UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31, 2020~~June 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission File Number001-39275

APi Group Corporation

(Exact Name of Registrant as Specified in its Charter)

Delaware


~~Delaware~~		98-1510303
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1100 Old Highway 8 NW New Brighton, Minnesota		55112
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (651)636-4320

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐☒ No ☒☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated ~~filer,”~~filer”, “accelerated ~~filer,”~~filer”, “smaller reporting ~~company,”~~company”, and “emerging growth company” in Rule12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: ~~169,294,244~~201,734,317 shares of Common Stock as of ~~May 29, 2020.~~August 4, 2021.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	3

~~PART I. FINANCIAL INFORMATION~~		1

Item 1. Financial Statements		1	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		29	27
Item 3. Quantitative and Qualitative Disclosures about Market Risk		41
Item 4. Controls and Procedures		41	42

PART II. OTHER INFORMATION		43	44

Item 1A. Risk Factors		43	44
Item 4. Mine Safety Disclosures	44
Item 6. Exhibits		44	45

SIGNATURES		45	46

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

APi Group Corporation

Condensed Consolidated Balance Sheets

~~March 31, 2020 (Successor) and December 31, 2019 (Successor)~~ (Unaudited)

(In ~~millions)~~millions, except per share data)

~~(Unaudited)~~

	June 30, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	686		$	515
Accounts receivable, net of allowances of $4 at June 30, 2021 and December 31, 2020		664			639
Inventories		69			64
Contract assets		184			142
Prepaid expenses and other current assets		82			77
Total current assets		1,685			1,437

Property and equipment, net		348			355
Operating lease right of use assets		105			107
Goodwill		1,079			1,082
Intangible assets, net		912			965
Deferred tax assets		87			89
Other assets		27			30
Total assets	$	4,243		$	4,065

Liabilities and Shareholders’ Equity
Current liabilities:
Short-term and current portion of long-term debt	$	13		$	18
Accounts payable		180			150
Contingent consideration and compensation liabilities		25			41
Accrued salaries and wages		151			182
Deferred consideration		—			67
Other accrued liabilities		100			133
Contract liabilities		232			219
Operating and finance leases		29			31
Total current liabilities		730			841

Long-term debt, less current portion		1,457			1,397
Contingent consideration and compensation liabilities		2			22
Operating and finance leases		81			96
Deferred tax liabilities		46			45
Other noncurrent liabilities		99			106
Total liabilities		2,415			2,507

Shareholders’ equity:
Preferred Shares, $0.0001 par value, 7 authorized shares, 4 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively		—			—
Common shares, $0.0001 par value, 500 authorized shares, 201 shares and 168 shares issued at June 30, 2021 and December 31, 2020, respectively (includes 12 shares declared for stock dividend at December 31, 2020)		—			—
Additional paid-in capital		2,105			1,856
Accumulated deficit		(271	)		(284	)
Accumulated other comprehensive loss		(6	)		(14	)
Total shareholders’ equity		1,828			1,558
Total liabilities and shareholders’ equity	$	4,243		$	4,065

   March 31,
2020
(Successor) December 31,
2019
(Successor)
Assets

Current assets:

Cash and cash equivalents
   $ 436 $ 256
Accounts receivable, net of allowances of $1 and $0 at March 31, 2020 and December 31, 2019, respectively
   662 730
Inventories
   59 58
Contract assets
   251 245
Prepaid expenses and other current assets
   37 33
Assets held for sale
   5 20


Total current assets
   1,450 1,342
Property and equipment, net
   397 402
Operating lease right of use asset
   103 105
Goodwill
   767 980
Intangible assets, net
   1,069 1,121
Preferred tax assets
   64 —
Other assets
   36 61


Total assets
   $ 3,886 $ 4,011


Liabilities and Shareholders’ Equity

Current liabilities:

Short-term and current portion of long-term debt
   $ 217 $ 19
Accounts payable
   152 156
Contingent consideration and compensation liabilities
   47 49
Accrued salaries and wages
   104 149
Deferred consideration
   35 73
Other accrued liabilities
   132 157
Contract liabilities
   205 193
Operating and finance leases
   27 27


Total current liabilities
   919 823
Long-term debt, less current portion
   1,167 1,171
Contingent consideration and compensation liabilities
   22 15
Operating and finance leases
   93 95
Deferred tax liabilities
   24 23
Deferred consideration
   53 78
Other noncurrent liabilities
   83 49


Total liabilities
   2,361 2,254
Shareholders’ equity:

Preferred shares, no par value; unlimited authorized shares; 4 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively
   —   —
Ordinary shares; no par value, unlimited authorized shares, 169 and 170 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively
   —
Additionalpaid-in capital
   1,880 1,885
Accumulated deficit
   (325 ) (131 )
Accumulated other comprehensive income (loss)
   (30 ) 3


Total shareholders’ equity
   1,525 1,757


Total liabilities and shareholders’ equity
   $ 3,886 $ 4,011

See notes to condensed consolidated financial statements.

APi Group Corporation

Condensed Consolidated Statements of Operations

~~Three Months Ended March 31, 2020 (Successor) and 2019 (Predecessor)~~ (Unaudited)

(In millions, except per share amounts)

~~(Unaudited)~~

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Net revenues	$	978		$	889		$	1,781		$	1,747
Cost of revenues		746			715			1,368			1,411
Gross profit		232			174			413			336
Selling, general, and administrative expenses		185			147			368			335
Impairment of goodwill and intangible assets		—			—			—			208
Operating income (loss)		47			27			45			(207	)
Interest expense, net		14			14			29			28
Loss on extinguishment of debt		9			—			9			—
Investment income and other, net		(6	)		(11	)		(9	)		(14	)
Other expense, net		17			3			29			14
Income (loss) before income taxes		30			24			16			(221	)
Income tax provision (benefit)		9			(12	)		3			(63	)
Net income (loss)	$	21		$	36		$	13		$	(158	)
Net income (loss) per common share:
Basic	$	0.09		$	0.18		$	0.06		$	(0.93	)
Diluted	$	0.09		$	0.17		$	0.06		$	(0.93	)
Weighted average shares outstanding:
Basic		201			169			197			170
Diluted		206			176			202			170

   Three months ended
March 31,
   2020 2019
   (Successor) (Predecessor)
Net revenues
   $ 858 $ 922
Cost of revenues
   696 759


Gross profit
   162 163
Selling, general, and administrative expenses
   188 137
Impairment of goodwill and intangible assets
   208 —


Operating income (loss)
   (234 ) 26


Interest expense, net
   14 6
Investment income and other, net
   (3 ) (2 )


Other expense, net
   11 4


Income (loss) before income tax provision
   (245 ) 22
Income tax provision (benefit)
   (51 ) 1


Net income (loss)
   $ (194 ) $ 21


Net loss per ordinary share:

Basic
   $ (1.14 ) n/a
Diluted
   $ (1.14 ) n/a
Weighted average shares outstanding:

Basic
   170 n/a
Diluted
   170 n/a
Pro forma income information (See Note 2):

Historical income before income taxes
   n/a $ 22
Pro forma provision for income taxes
   n/a 6


Pro forma net income
   n/a $ 16

See notes to condensed consolidated financial statements.

APi Group Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

~~Three Months Ended March 31, 2020 (Successor) and 2019 (Predecessor)~~ (Unaudited)

(In millions)

~~(Unaudited)~~

	Three Months Ended June 30,					Six Months Ended June 30,
	2021		2020			2021		2020
Net income (loss)	$	21	$	36		$	13	$	(158	)
Other comprehensive income (loss):
Fair value change - derivatives, net of tax (expense) benefit of ($3), $1, ($3), and $10, respectively		9		(3	)		8		(30	)
Foreign currency translation adjustment		4		6			—		—
Comprehensive income (loss)	$	34	$	39		$	21	$	(188	)

   Three months ended March 31,
   2020    2019
   (Successor)    (Predecessor)
Net income (loss)
   $ (194 )    $ 21
Other comprehensive income (loss):

Fair value change - derivatives, net of $9 and $0 of tax (expense) benefit, respectively
   (27 )    —
Foreign currency translation adjustment
   (6 )    3




Comprehensive income (loss)
   $ (227 )    $ 24

See notes to condensed consolidated financial statements.

APi Group Corporation

Condensed Consolidated Statements of Shareholders’ Equity

~~Three Months Ended March 31, 2020 (Successor) and 2019 (Predecessor)~~ (Unaudited)

(In millions, except share amounts)

~~(Unaudited)~~

	Preferred Shares Issued and Outstanding				Common Shares Issued and Outstanding					Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Shareholders’
	Shares		Amount		Shares			Amount		Capital		Deficit			Income (Loss)			Equity
Balance, December 31, 2020		4,000,000	$	—		168,052,024		$	—	$	1,856	$	(284	)	$	(14	)	$	1,558
Net loss		—		—		—			—		—		(8	)		—			(8	)
Fair value change - derivatives		—		—		—			—		—		—			(1	)		(1	)
Foreign currency translation adjustment		—		—		—			—		—		—			(4	)		(4	)
Preferred Share dividend		—		—		12,447,912			—		—		—			—			—
Warrants exercised		—		—		19,994,203			—		230		—			—			230
Profit sharing plan contributions		—		—		630,109			—		13		—			—			13
Share-based compensation and other, net		—		—		157,979			—		3		—			—			3
Balance, March 31, 2021		4,000,000	$	—		201,282,227		$	—	$	2,102	$	(292	)	$	(19	)	$	1,791
Net income		—		—		—			—		—		21			—			21
Fair value change - derivatives		—		—		—			—		—		—			9			9
Foreign currency translation adjustment		—		—		—			—		—		—			4			4
Share-based compensation and other, net		—		—		(1,140	)		—		3		—			—			3
Balance, June 30, 2021		4,000,000	$	—		201,281,087		$	—	$	2,105	$	(271	)	$	(6	)	$	1,828


