to $323 million, or 19.6% of net revenues, for the same period of 2022 primarily due to the factors discussed above.support growth in our Safety Services segment. See the discussion and reconciliation of our non-U.S. GAAP financial measures below.$38$37 million and $28$33 million for the three months ended JuneSeptember 30, 2023 and 2022, respectively. The increase in interest expense was primarily due to higher interest rates on our floating interest rate debt in the current year, partially offset by a decrease in the outstanding principal amounts of our floating rate debt.$11$10 million for the three months ended JuneSeptember 30, 2023 and 2022, respectively. The change was due to higher interest costs due to higher discount rates and lower expected return on asset benefit compared to the same period of the prior year.$3$4 million and $2$3 million for the three months ended JuneSeptember 30, 2023 and 2022, respectively. The increase in investment income was primarily due to an increase in earnings from joint ventures.other miscellaneous income.JuneSeptember 30, 2023 was $27$20 million compared to $14$18 million infor the same period of the prior year.three months ended September 30, 2022. This change was driven by increased generated income before taxes in the three months ended JuneSeptember 30, 2023 compared to a loss before taxes for the same period in 2022. The effective tax rate for the three months ended JuneSeptember 30, 2023 was 37.2%25.5%, compared to 31.8%40.5% in the same period of 2022. The difference in the effective tax rate was driven by discrete and nondeductible permanent items. The difference between the effective tax rate and the statutory U.S. federal income tax rate of 21.0% is due to the nondeductible permanent items, taxes on foreign earnings in jurisdictions that have higher tax rates, and state taxes.38JuneSeptember 30, 2023 and 2022, respectively:Three Months Ended September 30, Change ($ 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 % JuneSeptember 30, 2023 was $48$54 million compared to $30$28 million for the same period in 2022, an increase of $18$26 million. The improvement primarily resulted from an increase in inspection, service, and monitoring revenue and disciplined project and customer selection, pricing improvements within our Safety Services and Specialty Services segments, and pricing improvementsan increase in our Safety Services segment. The increase was also due to a decrease in operating expenses driven by lower acquisitioninspection, service, and integration related expenses.monitoring revenue. The net income increase was partially offset by a decrease in the non-service pension benefit comparedan impairment charge of $13 million related to the same period in 2022.assets held for sale. Net income as a percentage of net revenues for the three months ended JuneSeptember 30, 2023 and 2022 was 2.7%3.0% and 1.8%1.6%, respectively. EBITDA for the three months ended JuneSeptember 30, 2023 was $188 million compared to $148$152 million for the same period in 2022, an increase of $40$36 million. The increase in EBITDA was primarily driven by the factors previously discussed. See the discussion and reconciliation of our non-U.S. GAAP financial measures below.JuneSeptember 30, 2023 compared to the three months ended JuneSeptember 30, 2022Net Revenues Three Months Ended September 30, Change ($ 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 % EBITDA 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 % 39JuneSeptember 30, 2023 compared to the three months ended JuneSeptember 30, 2022.JuneSeptember 30, 2023 increased by $79$63 million or 6.9%5.5% compared to the same period in the prior year.2022. The increase was primarily driven by increased inspection, service, and monitoring revenue. This increase was also due to continued strength in our end markets and strategic pricing improvements.JuneSeptember 30, 2023 and 2022 was approximately 8.0%8.1% and 5.5%5.2%, respectively. The increase was primarily the result of growth 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 expenses incurred in the three months ended JuneSeptember 30, 2023 compared to the same period in the prior year.2022. Safety Services EBITDA as a percentage of net revenues for the three months ended JuneSeptember 30, 2023 and 2022 was approximately 12.2%12.6% and 10.6%10.1%, respectively. This increase was primarily related to the factors discussed above.JuneSeptember 30, 2023 increaseddecreased by $37$21 million or 7.1%3.6% compared to the same period in the prior year.2022. The increasedecrease was primarily drivendue to continued disciplined customer and project selection and customer project delays in the fabrication business, partially offset by increasedstrong growth in the service revenue across the segmentbusiness during the three months ended JuneSeptember 30, 2023 compared to the same period in the prior year.JuneSeptember 30, 2023 and 2022 was approximately 7.4% and 6.2%, respectively.2022. The increaseconsistency in operating