	Successor
																Accumulated
	Preferred Shares Issued				Ordinary Shares Issued					Additional						Other			Total
	and Outstanding				and Outstanding					Paid-In			Accumulated			Comprehensive			Shareholders’			Preferred Shares Issued and Outstanding				Common Shares Issued and Outstanding					Additional Paid-In			Accumulated			Accumulated Other Comprehensive			Total Shareholders’
	Shares		Amount		Shares			Amount		Capital			Deficit			Income (Loss)			Equity			Shares		Amount		Shares			Amount		Capital			Deficit			Income (Loss)			Equity
Balance, December 31, 2019		4,000,000	$	—		169,902,260		$	—	$	1,885		$	(131	)	$	3		$	1,757			4,000,000	$	—		169,902,260		$	—	$	1,885		$	(131	)	$	3		$	1,757
Net loss		—		—		—			—		—			(194	)		—			(194	)		—		—		—			—		—			(194	)		—			(194	)
Fair value change - derivatives																							—		—		—			—		—			—			(27	)		(27	)
Foreign currency translation adjustment																							—		—		—			—		—			—			(6	)		(6	)
Share cancellations		—		—		(608,016	)		—		(6	)		—			—			(6	)		—		—		(608,016	)		—		(6	)		—			—			(6	)
Share-based compensation		—		—		—			—		1			—			—			1			—		—		—			—		1			—			—			1
Balance, March 31, 2020																							4,000,000	$	—		169,294,244		$	—	$	1,880		$	(325	)	$	(30	)	$	1,525
Net income																							—		—		—			—		—			36			—			36
Fair value change - derivatives		—		—		—			—		—			—			(27	)		(27	)		—		—		—			—		—			—			(3	)		(3	)
Foreign currency translation adjustment		—		—		—			—		—			—			(6	)		(6	)		—		—		—			—		—			—			6			6

Balance, March 31, 2020		4,000,000	$	—		169,294,244		$	—	$	1,880		$	(325	)	$	(30	)	$	1,525



			Predecessor
													Accumulated			Note
			Common Stock Issued					Additional					Other			Receivable			Total
			and Outstanding					Paid-In		Retained			Comprehensive			From			Stockholders’
			Shares		Amount			Capital		Earnings			Income (Loss)			Stockholder			Equity
Balance, December 31, 2018				11,000,000	$	—		$	—	$	663		$	(28	)	$	(2	)	$	633
Net income				—		—			—		21			—			—			21
Distributions and other				—		—			—		(15	)		—			—			(15	)
Foreign currency translation adjustment				—		—			—		—			3			—			3

Balance, March 31, 2019				11,000,000	$	—		$	—	$	669		$	(25	)	$	(2	)	$	642

Share-based compensation																							—		—		—			—		1			—			—			1
Balance, June 30, 2020																							4,000,000	$	—		169,294,244		$	—	$	1,881		$	(289	)	$	(27	)	$	1,565

See notes to condensed consolidated financial statements.

APi Group Corporation

Condensed Consolidated Statements of Cash Flows

~~Three Months Ended March 31, 2020 (Successor) and 2019 (Predecessor)~~ (Unaudited)

(In millions)

~~(Unaudited)~~

	Six Months Ended June 30,
	2021			2020
Cash flows from operating activities:
Net income (loss)	$	13		$	(158	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		39			41
Amortization		63			103
Impairment of goodwill and intangible assets		—			208
Deferred taxes		(1	)		(50	)
Share-based compensation expense		6			2
Profit-sharing expense		7			6
Non-cash lease expense		16			14
Loss on extinguishment of debt		9			—
Other, net		4			2
Changes in operating assets and liabilities, net of effects of business acquisitions:
Accounts receivable		(24	)		78
Contract assets		(42	)		(1	)
Inventories		(5	)		(3	)
Prepaid expenses and other current assets		(2	)		(28	)
Accounts payable		30			—
Accrued liabilities and income taxes payable		(54	)		2
Contract liabilities		13			44
Other assets and liabilities		(53	)		(28	)
Net cash provided by operating activities		19			232
Cash flows from investing activities:
Acquisitions, net of cash acquired		(12	)		(5	)
Purchases of property and equipment		(34	)		(17	)
Proceeds from sales of property, equipment, held for sale assets, and businesses		11			6
Net cash used in investing activities		(35	)		(16	)
Cash flows from financing activities:
Proceeds from long-term borrowings		350			1
Payments on long-term borrowings		(318	)		(11	)
Payments of debt issuance costs		(4	)		—
Proceeds from warrant exercises		230			—
Payments of acquisition-related consideration		(70	)		(86	)
Restricted shares tendered for taxes		(1	)		—
Net cash provided by (used in) financing activities		187			(96	)
Effect of foreign currency exchange rate change on cash and cash equivalents		3			1
Net increase in cash and cash equivalents		174			121
Cash, cash equivalents, and restricted cash, beginning of period		515			256
Cash, cash equivalents, and restricted cash, end of period	$	689		$	377
Supplemental cash flow disclosures:
Cash paid for interest	$	22		$	25
Cash paid for income taxes, net of refunds		45			11
Accrued contingent consideration issued in business combinations		1			1
Shares issued to profit sharing plan		13			—

   Three months ended March 31,
   2020    2019
   (Successor)    (Predecessor)
Cash flows from operating activities:

Net income (loss)
   $ (194 )    $ 21
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation
   18    16
Amortization
   52    9
Impairment of goodwill and intangible assets
   208    —
Deferred taxes
   (53 )    —
Share-based compensation expense
   1    —
Other, net
   (2 )    (2 )
Changes in operating assets and liabilities, net of effects of business acquisitions

Accounts receivable
   63    102
Contract assets
   (7 )    (52 )
Inventories
   (2 )    (6 )
Prepaid expenses and other assets
   9    (2 )
Accounts payable
   (4 )    (37 )
Accrued liabilities and income taxes payable
   (56 )    (24 )
Contract liabilities
   14    (9 )
Other liabilities
   8    9




Net cash provided by operating activities
   55    25




Cash flows from investing activities:

Acquisitions, net of cash acquired
   (5 )    (1 )
Purchases of property and equipment
   (11 )    (22 )
Proceeds from sales of property, equipment and held for sale
   1    2
Advances on other notes receivable
   —      (4 )
Payments received on other notes receivable
   —      1
Proceeds from sale of marketable securities, net
   —      2




Net cash used in investing activities
   (15 )    (22 )




Cash flows from financing activities:

Net short-term debt
   200    1
Proceeds from long-term borrowings
   1    5
Payments on long-term borrowings
   (6 )    (7 )
Payments of acquisition-related consideration
   (56 )    —
Distributions paid
   —      (15 )




Net cash provided by (used in) financing activities
   139    (16 )




Effect of foreign currency exchange rate change on cash and cash equivalents
   1    —




Net increase (decrease) in cash and cash equivalents
   180    (13 )
Cash and cash equivalents, beginning of period
   256    54




Cash and cash equivalents, end of period
   $ 436    $ 41





Supplemental schedule of disclosures of cash flow information:

Cash paid for interest
   $ 13    $ 6
Cash paid for income taxes, net of refunds
   8    2

See notes to condensed consolidated financial statements.

APi Group Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Amounts in millions, except shares and where noted otherwise)

~~(Unaudited)~~

~~Note~~NOTE 1. ~~Nature of Business~~NATURE OF BUSINESS

APi Group Corporation (the “Company” or “APG”) is a market-leading business services provider of safety, specialty, and industrial services in over 200 locations, primarily in North America. Until its acquisition of APi Group, Inc. (“APi Group”) on October 1, 2019, the Company had neither engaged in any operations nor generated any revenues. (See Note 4 – “Business Combinations”).America and Europe.

~~Note~~NOTE 2. ~~Basis of Presentation and Significant Accounting Policies~~BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Principles of ~~consolidation:~~consolidation

The accompanying interim unaudited condensed consolidated financial statements (the “Interim Statements”) include the accounts of the Company and of its ~~wholly owned~~wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. These Interim Statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and do not include all of the information and footnotes required by generally accepted accounting principles ~~generally accepted~~ in the United States of America ~~(U.S. GAAP)~~(“U.S. GAAP”) for complete financial statements. The unaudited condensed consolidated balance sheet as of December 31, ~~2019~~2020 was derived from audited financial statements for the year then ended but does not include all of the information and footnotes required by U.S. GAAP with respect to annual financial statements. In the opinion of management, the Interim Statements include all adjustments (including normal recurring accruals) necessary for a fair presentation of the Company’s consolidated financial position, results of operations and cash flows for the dates and periods presented. It is recommended that these Interim Statements ~~should~~ be read in conjunction with the Company’s audited annual consolidated financial statements and accompanying footnotes thereto for the year ended December 31, ~~2019.~~2020. Results for interim periods are not necessarily indicative of the results to be expected for a full fiscal year or for any future period.

~~In accounting for~~

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash on hand and highly liquid investments that have a maturity of three months or less when purchased. Restricted cash reflects collateral against certain bank guarantees. Restricted cash is reported as prepaid expenses and other current assets and other assets in the ~~acquisition of APi Group (the “APi Acquisition”), APG is considered the acquirer of APi Group for accounting purposes and APi Group is the accounting Predecessor.~~ unaudited condensed consolidated balance sheets.

Investments

The ~~Company’s financial statement presentation for the APi Group financial information as of and for the periods presented prior to the APi Acquisition date~~Company holds investments in joint ventures which are ~~labeled “Predecessor”. The Company’s financial statements, including APi Group from the APi Acquisition date, are labeled “Successor”. The merger was~~ accounted for ~~as a business combination using~~under the acquisition method of accounting, and the Successor financial statements reflect a new basis of accounting that is based on the fair value of the net assets acquired. Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions. See Note 4 – “Business Combinations” for a discussion of the fair values of assets and liabilities recorded in connection with the APi Acquisition, which remain preliminary as of March 31, 2020.

~~As a result of the application of the acquisition~~equity method of accounting as of the effective date of the APi Acquisition, the accompanying Interim Statements include a black line division, where applicable, which indicates a differentiation that the Predecessor and Successor reporting entities shown are presented on a different basis and are, therefore, not comparable.

~~The historical financial information of~~ the Company ~~which was, prior to~~does not exercise control over the APi Acquisition, an acquisition vehicle, has not been presented in financial statements as these historical amounts are not considered meaningful. As an acquisition vehicle, the Company retained and invested the proceeds from its initial public offering (the “IPO”) and the funds were used to pay a portionjoint ventures. The Company’s share of ~~the cash consideration for the APi Acquisition.~~

As of March 31, 2020, the Company had two classes of stock outstanding: ordinary shares, which equate to common shares under U.S. GAAP, and Founder Preferred Shares, which equate to preferred shares under U.S. GAAP. Subsequent to March 31, 2020, the Company changed its jurisdiction of incorporationearnings from the ~~British Virgin Islands to~~joint ventures was $1 and $5 during the ~~State of Delaware, which resulted~~three months ended June 30, 2021 and 2020, respectively, and $2 and $7 during the six months ended June 30, 2021 and 2020, respectively. The earnings are recorded within investment income and other, net in ~~conversion of ordinary shares~~

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

and Founder Preferred Shares to shares of common stock and Series A Preferred Stock, respectively (see Note 17 – “Subsequent Events”). The Interim Statements present the ordinary shares and Founder Preferred Shares that were outstanding as of March 31, 2020 and December 31, 2019 prior to the change in the jurisdiction of incorporation and the conversion of such shares.

~~Unaudited pro forma income information:~~ ~~The unaudited pro forma net income information presented on the face of~~ the unaudited condensed consolidated statements of ~~operations gives effect to the conversion~~operations. The investment balances were $8 and $9 as of ~~APi Group to a C corporation. Prior to such conversion, APi Group was a S corporation~~June 30, 2021 and ~~generally not subject to federal income taxes~~December 31, 2020, respectively, and are recorded within ~~the United States. The pro forma net income presented on the face of~~other assets in the unaudited condensed consolidated statement of operations, therefore, includes an adjustment for income tax expense on the income as if APi Group had been a C corporation for the period from January 1, 2019 through March 31, 2019, at an assumed combined federal, state, local and foreign effective income tax rate of 28.7%.balance sheets.

~~Use of estimates and risks and uncertainty ofCOVID-19:~~ The Interim Statements are prepared in conformity with U.S. GAAP. Management’s application of U.S. GAAP requires the pervasive use of estimates and assumptions in preparing the unaudited condensed consolidated financial statements. On January 30, 2020, the World Health Organization declared the coronavirus outbreak~~(COVID-19)~~ ~~a “Public Health Emergency of International Concern” and on March 11, 2020, declaredCOVID-19~~ ~~a pandemic. Inmid-March~~ ~~2020, U.S. State Governors, local officials and leaders outside of the U.S. began ordering various“shelter-in-place”~~ orders which have had various impacts on the U.S. and global economies. This has required greater use of estimates and assumptions in the preparation of the Interim Statements, specifically those estimates and assumptions utilized in the Company’s forecasted cash flows that form the basis in developing the fair values utilized in its impairment assessments, annual effective tax rate, and assessment of the realizability of deferred tax assets. This has included assumptions as to the duration and severity of the~~COVID-19~~ pandemic, timing and amount of demand shifts for the Company’s services, labor availability and productivity, supply chain continuity, required remedial measures, and timing as to a return to normalcy.

~~As theCOVID-19~~ pandemic continues to evolve, the Company believes the extent of the impact to its businesses, operating results, cash flows, liquidity and financial condition will be primarily driven by the severity and duration of the~~COVID-19~~ pandemic, the pandemic’s impact on the U.S. and global economies and the timing, scope and effectiveness of federal, state and local governmental responses to the pandemic. Those primary drivers are beyond the Company’s knowledge and control, and as a result, at this time the Company is unable to predict the cumulative impact, both in terms of severity and duration, that~~COVID-19~~ will have on its businesses, operating results, cash flows and financial condition, but it could be material if the current circumstances continue to exist for a prolonged period of time. Although we have made our best estimates based upon current information, actual results could materially differ from the estimates and assumptions developed by management. If so, the Company may be subject to future incremental impairment charges as well as changes to recorded reserves and valuations.

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

~~Goodwill impairment:~~ Goodwill represents the excess of cost over the fair market value of net tangible and identifiable intangible assets of acquired businesses. Goodwill is not amortized but instead is annually tested for impairment, or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired. The Company has recorded goodwill in connection with its historical acquisitions of businesses. Upon acquisition, these businesses were either combined into one of the existing components or managed on a stand-alone basis as an individual component.

The components are aligned to one of the Company’s three reportable segments, Safety Services, Specialty Services, or Industrial Services. Goodwill is required to be evaluated for impairment at the reporting unit level, which represents the operating segment level or one level below the operating segment level for which discrete financial information is available.

Management identifies its reporting units by assessing whether components have discrete financial information available, engage in business activities, and have a segment manager regularly review the component’s operating results. If two or more components are deemed economically similar, those components are aggregated into one reporting unit when performing the annual goodwill impairment test.

The Company performs its annual goodwill impairment assessment on October 1 each fiscal year, or more frequently if events or circumstances arise which indicate that goodwill may be impaired. Qualitative indicators that may trigger the need for annual or interim quantitative impairment testing include, among other things, deterioration in macroeconomic conditions, declining financial performance, deterioration in the operational environment, or an expectation of selling or disposing of a portion of a reporting unit. Additionally, a significant change in business climate, a loss of a significant customer, increased competition, a sustained decrease in share price, or a decrease in estimated fair value below book value may trigger the need for interim impairment testing of goodwill associated with one or more reporting units.

While the Company’s services have largely been deemed essential, the Company did experience negative impacts on its operations in the latter part of March as the shelter-in-place orders began. The impact of COVID-19 has negatively impacted the Company’s operations, suppliers and other vendors, and customer base. In addition to the impacts of COVID-19, the Company was also impacted by a significant decline in demand and volatility in oil prices as some of the Company’s services involve work within the oil and gas industry. As a result, during the first quarter of 2020, the Company concluded that an impairment triggering event had occurred for all of its reporting units and performed impairment tests for its goodwill and recoverability tests for its long-lived assets, which primarily include finite-lived intangible assets, property and equipment and right of use lease assets. As a result of the impairment testing performed in connection with the triggering event, the Company determined that certain of its goodwill and intangible assets were impaired as the preliminary carrying values exceeded fair values. The Company recorded an aggregate non-cash charge during the three months ended March 31, 2020 in connection with these impairments. See Note 7 – “Goodwill and Intangibles” for further information.

As a result of the impairment triggering event and the Company performed an impairment test for its goodwill at all reporting units. The Company performed a quantitative test comparing the fair value of each reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recorded as a reduction to goodwill with a corresponding change to earnings in the period the goodwill is determined to be impaired. Any goodwill impairment is limited to the total amount of goodwill allocated to that reporting unit. As of March 31, 2020, the Company had not finalized its purchase price allocation for the APi Acquisition (See Note 4 – “Business Combinations”). The carrying value of each reporting unit used in the impairment test was based on preliminary values from the APi Acquisition. The Company anticipates it will finalize its accounting for the APi Acquisition during the third quarter of 2020, which will lead to changes in the carrying value of each reporting unit and may change the corresponding impairment charge recognized in each reporting unit.

The Company determines the fair value of its reporting units using a combination of the income approach (discounted cash flow method) and market approach (guideline transaction method and guideline public company method). Management weighs each of the methods applied to determine the fair value of its reporting units.

Under the discounted cash flow method, the Company determines fair value based on the estimated future cash flows for each reporting unit, discounted to present value using a risk-adjusted industry weighted-average cost of capital, which reflects the overall level of inherent risk for each reporting unit and the rate of return an outside investor would expect to earn. Cash flow projections are derived from budgeted amounts (typically a~~one-year~~ model) and subsequent period cash flows are developed for each reporting unit using growth rates that management believes are reasonably likely to occur from a market participant’s standpoint. All cash flow projections by reporting unit are evaluated by management. A terminal value is derived by capitalizing free cash flow into perpetuity. The capitalization rate is derived from the weighted-average cost of capital and the estimated long-term growth rate for each reporting unit.

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

Under the guideline transaction and guideline public company methods, the Company determines the estimated fair value for each of its reporting units by applying transaction multiples and public company multiples, respectively, to each reporting unit’s applicable earnings measure. The transaction multiples are based on observed purchase transactions for similar businesses adjusted for size, diversification and risk. The public company multiples are based on peer group multiples adjusted for size, growth, risk and margin.

~~Impairment of long-lived assets excluding goodwill:~~ The Company periodically reviews the carrying amount of its long-lived asset groups, including property and equipment and other identifiable intangibles subject to amortization, when events or changes in circumstances indicate the carrying value may not be recoverable. If facts and circumstances support the possibility of impairment, the Company will compare the carrying value of the asset or asset group with the undiscounted future cash flows related to the asset or asset group. If the carrying value of the asset or asset group is greater than its undiscounted cash flows, the resulting impairment will be determined as the difference between the carrying value and the fair value, where fair value is determined for the carrying amount of the specific asset groups based on discounted future cash flows or appraisal of the asset groups.