margin despite lower revenues was primarily the result of disciplined project and customer selection and betteroffsetting lower volume leverage of overhead expenses during the three months ended JuneSeptember 30, 2023. Specialty Services EBITDA as a percentage of net revenues for the three months ended JuneSeptember 30, 2023 and 2022 was approximately 12.4%12.3% and 11.6%12.4%, respectively, due to the factors discussed above.JuneSeptember 30, 2023 compared to the sixnine months ended JuneSeptember 30, 2022Nine Months Ended September 30, Change ($ 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 meaningful40sixnine months ended JuneSeptember 30, 2023 were $3,385$5,169 million compared to $3,120$4,855 million for the same period in 2022, an increase of $265$314 million or 8.5%6.5%. The increase in net revenues occurred in both the Safety Services and Specialty Services segments and was driven by growth in inspection, service, and monitoring revenue. This increase was partially offset by the impact of foreign currency exchange rates.sixnine months ended JuneSeptember 30, 2023 and 2022, respectively:Nine Months Ended September 30, Change ($ in millions) 2023 2022 $ % Gross profit $ 1,432 $ 1,251 $ 181 14.5 % Gross margin 27.7 % 25.8 % sixnine months ended JuneSeptember 30, 2023 was $921$1,432 million compared to $811$1,251 million for the same period in 2022, an increase of $110$181 million, or 13.6%14.5%. Gross margin was 27.2%27.7%, an increase of 120190 basis points compared to the prior year period, primarily due to disciplined project and customer selection within our Safety Services and Specialty Services segments and pricing improvements, as well as an improved mix of inspection, service, and monitoring revenue, which generates higher margins.sixnine months ended JuneSeptember 30, 2023 and 2022, respectively:Nine Months Ended September 30, Change ($ 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 % sixnine months ended JuneSeptember 30, 2023 were $741$1,148 million compared to $759$1,138 million for the same period in 2022, a decreasean increase of $18$10 million. SG&A expenses as a percentage of net revenues was 21.9%22.2% during the sixnine months ended JuneSeptember 30, 2023 compared to 24.3%23.4% for the same period in 2022. The decrease in expenses as a percentage of net revenues was driven by lower acquisition and integration related expenses incurred, better leverage of SG&A expenses across a growing revenue base, and changes in estimates to acquired liabilities in the sixnine months ended JuneSeptember 30, 2023 compared to the same period in the prior year. The decrease in the six months ended June 30, 2023 wasyear, partially offset by changesan impairment charge of $13 million related to assets held for sale and investments to support growth in estimates to acquired liabilities.our Safety Services segment. Our SG&A expenses excluding amortization and impairment for the sixnine months ended JuneSeptember 30, 2023 were $643$988 million, or 19.0%19.1% of net revenues, compared to $652$995 million, or 20.9%20.5% of net revenues, for the same period of 2022 primarily due to the factors discussed above. See the discussion and reconciliation of our non-U.S. GAAP financial measures below.$75$112 million and $55$88 million for the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively. The increase in interest expense was primarily due to higher interest rates on our floating interest rate debt in the current year, partially offset by a decrease in the outstanding principal amounts of our floating rate debt.41sixnine months ended JuneSeptember 30, 2023, we made payments of $100 million and $100 million of the outstanding principal amount of the 2019 Term Loan and 2021 Term Loan, respectively. In connection with the payments, we recognized a net loss on debt extinguishment of $3 million.$6$9 million and $22$32 million for the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively. The change was due to higher interest costs due to higher discount rates and lower expected return on asset benefit compared to the same period of the prior year.$5$9 million and $2$5 million for the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively. The increase in investment income was primarily due to an increase in earnings from joint ventures. (benefit)sixnine months ended JuneSeptember 30, 2023 was an expense of $39$59 million compared to a benefit of ($2)$16 million in the same period of the prior year.2022. This change was driven by increased generated income before taxes in the sixnine months ended JuneSeptember 30, 2023 compared to a loss before taxes for the same period in 2022, as well asof the prior year, and the reversal of the permanent reinvestment assertion, which drovewas $9 million of the benefit in 2022. The effective tax rate for the sixnine months ended JuneSeptember 30, 2023 was 35.0%31.3%, compared to (11.3%)24.2% in the same period of 2022. The difference in the effective tax rate was driven by discrete and nondeductible permanent