~~As noted above in “Use of estimates and risks and uncertainty ofCOVID-19”,~~ during the first quarter of 2020, the Company concluded that an impairment triggering event had occurred. The Company reviewed its long-lived assets for impairment and recorded a $5 impairment charge related to the intangible assets that were part of a business classified as held for sale at March 31, 2020. The impairment was measured under the market multiple approach, utilizing estimates of market multiples from the eventual sale of the business based on information obtained as part of the marketing process. The carrying value used in the impairment test was based on preliminary values from the APi Acquisition. The Company anticipates it will finalize its purchase price allocation for the APi Acquisition during the third quarter of 2020, which will lead to changes in the carrying value and may change the corresponding impairment charge.

~~Note~~NOTE 3. ~~Recent accounting pronouncements~~RECENT ACCOUNTING PRONOUNCEMENTS

See the recent accounting pronouncements discussion below for information pertaining to the effects of recently adopted and other recent accounting pronouncements as updated from the discussion in the Company’s ~~2019~~2020 audited consolidated financial statements included in the ~~Registration Statement~~Company’s Form 10-K filed on ~~FormS-4~~ ~~effective May 1, 2020.~~

~~Accounting standards issued and adopted:~~

~~In August 2018, the FASB issued ASUNo. 2018-13,~~~~Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement~~. The ASU removes the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. The ASU requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments or changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company adopted this guidance as of January 1, 2020, which did not have a material impact on its consolidated financial position, results of operations, cash flows, or disclosures.

~~In June 2016, the FASB issued ASUNo. 2016-13,~~~~Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~, to replace the incurred loss model for financial assets measured at amortized cost and require entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. For trade and other receivables, contract assets, loans and other financial

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

instruments, the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. The Company adopted this guidance as of January 1, 2020, which did not have a material impact on its consolidated financial statements as credit losses are not expected to be significant based on historical trends, the financial condition of our customers and external factors. Management actively monitors the economic environment, including any potential effects from the~~COVID-19~~ ~~pandemic, on the Company’s customers and its financial assets.~~March 24, 2021.

Accounting ~~standards issued but not yet adopted:~~Standards Issued and Adopted:

In January 2020, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ASU2020-01,Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (“(“ASU2020-01”)to clarify the interaction in accounting for equity securities under Topic 321, investments accounted for under the equity method of accounting in Topic 323, and the accounting for certain forward contracts and purchased options accounted for under Topic 815. ASU2020-01 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020 with early adoption permitted. The Company ~~is currently evaluating the potential effect of~~adopted this ASU on January 1, 2021 and it did not have a material impact on its consolidated financial statements.

In December 2019, the FASB issued ASU2019-12,Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“(“ASU2019-12”), which eliminates certain exceptions to the existing guidance for income taxes related to the approach for intra-period tax allocations, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside

basis differences. This ASU also simplifies the accounting for income taxes by clarifying and amending existing guidance related to the effects of enacted changes in tax laws or rates in the effective tax rate computation, the recognition of franchise tax, and the evaluation of astep-up in the tax basis of goodwill, among other clarifications. ASU2019-12 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020 with early adoption permitted. The Company ~~is currently evaluating the potential effect of~~adopted this ASU on January 1, 2021 and it had no impact on its consolidated financial statements.

~~Note~~NOTE 4. ~~Business Combinations~~BUSINESS COMBINATIONS

~~On September 2, 2019, the~~The Company (then known as J2 Acquisition Limited) entered into an agreement (the “Purchase Agreement”) to acquire all of the issued and outstanding capital stock of APi Group (the “APi Acquisition”), a market-leading business services provider of safety, specialty, and industrial services in over 200 locations, primarily in North America. In accordance with the terms of the Purchase Agreement, on October 1, 2019, the Company completed the APi Acquisition and obtained control of APi Group and, concurrently, changedcontinually evaluates potential acquisitions that strategically fit within the Company’s ~~name to APi Group Corporation.~~

~~The aggregate purchase price consideration transferred to~~existing portfolio or expand the shareholders of APi Group (the “Sellers”) totaled $2,991, which included: i) a cash payment made at closing of $2,565, net of cash acquired; ii) deferred purchase consideration with an estimated fair value of $135; and iii) 28,373,000 ordinary shares of the Company with a value of $291. The Company funded the cash portion of the purchase price with a combination of cash on hand, a $1,200 term loan underCompany’s portfolio into a new ~~term loan facility (see Note 11 – “Debt”)~~ and ~~approximately $207 of proceeds from a warrant exercise.~~

The deferred purchase price consideration is an estimate of future payments to be made to the Sellers pursuant to the terms of the Purchase Agreement upon final determination of certain income tax related matters. Prior to the APi Acquisition, APi Group was structured for United States (“US”) income tax purposes as a “flow through entity”. Pursuant to the terms of the Purchase Agreement, the Company agreed to pay to the Sellers the following amounts: i) up to $130 related to an Internal Revenue Code (“IRC”) Section 338(h)(10) election made by the Sellers; ii) up to $22.5 for IRC Section 965 taxes incurred by the Sellers and; iii) an amount sufficient to cover the Sellers’ state and federal tax liabilities for 2019. These deferred paymentsattractive business area. Acquisitions are expected to be paid to the Sellers over the course of approximately 18 months from the APi Acquisition date. A final determination of the amounts of deferred purchase consideration due to the sellers will not be determined until such time that the Company files its final 2019 tax return. The

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

Company expects to file its final 2019 tax returns no later than the fourth quarter of 2020. The fair value of the deferred purchase consideration is based on management’s estimated amounts and timing of future payments, discounted utilizing rates ranging from 2.6% to 2.8% to reflect market participant assumptions. The discount rate utilized was a risk-free rate selected based on the nearest risk-free rate term associated with the payments of the deferred purchase consideration, with a credit risk premium applied as the payments are not risk-free. During the three months ended March 31, 2020, the Company recorded measurement period adjustments related to revising the estimate of deferred consideration, which reduced the purchase price by $12.

~~The estimated fair value of the Company’s capital stock issued as purchase consideration was determined in accordance with ASC 820,~~~~Fair Value Measurement~~ ~~(“ASC 820”)~~.

~~The APi Acquisition was~~ accounted for as a business ~~combination~~combinations using the acquisition method of ~~accounting in accordance with ASC 805,~~~~Business Combinations~~~~(“ASC 805”). The~~accounting. As such, the Company makes a preliminary allocation of the purchase price ~~has been preliminarily allocated~~ to the tangible assets and identifiable intangible assets acquired and liabilities assumed. In the months after closing, as the Company obtains additional information about the acquired assets and liabilities and learns more about the newly acquired business, it is able to refine the estimates of fair value and more accurately allocate the purchase price. Purchase price is allocated to acquired assets and liabilities assumed based upon their estimated fair values as determined based on estimates and assumptions deemed reasonable by the Company. The Company engages third-party valuation specialists to assist with ~~the exception~~preparation of critical assumptions and calculations of the ~~following: i)pre-acquisition~~ ~~contingencies which are recognized and measured in accordance with ASC 450,~~~~Contingencies~~ ~~(“ASC 450”) if~~ fair value ~~cannot be determined; ii) indemnification~~of acquired intangible assets ~~which are recognized and recorded~~ in ~~accordance~~connection with ASC 805 consistent with that used to measure the liabilities to which they relate, subject to any contractual limitations; iii) deferred income tax assets acquired and liabilities assumed which are recognized and measured in accordance with ASC 740,~~Income Taxes~~~~; iv) certain lease related assets and liabilities which are measured and recognized in accordance with ASC 842,~~~~Leases~~ ~~and; v) assets held for sale which are measured in accordance with ASC 360,~~~~Impairment or Disposal of Long-Live Assets~~. The Company has not finalized its accounting for the APi Acquisition as this transaction occurred during the fourth quarter of 2019. The areas of the purchase price allocation that are not yet finalized are primarily related to the valuation of: i) property and equipment; ii) intangible assets; iii) lease-related assets and liabilities; iv) indemnification assets and; v)~~pre-acquisition~~ ~~contingencies. Additionally, the purchase price allocation is provisional for incometax-related~~ matters and a final determination of deferred purchase consideration. The Company anticipates it will finalize its accounting for the APi Acquisition, including the allocation of goodwill to reporting units, during the third quarter of 2020.

significant acquisitions. The excess of the purchase price over the tangible and intangible assets acquired and liabilities assumed ~~has been~~is recorded as goodwill. The APi Acquisition resulted in recorded goodwill as a result of a higher consideration multiple paid relative to prior similar acquisitions driven by maturity and quality of the operations and industry, including workforce, and how the Company expects to leverage this business within the public capital markets to create additional value for its shareholders. The Company has assigned the provisional goodwill to its reportable segments as follows: i) Safety Services—$633; ii) Specialty Services—$286; iii) Industrial Services—$50. Under the terms of the Purchase Agreement, the Sellers made a Section 338(h)(10) election under the US IRC. Accordingly, goodwillGoodwill is attributable to the ~~US operating subsidiaries~~workforce of the acquired businesses, the complementary strategic fit and ~~thestep-up~~resulting synergies these businesses bring to ~~fair value allocated~~existing operations, and the opportunities in new markets expected to ~~US domiciled property~~be achieved from the expanded platform.

2021 Acquisitions

During the first six months of 2021, the Company completed several individually immaterial acquisitions for consideration transferred of $13, made up of cash paid at closing of $12 and ~~equipment~~accrued consideration of $1. The results of operations of these acquisitions are included in the Company’s unaudited condensed consolidated statement of operations from their respective dates of acquisition and were not material.

2020 Acquisitions

During 2020, the Company completed the acquisition of SK FireSafety (“SKG”) within the Safety Services segment and a number of other immaterial acquisitions for consideration transferred of $324, which includes a cash payment made at closing of $319, net of cash acquired, and $5 of accrued consideration that may be paid out in 1-2 years.

SKG is a European market-leading provider of commercial safety services with operations primarily in the Netherlands, Belgium, Sweden, Norway, and the United Kingdom. On October 1, 2020, the Company completed the SKG Acquisition and acquired all of the outstanding stock. Through the acquisition of SKG, APG established a European platform for international organic and acquisition expansion. The other acquisitions were primarily in the Safety Services segment and based in the United States.

The Company has not finalized its accounting for all 2020 acquisitions that occurred during the fourth quarter of 2020. The areas of the purchase price allocation not yet finalized are primarily related to SKG and include the valuation of intangible assets ~~reflected in~~and goodwill and income tax related matters. The Company will make appropriate adjustments to the ~~acquisition date balance sheet are~~purchase price allocation prior to completion of the measurement period, as required. During Q2 2021, we recorded a measurement period adjustment, primarily related to intangible assets and goodwill, for which the resulting impact to amortization expense was immaterial. Based on preliminary estimates, the total amount of goodwill from the 2020 acquisitions expected to be deductible for ~~US income tax purposes. The provisional amount of goodwill that is expected to be deductible for US income~~ tax purposes is ~~$917.~~

~~Prior~~$20. See Note 6 – “Goodwill and Intangibles” for the provisional goodwill assigned to the APi Acquisition, one of the APi Group subsidiaries was the subject of a class action lawsuit in which the plaintiffs claim the Subsidiary owed unpaid overtime wages stemming from its alleged misclassification of employees as exempt from~~time-and-a-half~~ pay under the Fair Labor Standards Act (FLSA). During September 2019, prior to the APi Acquisition, a tentative settlement was reached under which the Subsidiary agreed to pay approximately $20 to the participants in the class action. Accordingly, pursuant to ASC 805, a liability for this~~pre-acquisition~~ contingency was recognized. This matter was included as a specifically identified indemnification matter in the Purchase Agreement, for which the Company recognized an indemnification asset in purchase accounting, as the amount is deemed realizable based on the contractual nature of this item. During the quarter ended March 31, 2020, the indemnified matter was funded by the former stockholders.each segment.

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

The following table summarizes ~~the preliminary fair value of consideration transferred and~~ the preliminary estimated fair values of the assets acquired and liabilities assumed at the ~~date~~dates of ~~the APi Acquisition:~~acquisition:

Cash paid at closing
   $ 2,703
Deferred consideration
   135
Share consideration—28,373,000 APG ordinary shares
   291


Total consideration
   $ 3,129



Cash
   $ 138
Accounts receivable
   770
Contract assets
   350
Other current assets
   182
Property and equipment
   416
Finance and operating lease right of use assets
   102
Other noncurrent assets
   72
Assets held for sale
   14
Intangibles
   1,182
Goodwill
   969
Accounts payable
   (188 )
Contract liabilities
   (206 )
Accrued expenses
   (392 )
Other current liabilities
   (57 )
Operating lease liability
   (101 )
Finance lease liability
   (18 )
Deferred tax liability
   (25 )
Other noncurrent liabilities
   (79 )


Net assets aquired
   $ 3,129

The fair value of the acquired trade accounts receivables approximates the carrying value of trade accounts receivables due to the short-term nature of the expected timeframe to collect the amounts due to the Company and the contractual cash flows, which are expected to be collected related to these receivables.

As part of the purchase price allocation, the Company determined the identifiable intangible assets were: i) customer relationships; ii) tradenames and trademarks and; iii) contractual backlog. The fair value of the intangible assets was estimated using variations of the income approach. Specifically, the excess earnings method was utilized to estimate the fair value of the customer relationships and the contractual backlog and the relief from royalty method was utilized to estimate the fair value of the tradenames and trademarks. The customer relationships intangible asset pertains to APi Group’s~~non-contractual~~ relationships with its customers. Tradenames and trademarks relate to the individual acquired subsidiaries’ names and overall consolidated group name and related industry recognition. Contractual backlog represents the expected remaining cash flows to be received under~~non-cancellable~~ customer contracts, which are anticipated to be completed within the next 15 months. The cash flow projections were discounted using rates ranging from 15.7% to 17.5%. The cash flows were based on estimates used to price the transaction, including market participant considerations, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital.

Cash paid at closing	$	329
Deferred consideration		5
Total consideration	$	334

Cash	$	10
Other current assets		76
Property and equipment		12
Customer relationships		82
Trade names and trademarks		16
Contractual backlog		1
Goodwill		215
Other noncurrent assets		14
Current liabilities		(54	)
Noncurrent liabilities		(38	)
Net assets acquired	$	334

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

The ~~following table summarizes the preliminary fair value of the identifiable intangible assets:~~

Contractual backlog
   $ 112
Customer relationships
   762
Tradenames and trademarks
   308


Total intangibles
   $ 1,182

The estimated useful lives over which the intangible assets will be amortized are as follows: contractual backlog (15 months), customer relationships (8 years), and tradenames and trademarks (15 years).

Pursuant to the terms of the Purchase Agreement, approximately $2 of cash consideration and $18 of share consideration (1,746,342 ordinary shares) were placed into escrow. As of March 31, 2020, 608,016 shares had been released from escrow. The cash escrow and share consideration escrow represent escrow accounts established for consideration adjustments that may be required to be made by the employee stock ownership plan (“ESOP”). The share consideration placed in escrow is specifically related to any indemnification matters, including certain specifically identified indemnification matters in the Purchase Agreement (the “Indemnity Escrow Account”) related to~~pre-acquisition~~ asserted claims and litigation. The Indemnity Escrow Account will remain in place until the later of March 31, 2021 or the receipt of the Final Determination Letter (as defined in the Purchase Agreement) in relation to the termination of the ESOP, to the extent there are no submitted but unsettled indemnification claims at that date. Prior to the APi Acquisition, the ESOP held an approximately 36% ownership interest in APi Group. Pursuant to the terms of the Purchase Agreement, the Purchase Agreement contains an indemnification cap of $45. For any indemnification claims that are identified, the~~pro-rata~~ ~~portion that relates to the ESOP shareholders of APi Group will be paid from the Indemnity Escrow Account up to $18. For any indemnification claims that are identified, thepro-rata~~ ~~portion that relates to thenon-ESOP~~ ~~shareholders of APi Group will require settlement directly from those former shareholders.~~

The following unaudited pro forma consolidated financial information reflects the results of operations of the Company for the three months ended March 31, 2019 as if the APi Acquisition and related financing had occurred as of January 1, 2018, after giving effect to certain purchase accounting and financing adjustments. These amounts are based on financial information of APi Group and are not necessarily indicative of what Company’s ~~operating results would have been had the~~ acquisition ~~and related financing taken place on January 1, 2018.~~

   Three Months
Ended
March 31, 2019
(Predecessor)
Net revenue
   $ 922
Net loss
   (10 )

Pro forma financial information is presented as if the operations of APi Group had been included in the consolidated results of the Company since January 1, 2018 and gives effect to transactions that are directly attributable to the APi Acquisition and related financing. Successor and Predecessor periods have been combined in the pro forma financial information for the three months ended March 31, 2019 with pro forma adjustments to adjust for the different basis in accounting between the Successor and the Predecessor. Adjustments include: additional depreciation and amortization expense related to the fair value of acquired property and equipment and intangible assets as if such assets were acquired on January 1, 2018; interest expense under the Company’s $1,200 term loan under a new term loan facility as if the amount borrowed to partially finance the purchase price was borrowed on January 1, 2018; and adjustments for interest and investment income on cash and cash equivalents and investments in marketable securities held by the Company for the three months ended March 31, 2019 related to

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

the IPO proceeds generated and invested until the completion of the APi Acquisition as the pro forma financial statements assume that the IPO financing occurred on January 1, 2018 and the proceeds were used to complete the APi Acquisition concurrently. Further adjustments assume income taxes for the Predecessor periods based on a blended US federal and state statutory tax rate.

~~The~~ purchase agreements ~~related to APi Group’s previously completed acquisitions~~ typically ~~included~~include deferred payment provisions, often to ~~the former owners,~~sellers who ~~became~~become employees of ~~APi Group.~~the Company. The provisions are made up of ~~two~~three general types of ~~arrangements both~~arrangements- contingent compensation and contingent consideration (both of which are contingent on the future performance of the acquired ~~entity; contingent~~entity) and deferred payments related to indemnities. Contingent compensation ~~and contingent consideration. Compensation~~ arrangements are ~~also~~ contingent on the former owner’s future employment with ~~APi Group. The expense~~the Company, and the related ~~to contingent compensation arrangements is~~amounts are recognized over the required employment period, which is typically three to five years. Contingent consideration arrangements are not contingent on employment and are included as part of purchase consideration at the time of the initial ~~acquisition. Both the compensation-type~~acquisition and ~~contingent consideration arrangements~~ are ~~typically~~ paid over a ~~three-~~three to ~~five-year~~five 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 twelve to twenty-four month 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.

The total contingent compensation arrangement liability ~~assumed as part of the APi Acquisition~~ was ~~$27. The total contingent compensation arrangement liability was $34~~$15 and ~~$30~~$39 at ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019,~~2020, respectively. The maximum payout of these arrangements upon completion of the future performance periods ~~is $102~~was $46 and ~~$99,~~$85, inclusive of the ~~$34~~$15 and ~~$30~~$39, accrued as of ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019,~~2020, respectively. The contingent compensation liability is included in contingent consideration and compensation liabilities in the unaudited condensed consolidated balance sheets for all periods presented. ~~Compensation expense is recognized~~The Company primarily determines the contingent compensation liability based on ~~the individual arrangement’s portion of the~~forecasted cumulative earnings ~~achieved~~ compared to the cumulative earnings target set forth in the ~~arrangement in conjunction~~arrangement. For one of the Company’s contingent compensation arrangements, the liability is determined based on the Monte Carlo Simulation method. Compensation expense associated with ~~the portion of~~these arrangements is recognized ratably over the required employment ~~period that has passed compared to what is remaining.~~period.