items, primarily the reversal of our indefinite reinvestment assertion in 2022. The difference between the effective tax rate and the statutory U.S. federal income tax rate of 21.0% is due to the nondeductible permanent items, taxes on foreign earnings in jurisdictions that have higher tax rates, state taxes, and discrete items.sixnine months ended JuneSeptember 30, 2023 and 2022, respectively:Nine Months Ended September 30, Change ($ 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 % sixnine months ended JuneSeptember 30, 2023 was $74$128 million compared to $23$51 million for the same period in 2022, an increase of $51$77 million. The improvement primarily resulted from growth in inspection, service, and monitoring revenue and disciplined project and customer selection, pricing improvements within our Safety Services and Specialty Services segments, and pricing improvementsgrowth in our Safety Services segment.inspection, service, and monitoring revenue. The increase was also due to a decrease in operating expenses driven by lower acquisition and integration related expenses. The increase in net income increase was partially offset by a decrease in the non-service pension benefit comparedan impairment charge of $13 million related to the same period in 2022.assets held for sale. Net income as a percentage of net revenues for the sixnine months ended JuneSeptember 30, 2023 and 2022 was 2.2%2.5% and 0.7%1.1%, respectively. EBITDA for the sixnine months ended JuneSeptember 30, 2023 was $337$525 million compared to $228$380 million for the same period in 2022, an increase of $109$145 million. The increase in EBITDA was primarily driven by the factors previously discussed. See the discussion and reconciliation of our non-U.S. GAAP financial measures below.42sixnine months ended JuneSeptember 30, 2023 compared to the sixnine months ended JuneSeptember 30, 2022Net Revenues Nine Months Ended September 30, Change ($ 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 % EBITDA 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 % sixnine months ended JuneSeptember 30, 2023 compared to the sixnine months ended JuneSeptember 30, 2022.sixnine months ended JuneSeptember 30, 2023 increased by $196$259 million or 8.8%7.7% compared to the same period in the prior year.2022. The increase was driven by both increased inspection, service, and monitoring revenue. This increase was also due to continued strength in our end markets and strategic pricing improvements. This increase was partially offset by the impact of foreign currency exchange rates.sixnine months ended JuneSeptember 30, 2023 and 2022 was approximately 8.0% and 5.7%5.5%, respectively. The increase was primarily the result of disciplined project and customer selection, pricing improvements, and pricing improvements.improved mix of inspection, service, and monitoring revenue, which generates higher margins. The increase was also driven by lower acquisition and integration related expenses incurred in the sixnine months ended JuneSeptember 30, 2023 compared to the same period in the prior year.2022. Safety Services EBITDA as a percentage of net revenues for the sixnine months ended JuneSeptember 30, 2023 and 2022 was approximately 12.3%12.4% and 11.0%10.7%, respectively. This increase was primarily related to the factors discussed above.sixnine months ended JuneSeptember 30, 2023 increased by $55$34 million or 5.9%2.2% compared to the same period in the prior year.2022. The increase was primarily driven by increasedan increase in service revenue acrossin the segment for emergency service workinfrastructure, utility, and specialty contracting markets during the sixnine months ended JuneSeptember 30, 2023 compared to the same period in the prior year.43sixnine months ended JuneSeptember 30, 2023 and 2022 was approximately 4.2%5.4% and 2.7%4.6%, respectively. The increase was primarily the result of disciplined project and customer selection and better leverage of overhead expenses during the sixnine months ended JuneSeptember 30, 2023. Specialty Services EBITDA as a percentage of net revenues for the sixnine months ended JuneSeptember 30, 2023 and 2022 was approximately 9.7%10.7% and 8.6%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.amortization)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 44(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 Liquidity and Capital ResourcesAPITALJuneSeptember 30, 2023, we had $851$945 million of total liquidity, comprising $368$461 million in cash and cash equivalents and $483$484 million ($500 million less outstanding letters of credit of approximately $17$16 million, which reduce availability) of available borrowings under our Revolving Credit Facility.sixnine months ended JuneSeptember 30, 2023, we repurchased 428,688656,489 and 970,0041,626,493 shares of common stock for aggregate payments of approximately $11$18 million and $23$41 million under this stock repurchase program, respectively, leaving approximately $184$166 million of authorized repurchases.