The total ~~accrued~~liability for deferred payments was $11 and $16 at June 30, 2021 and December 31, 2020, respectively, and are included in contingent consideration ~~obligation assumed as part of the APi Acquisition was $8 which is included in other accrued~~ and ~~other noncurrent~~compensation liabilities ~~as of October 1, 2019.~~

The fair value of the contingent consideration obligations assumed related to APi Group’s previously completed acquisitions is determined using a probability-weighted discounted cash flow method. This fair value measurement is based on significant unobservable inputs in the market and thus represents a Level 3 measurement within the fair value hierarchy. This analysis reflects the contractual terms of the purchase agreements (e.g., potential payment amounts, length of measurement periods, manner of calculating any amounts due, etc.) and utilizes assumptions with regard to future cash flows, probabilities of achieving such future cash flows and a discount rate. There are no elements of contingent consideration related to the APi Acquisition, other than those liabilities assumed related to APi Group’s previously completed acquisitions. See Note 8 – “Fair Value of Financial Instruments” for further information regarding the contingent consideration liabilities.

In conjunction with the APi Acquisition, the Company acquired certain assets that qualified as held for sale. Accordingly, these assets were recognized by the Company in purchase accounting at fair value less the cost to sell and totaled $14. All of these assets were sold by the Company as of March 31, 2020.

~~Note 5. Divestitures and Held for Sale~~

During the fourth quarter 2019, the Company determined its intent to sell or otherwise discontinue operations of two subsidiaries in its Industrial Services segment and classified the net book value of those companies as held for sale in the consolidated balance sheet. As of March 31, 2020, the Company has completed the divestiture of one of the subsidiaries and the other subsidiary remains classified as held for sale. The sale was completed for $10, for which the Company recorded a note receivable within prepaid expense and other current assets on theunaudited condensed consolidated balance ~~sheet. The divestiture resulted in no gain or loss on sale.~~sheets for all periods presented.

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

~~The following table presents information related to the major classes of assets that were classified as assets held for sale in the consolidated balance sheets:~~

   March 31,
2020
(Successor)    December 31,
2019
(Successor)
Property and equipment, net
   $ —      $ 9
Goodwill
   —      1
Intangible assets, net⁽¹⁾
   5    10




Total assets held for sale
   $ 5    $ 20

~~(1)~~

~~During the three months ended March 31, 2020, the Company recorded an impairment of $5 on the intangible assets of a subsidiary held for sale as a result of the triggering events associated with theCOVID-19~~ ~~pandemic.~~

~~Note 6. Revenue~~NOTE 5. REVENUE

Under ASC 606,Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when or as control of promised goods and services is transferred to customers, and the amount of revenue recognized reflects the consideration to which an entity expects to be entitled in exchange for the goods and services transferred. Revenue is primarily recognized by the Company over time utilizing thecost-to-cost measure of progress, consistent with the Company’s previous revenue recognition practices. Revenue recognized at a point in time relates primarily to distribution contracts and was not material for the three and six months ended ~~March 31,~~June 30, 2021 and 2020, ~~(Successor) and 2019 (Predecessor),~~ respectively.

Contracts with ~~customers:~~Customers

The Company derives revenue primarily from Safety Services, Specialty Services and Industrial Services contracts with a duration of less than one week to three years ~~with~~(with the majority of contracts with durations of less than six ~~months,~~months) which are subject to multiple pricing options, including fixed price, unit price, time and ~~materials,~~material, or cost plus a markup. The Company also enters into ~~fixed-price~~fixed price service contracts related to monitoring, maintenance and inspection of safety systems. The Company may utilize subcontractors in the fulfillment of its performance obligations. When doing so, the Company is considered the principal in these transactions and revenue is recognized on a gross basis.

Revenue for fixed price agreements is generally recognized over time using thecost-to-cost method of accounting, which measures progress based on the cost incurred relative to total expected cost in satisfying ~~its~~the performance obligation. Thecost-to-cost method is used as it best depicts the continuous transfer of control of goods or services to the customer. Costs incurred include direct materials, labor and subcontract costs, and indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. These contract costs are included in the results of operations under cost of revenues. Labor costs are considered to be incurred as the work is performed. Subcontractor labor is recognized as the work is performed.

Revenue from time and material contracts is recognized as the services are provided and is equal to the sum of the contract costs incurred plus an agreed upon markup. Revenue earned from distribution contracts is recognized upon shipment or performance of the service.

The cost estimation process for recognizing revenue over time under thecost-to-cost method is based on the professional knowledge and experience of the Company’s project managers, engineers and financial professionals. Management reviews estimates of total contract transaction price and total project costs on an ongoing basis. Changes in job performance, job conditions, and management’s assessment of expected variable consideration are factors that influence estimates of the total contract transaction price, total costs to complete those contracts, and the Company’s profit recognition. Changes in these factors could result in cumulative revisions to revenue in the period in which the revisions are determined, which could materially affect the Company’s consolidated results of operations for that period. Provisions for estimated losses on uncompleted contracts are recorded in the period in which such estimated losses are determined.

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

The Company disaggregates its revenue primarily by segment, service type, and country from which revenue is invoiced, as the nature, timing and uncertainty of cash flows are relatively consistent within each of these categories. Disaggregated revenue information is as follows:

	Three Months Ended June 30, 2021
	Safety Services		Specialty Services		Industrial Services		Corporate and Eliminations			Consolidated
Life Safety	$	403	$	—	$	—	$	—		$	403
Heating, Ventilation and Air Conditioning ("HVAC")		109		—		—		—			109
Infrastructure/Utility		—		201		—		—			201
Fabrication		—		59		—		—			59
Specialty Contracting		—		155		—		—			155
Transmission		—		—		51		—			51
Civil		—		—		17		—			17
Corporate and Eliminations		—		—		—		(17	)		(17	)
Net revenues	$	512	$	415	$	68	$	(17	)	$	978

													Three Months Ended June 30, 2020
	Three Months Ended March 31, 2020 (Successor)												Safety Services		Specialty Services		Industrial Services		Corporate and Eliminations			Consolidated
	Safety		Specialty		Industrial		Corporate and
	Services		Services		Services		Eliminations			Consolidated
Life safety	$	343	$	—	$	—	$	—		$	343
Mechanical		81		—		—		—			81
Life Safety													$	298	$	—	$	—	$	—		$	298
HVAC														73		—		—		—			73
Infrastructure/Utility		—		170		—		—			170			—		215		—		—			215
Fabrication		—		38		—		—			38			—		33		—		—			33
Specialty contracting		—		92		—		—			92
Specialty Contracting														—		101		—		—			101
Transmission		—		—		93		—			93			—		—		116		—			116
Civil		—		—		7		—			7			—		—		18		—			18
Inspection		—		—		37		—			37			—		—		39		—			39
Corporate and eliminations		—		—		—		(3	)		(3	)

Corporate and Eliminations														—		—		—		(4	)		(4	)
Net revenues	$	424	$	300	$	137	$	(3	)	$	858		$	371	$	349	$	173	$	(4	)	$	889



	Three Months Ended March 31, 2019 (Predecessor)
	Safety		Specialty		Industrial		Corporate and
	Services		Services		Services		Eliminations			Consolidated
Life safety	$	334	$	—	$	—	$	—		$	334
Mechanical		92		—		—		—			92
Infrastructure/Utility		—		160		—		—			160
Fabrication		—		41		—		—			41
Specialty contracting		—		85		—		—			85
Transmission		—		—		151		—			151
Civil		—		—		2		—			2
Inspection		—		—		60		—			60
Corporate and eliminations		—		—		—		(3	)		(3	)

Net revenues	$	426	$	286	$	213	$	(3	)	$	922


	Three Months Ended March 31, 2020 (Successor)
	Safety		Specialty		Industrial		Corporate and
	Services		Services		Services		Eliminations			Consolidated
United States	$	376	$	300	$	131	$	(3	)	$	804
Canada and United Kingdom		48		—		6		—			54

Net revenues	$	424	$	300	$	137	$	(3	)	$	858



	Three Months Ended March 31, 2019 (Predecessor)
	Safety		Specialty		Industrial		Corporate and
	Services		Services		Services		Eliminations			Consolidated
United States	$	374	$	286	$	186	$	(3	)	$	843
Canada and United Kingdom		52		—		27		—			79

Net revenues	$	426	$	286	$	213	$	(3	)	$	922

	Six Months Ended June 30, 2021
	Safety Services		Specialty Services		Industrial Services		Corporate and Eliminations			Consolidated
Life Safety	$	771	$	—	$	—	$	—		$	771
HVAC		207		—		—		—			207
Infrastructure/Utility		—		341		—		—			341
Fabrication		—		141		—		—			141
Specialty Contracting		—		254		—		—			254
Transmission		—		—		73		—			73
Civil		—		—		20		—			20
Corporate and Eliminations		—		—		—		(26	)		(26	)
Net revenues	$	978	$	736	$	93	$	(26	)	$	1,781

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

	Six Months Ended June 30, 2020
	Safety Services		Specialty Services		Industrial Services		Corporate and Eliminations			Consolidated
Life Safety	$	641	$	—	$	—	$	—		$	641
HVAC		154		—		—		—			154
Infrastructure/Utility		—		385		—		—			385
Fabrication		—		71		—		—			71
Specialty Contracting		—		193		—		—			193
Transmission		—		—		209		—			209
Civil		—		—		25		—			25
Inspection		—		—		76		—			76
Corporate and Eliminations		—		—		—		(7	)		(7	)
Net revenues	$	795	$	649	$	310	$	(7	)	$	1,747

	Three Months Ended June 30, 2021
	Safety Services		Specialty Services		Industrial Services		Corporate and Eliminations			Consolidated
United States	$	422	$	415	$	59	$	(17	)	$	879
Canada and Europe		90		—		9		—			99
Net revenues	$	512	$	415	$	68	$	(17	)	$	978