and restricted cashNine Months Ended September 30, ($ 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 (Used in) Operating Activities$73$217 million for the sixnine months ended JuneSeptember 30, 2023 compared to ($64)$82 million of cash used for the same period in 2022. The increase in cash provided by operating activities is primarily due to an increase in net income in the period. This increase in cash provided is also driven by lower working capital needs associated with the various services we provided in the sixnine months ended JuneSeptember 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. The increase in cash provided by operating activities in the current year is also due to a one-time contribution to an assumed pension plan of $27 million during the sixnine months ended JuneSeptember 30, 2022.$82$108 million for the sixnine months ended JuneSeptember 30, 2023 compared to $2,903$2,931 million for the same period in 2022. During 2022, we completed the Chubb Acquisition resulting in the use of $2,875$2,881 million for acquisitions during the sixnine months ended JuneSeptember 30, 2022 compared to $45$57 million for the same period in 2023. The decrease in cash used in investing activities in the current year was partially offset by an increase in purchases of property and equipment. We purchased $46 million and $34 million of property and equipment during the six months ended June 30, 2023 and 2022, respectively.($232)$(253) million for the sixnine months ended JuneSeptember 30, 2023 compared to $1,818$1,773 million provided by financing activities for the same period in 2022. The decrease in cash provided by financing activities was primarily driven by equity and debt issuances in the sixnine months ended JuneSeptember 30, 2022 related to the Chubb Acquisition. In the sixnine months ended JuneSeptember 30, 2022, cash provided by financing activities was higher due to $1,101$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 sixnine months ended JuneSeptember 30, 2023 was also driven by $204$206 million of payments on long-term borrowings.1.50%1.25% or (b) a Term SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.50%2.25% plus a credit spread adjustment ("CSA"). Principal payments on the 2019 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 1.00% of the initial aggregate principal amount of the 2019 Term Loan. The 2019 Term Loan matures on October 1, 2026.The1.75%1.50% or (b) a Term 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.JuneSeptember 30, 2023 was 2.14:1.92:1.00.sixnine months ended JuneSeptember 30, 2023, we repaid an aggregate amount of $200 million, $100 million to each of 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 havehad 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 $483$484 million was available after giving effect to $17$16 million of outstanding letters of credit, which reduces availability.JuneSeptember 30, 2023, we had $337 million aggregate principal amount of 4.125% Senior Notes outstanding.JuneSeptember 30, 2023, we had $277 million aggregate principal amount of 4.750% Senior Notes outstanding.JuneSeptember 30, 2023 and December 31, 2022.47sixnine months ended JuneSeptember 30, 2023.1011 – "Debt" for future principal payments and interest rates on our debt instruments.1112 – "Income Taxes."1213 – "Employee Benefit Plans."48ItemQuantitative and Qualitative Disclosures about Market RiskJuneSeptember 30, 2023, our outstanding variable interest rate debt was primarily related to our 2019 Term Loan and our 2021 Term Loan. As of JuneSeptember 30, 2023, we had $1,027 million outstanding on the 2019 Term Loan and $985 million outstanding on the 2021 Term Loan. 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. 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 SOFR for a rate of 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$22$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 3.92%. The remaining floating $307 million of our 2019 Term Loan balancerate portfolio will bear interest based on one-month SOFR plus CSA plus 225 basis points or one-month SOFR plus CSA plus 250 basis points. We have five-year interest rate swaps with respect to $400 million of the notional value of the 2021 Term Loan, exchanging one-month SOFR for a rate an average fixed rate of 3.41%. The 2021 Term Loan balance will bear interest based on one-month SOFR plus 275 basis points, but the rate will fluctuate as SOFR fluctuates. As of JuneSeptember 30, 2023, excluding letters of credit outstanding of $17$16 million, we had no amounts of outstanding revolving loans under our Credit Agreement.37%35% and 38%37% of our consolidated net revenues for the three and sixnine months ended JuneSeptember 30, 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 sixnine months ended JuneSeptember 30, 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 and ($1) million for both the three months ended JuneSeptember 30, 2023 and 2022, respectively, and $0 million and ($2)$(2) million for the sixnine months ended JuneSeptember 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 gains (losses) totaled approximately $27$(63) million and ($166)$(86) million for the three months ended JuneSeptember 30, 2023 and 2022, respectively, and $41$(22) million and ($225)$(311) million for the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively.49ItemControls and Procedures(as(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are not effective as of JuneSeptember 30, 2023 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, 2022.March 31,September 30, 2023 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 JuneSeptember 30, 2023 due to the material weaknesses in internal control over financial reporting identified and further described below.JuneSeptember 30, 2023 related to user access controls related to an information technology system which resulted from insufficient risk assessment and ineffective operation of process level controls over revenue recognition, which resulted from insufficient training. As a result of the user access control deficiencies, process level controls at certain entities that use information from the affected system cannot be relied upon. These control deficiencies constitute material weaknesses in our internal control over financial reporting as of JuneSeptember 30, 2023.50JuneSeptember 30, 2023 include the following: andrecognition.recognition; andPerform corporate level review of high risk contracts and their related revenue recognition documentation; and•JuneSeptember 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.ItemRisk factorsItemAND USE OF PROCEEDS,JuneSeptember 30, 2023:
Purchased as Part of
Publicly Announced
Plans or ProgramsDuring 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 ItemMine Safety DisclosuresItemOther InformationJuneSeptember 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.ItemExhibitsExhibit No. Description of Exhibits Exhibit No.10.25Description of Exhibits10.24*August 3,November 2, 2023August 3,November 2, 202354