	Three Months Ended June 30, 2020
	Safety Services		Specialty Services		Industrial Services		Corporate and Eliminations			Consolidated
United States	$	337	$	349	$	170	$	(4	)	$	852
Canada and Europe		34		—		3		—			37
Net revenues	$	371	$	349	$	173	$	(4	)	$	889

	Six Months Ended June 30, 2021
	Safety Services		Specialty Services		Industrial Services		Corporate and Eliminations			Consolidated
United States	$	805	$	736	$	80	$	(26	)	$	1,595
Canada and Europe		173		—		13		—			186
Net revenues	$	978	$	736	$	93	$	(26	)	$	1,781

	Six Months Ended June 30, 2020
	Safety Services		Specialty Services		Industrial Services		Corporate and Eliminations			Consolidated
United States	$	713	$	649	$	301	$	(7	)	$	1,656
Canada and Europe		82		—		9		—			91
Net revenues	$	795	$	649	$	310	$	(7	)	$	1,747

The Company’s contracts with its customers generally require significant services to integrate complex activities and equipment into a single deliverable and are, therefore, generally accounted for as a single performance obligation to provide a single contracted service

for the duration of the project. For contracts with multiple performance obligations, the transaction price of a contract is allocated to each performance obligation and recognized as revenue when or as the performance obligation is satisfied using the estimated stand-alone selling price of each distinct good or service. The stand-alone selling price is estimated using the expected cost plus a margin approach for each performance obligation. The aggregate amount of transaction price allocated to the performance obligations that are unsatisfied as of ~~March 31, 2020,~~June 30, 2021, was ~~$1,433.~~$1,251.

When more than one contract is entered into with a customer on or close to the same date, management evaluates whether those contracts should be combined and accounted for as a single contract as well as whether those contracts should be accounted for as one, or more than one, performance obligation. This evaluation requires significant judgment and is based on the facts and circumstances of the various contracts.

Contracts are often modified through change orders to account for changes in the scope and price of the goods or services being provided. Although the Company evaluates each change order to determine whether such modification creates a separate performance obligation, the majority of change orders are for goods or services ~~that are~~ not distinct within the context of the original contract and, therefore, ~~are~~ not treated as separate performance obligations but rather as a modification of the existing contract and performance obligation.

Variable ~~consideration:~~consideration

Transaction prices for customer contracts may include variable consideration which comprises items such as early completion bonuses and liquidated damages provisions. Management estimates variable consideration for a performance obligation utilizing estimation methods ~~that are~~ believed to best predict the amount of consideration to which the Company will be entitled. Variable consideration is included in the transaction price only to the extent it is probable, in the Company’s judgment, that a significant future reversal in the amount of cumulative revenue recognized under the contract will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

Changes in the estimates of transaction prices are recognized in revenue on a cumulativecatch-up basis in the period in which the revisions to the estimates are made. Such changes in estimates may also result in the reversal of previously recognized revenue if the ultimate outcome differs from the Company’s previous estimate. For the three and six months ended ~~March 31,~~June 30, 2021 and 2020, (Successor) and 2019 (Predecessor), the Company did not recognize significant revenue associated with the final settlement of contract value for any projects that were completed in prior periods. In addition, for the three months ended March 31, 2020 (Successor) and 2019 (Predecessor), there were no significant reversals of revenue recognized associated with the revision of transaction prices. The Company typically does not incur any returns, refunds or similar obligations after the completion of the performance obligation since any deficiencies are corrected during the course of performance.

Contract ~~assets~~Assets and ~~liabilities:~~Liabilities

The Company typically invoices customers with payment terms of net due in 30 days. It is also common for ~~the contract~~contracts in the ~~industry~~Company’s industries to specify ~~that~~ a general contractor is not required to submit payments to a subcontractor until it has received those funds from the owner or funding source. In most instances, the Company receives payment of invoices between 30 to 90 days of the date of the invoice.

The timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets include unbilled amounts from the Company’s projects when ~~revenues~~revenue is recognized under thecost-to-cost measure of progress ~~exceed~~and exceeds the amounts invoiced to the Company’s customers, as the amounts cannot be billed under the terms of the Company’s contracts. In addition, many of the Company’s time and ~~materials~~material arrangements are billed in arrears pursuant to contract terms, resulting in contract assets being recorded as revenue is recognized in advance of billings.

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

The Company utilizes the practical expedient under ASC 606 and does not adjust for a significant financing component if the time between payment and the transfer of the related good or service is expected to be one year or less. The Company’s revenue arrangements are typically accounted for under such expedient as payments are within one year of performance for the Company’s services. As of ~~March 31, 2020,~~June 30, 2021, none of the Company’s contracts contained a significant financing component. Contract liabilities from the Company’s ~~construction~~ contracts arise when amounts invoiced to the Company’s customers exceed revenues recognized under thecost-to-cost measure of progress. Contract liabilities also include advance payments from the Company’s customers on certain contracts. Contract liabilities decrease as the Company recognizes revenue from the satisfaction of the related performance obligation. ~~Contact~~Contract assets and liabilities are classified as current in the unaudited condensed consolidated balance sheets as all amounts are expected to be relieved within one year.

The opening and closing balances of accounts receivable, net of allowances, contract assets and contract liabilities from contracts with customers as of ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019~~2020 are as follows:

   March 31,    December 31, December 31,
   2020    2019 2018
   (Successor)    (Successor) (Predecessor)
Accounts receivable, net of allowances
   $ 662    $ 730 $ 765
Contract assets
   251    245 240
Contract liabilities
   205    193 203

Accounts

receivable,

net of

allowances

Contract

Assets

Contract

Liabilities

Balance as of June 30, 2021

664

184

232

Balance as of December 31, 2020

639

142

219

The Company did not recognize significant revenue associated with the final settlement of contract value for any projects that were completed in prior periods. In accordance with industry practice, accounts receivable includes retentions receivable, a portion of which may not be received within one year. At ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019,~~2020, retentions receivable were ~~$116~~$112 and ~~$133,~~$122, respectively, while the portions that may not be received within one year were ~~$24~~$20 and ~~$28,~~$26, respectively. There were no other significant changes due to business acquisitions or significant changes in estimates of contract progress or transaction price. There ~~was no~~were 0 significant ~~impairment~~impairments of contract assets recognized during the period.

Costs to ~~obtain~~Obtain or ~~fulfill~~Fulfill a ~~contract:~~Contract

The Company generally does not incur significant incremental costs related to obtaining or fulfilling a contract prior to the start of a project. The Company may incur certain fulfilment costs such as initial design or mobilization costs which are capitalized if: (i) they relate directly to the ~~contract,~~contract; (ii) are expected to generate resources that will be used to satisfy the Company’s performance obligation under the ~~contract,~~contract; and (iii) are expected to be recovered through ~~revenue~~revenues generated under the contract. Such costs, which are amortized over the life of the respective project, were not material for any period presented. ~~The Company generally does not incur any significant costs related to obtaining a contract with a customer.~~

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

NOTE 6. GOODWILL AND INTANGIBLES

Goodwill

~~Note 7. Goodwill and Intangibles~~

~~Goodwill:~~The changes in the ~~preliminary~~ carrying amount of goodwill by reportable segment for the ~~three~~six months ended ~~March 31, 2020~~June 30, 2021 are as ~~follows (amounts primarily represent~~follows:

	Safety Services			Specialty Services			Industrial Services		Total Goodwill
Goodwill as of December 31, 2020	$	906		$	172		$	4	$	1,082
Acquisitions		7			5			—		12
Measurement period adjustments and other ⁽¹⁾		(14	)		(1	)		—		(15	)
Goodwill as of June 30, 2021	$	899		$	176		$	4	$	1,079

⁽¹⁾

Measurement period adjustments related to the purchase accounting for SKG and finalization of certain immaterial acquisitions in 2020 (see Note 4 – “Business Combinations”). Other includes fluctuations due to foreign currency translation.

As of June 30, 2021, the ~~preliminary estimate~~Company has recorded accumulated goodwill impairment charges of ~~goodwill attributable~~$193, including $83 in the Safety Services segment, $52 in the Specialty Services segment, and $58 in the Industrial Services segment.

During 2020, while the Company’s services were largely deemed essential under various governmental orders, the Company did experience negative impacts from COVID-19 on its operations including impacts from the Company’s suppliers, other vendors, and customer base. In addition to the ~~APi Acquisition):~~

   Safety    Specialty    Industrial    Total
   Services    Services    Services    Goodwill
Goodwill as of December 31, 2019
   $ 639    $ 290    $ 51    $ 980
Acquisitions
   —      2    —      2
Impairments⁽¹⁾
   (34 )    (120 )    (49 )    (203 )
Measurement period adjustments
   (6 )    (4 )    (2 )    (12 )








Goodwill as of March 31, 2020
   $ 599    $ 168    $ —      $ 767

~~(1) During~~impacts of COVID-19, the Company was also impacted by a significant decline in demand and volatility in oil prices as some of the Company’s services involve work within the energy industry. As a result of these factors and the significant decline in the Company’s market capitalization during the first quarter of 2020, the Company concluded ~~that a~~an impairment triggering event had occurred for all of its reporting units ~~(See Note 2 – “Basis~~and performed impairment tests for its goodwill and recoverability tests for its long-lived assets, which primarily include finite-lived intangible assets, property and equipment and right of ~~Presentation and Significant Accounting Policies”). Pursuant to~~use lease assets. During the ~~authoritative literature,~~first quarter of 2020, based on preliminary carrying values from the October 1, 2019 acquisition of APi Group, Inc. (“APi Acquisition”), the Company ~~performed an impairment test and~~determined goodwill was impaired as the preliminary carrying values of some reporting units exceeded fair values. The Company recorded an impairment charge to goodwill of $203 ~~to reflect~~based on preliminary carrying values. During the ~~impairment~~third quarter of ~~its goodwill. The impairment charge of $34 recorded within~~2020 when purchase accounting was finalized, the Safety Services segment was recorded within the Mechanical reporting unit. The impairment charge of $120 recorded within the Specialty Services segment was recorded within the Infrastructure/Utility reporting unit, Fabrication reporting unit and Specialty Contracting reporting unit for $80, $17 and $23, respectively. The impairment charge of $49 recorded within the Industrial Services segment was recorded within the Transmission reporting unit and Civil reporting unit for $45 and $4, respectively. The impairment charge was ~~recorded based on preliminary estimates of each reporting unit’s carrying values, and may change in future periods as the accounting for the APi Acquisition is~~ finalized ~~(See Note 2 – “Basis of Presentation and Significant Accounting Policies”).~~at $197.

Intangibles

~~Intangibles:~~The ~~Company has the following~~Company’s identifiable intangible assets are comprised of the following as of ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019 (amounts primarily represent the preliminary estimate of intangibles attributable to the APi Acquisition):~~2020:


	March 31, 2020
	Weighted-Average		Gross
	Useful Lives		Carrying		Accumulated			Net Carrying		June 30, 2021
	(Years)		Amount		Amortization			Amount		Weighted Average Remaining Useful Lives (in Years)		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Amortized intangibles:
Backlog intangibles		1	$	112	$	(45	)	$	67
Contractual backlog											1.3	$	100	$	(95	)	$	5
Customer relationships		8		755		(48	)		707		6.6		833		(170	)		663
Trade names		15		305		(10	)		295		13.5		275		(31	)		244

Total			$	1,172	$	(103	)	$	1,069			$	1,208	$	(296	)	$	912


	December 31, 2019
	Weighted-Average		Gross
	Useful Lives		Carrying		Accumulated			Net Carrying
	(Years)		Amount		Amortization			Amount
Amortized intangibles:
Backlog intangibles		1	$	112	$	(22	)	$	90
Customer relationships		8		755		(24	)		731
Trade names		15		305		(5	)		300

Total			$	1,172	$	(51	)	$	1,121

	December 31, 2020
	Weighted Average Remaining Useful Lives (in Years)		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Amortized intangibles:
Contractual backlog		1.6	$	101	$	(92	)	$	9
Customer relationships		7.0		823		(119	)		704
Trade names		13.8		274		(22	)		252
Total			$	1,198	$	(233	)	$	965

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

Amortization expense recognized on ~~intangibles was~~identifiable intangible assets are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Cost of revenues	$	2	$	23	$	3	$	45
Selling, general, and administrative expense		30		28		60		58
Total intangible asset amortization expense	$	32	$	51	$	63	$	103

During the first quarter 2020, the Company concluded an impairment triggering event had occurred. The Company reviewed its long-lived assets for impairment and recorded a $5 preliminary impairment charge related to the intangible assets that were part of a business classified as held for sale. The impairment was based on preliminary carrying values from the APi Acquisition which were later finalized in the third quarter of 2020, and as a result the final impairment charge related to intangible assets was adjusted to $0.

   Three Months Ended March 31,
   2020
(Successor)       2019
(Predecessor)
Cost of revenues
   $ 22       $ —
Selling, general, and administrative expense
   30       9




Total intangible asset amortization expense
   $ 52       $ 9

During the year ended December 31, 2020, the Company finalized the fair value of goodwill and intangible assets related to the APi Acquisition. The measurement period adjustments recorded during the year ended December 31, 2020 resulted in a cumulative reversal to amortization expense that had been recorded earlier in the year. If the final intangible assets fair values had been known at the date of the APi Acquisition, amortization expense would have decreased by $5 and $10 for the three and six months ended June 30, 2020, to $46 and $93, respectively.

~~Note 8. Fair Value of Financial Instruments~~NOTE 7. FAIR VALUE OF FINANCIAL INSTRUMENTS

U.S. GAAP defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. ~~Management considers debt to approximate fair value.~~ The authoritative guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). These valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. As the basis for evaluating such inputs, a three-tier value hierarchy prioritizes the inputs used in measuring fair value as follows:

~~Level~~ 1:

Level 1:

Observable inputs such as quoted prices for identical assets or liabilities in active markets.

~~Level~~ 2:

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:

Level 3:

Unobservable inputs that reflect the reporting entity’s own assumptions.

Recurring Fair Value ~~Measurements:~~Measurements

The Company’s financial assets and liabilities ~~adjusted~~(adjusted to fair value at least ~~annually~~quarterly) are derivative instruments ~~and contingent consideration,~~ which are primarily included in other noncurrent liabilities and contingent consideration which is primarily included in contingent consideration and compensation ~~liabilities.~~liabilities in the unaudited condensed consolidated balance sheets.

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 ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019:~~2020:

												Fair Value Measurements at June 30, 2021
	Fair Value Measurements at March 31, 2020
	Level 1		Level 2			Level 3			Total
Derivatives	$	—	$	(36	)	$	—		$	(36	)
Assets (Liabilities)												Level 1		Level 2			Level 3			Total
Derivatives designated as effective hedges
Interest rate swaps												$	—	$	(24	)	$	—		$	(24	)
Cross currency swaps													—		—			—			—
Net investment hedges													—		1			—			1
Contingent consideration obligations		—		—			(9	)		(9	)		—		—			(1	)		(1	)
												$	—	$	(23	)	$	(1	)	$	(24	)
	$	—	$	(36	)	$	(9	)	$	(45	)


	Fair Value Measurements at December 31, 2019
	Level 1		Level 2			Level 3			Total
Derivatives	$	—	$	—		$	—		$	—
Contingent consideration obligations		—		—			(7	)		(7	)

	$	—	$	—		$	(7	)	$	(7	)

	Fair Value Measurements at December 31, 2020
Assets (Liabilities)	Level 1		Level 2			Level 3			Total
Derivatives designated as effective hedges
Interest rate swaps	$	—	$	(35	)	$	—		$	(35	)
Derivatives not designated as effective hedges
Foreign currency contracts		—		(9	)		—			(9	)
Contingent consideration obligations		—		—			(7	)		(7	)
	$	—	$	(44	)	$	(7	)	$	(51	)

The Company determines the fair value of its interest rate swaps (“Derivatives”) using standard pricing models and market-based assumptions for all inputs such as yield curves and quoted spot and forward exchange rates. Accordingly, the Company’s derivative instruments are classified as Level 2.

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

The value of the contingent consideration obligations is determined using a probability-weighted discounted cash flow method. This fair value measurement is based on unobservable inputs in the market and thus represents a Level 3 measurement within the fair value hierarchy. This analysis reflects the contractual terms of the purchase agreements (e.g., potential payment amounts, length of measurement periods, manner of calculating any amounts ~~due, etc.)~~due) and utilizes assumptions with regard to future cash flows, probabilities of achieving such future cash flows, and a discount rate. Depending on the contractual terms of the purchase agreement, the probability of achieving future cash flows or earnings generally represent the only significant unobservable inputs. The contingent consideration obligations are measured at fair value each reporting period and changes in estimates of fair value are recognized in earnings.

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 June 30, 2021
	Three Months Ended March 31, 2020
Balances at beginning of period	$	7
Acquisitions		—
Balance as of December 31, 2020			$	7
Issuances		—		—
Settlements		—		(6	)
Adjustments to fair value		2		—

Balance at end of period	$	9

Balance as of June 30, 2021			$	1
Number of open contingent consideration arrangements at the end of period		6		2
Maximum potential payout at end of period	$	11	$	2

At ~~March 31, 2020,~~June 30, 2021, the remaining open contingent consideration arrangements are set to expire at various dates through ~~March 2023.~~2024. 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 six months ended ~~March 31, 2020.~~June 30, 2021.

Fair Value Estimates

The following table presents the carrying amount and fair value of the Company’s non-variable interest rate debt (“Senior Notes,” as defined in Note ~~9. Derivatives~~10 – “Debt”), including current portion and excluding unamortized debt issuance costs, which is estimated by discounting future cash flows at currently available rates for borrowing arrangements with similar terms and conditions, which are considered to be Level 2 inputs under the fair value hierarchy. The carrying values of variable interest rate long-term debt, including current portions, approximate their fair values because of the variable interest rates of these instruments, which generally are reset monthly.

	June 30, 2021				December 31, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value
Senior Notes	$	350	$	348	$	—	$	—

NOTE 8. DERIVATIVES

From time to time, the Company ~~(Successor)~~ enters into derivative transactions to hedge its exposures to interest rate and foreign currency rate fluctuations. The Company does not enter into derivative transactions for trading purposes.

Interest Rate Swaps

The Company manages its fixed and floating rate debt mix using interest rate swaps. Interest rate swap contracts are used by the Company to separate interest rate risk management from the debt funding decision. The cash paid and received from the settlement of interest rate swaps is included in interest expense in the unaudited condensed consolidated statement of operations.

At ~~March 31, 2020,~~June 30, 2021, the Company had a $720 notional amount interest rate swap that fixes ~~LIBOR~~the London Interbank Offering Rate (“LIBOR”) at 1.62%. This interest rate swap is designated as a cash flow hedge of the interest rate risk attributable to the Company’s forecasted variable interest payments and has a maturity ~~dates through~~date of October 2024. ~~The effective portion of theafter-tax~~ ~~fair value unrealized gains or losses on this swap is included as a component of accumulated other comprehensive income (loss).~~

The fair value of the interest rate swap designated as an effective hedge was a liability of ~~$36 and an asset of less than $1~~$24 as of ~~March 31, 2020~~June 30, 2021 and a liability of $35 as of December 31, ~~2019, respectively.~~2020. The ~~increase~~decrease in the

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

liability was primarily driven by changes in the applicable ~~LIBOR rate which was 0.99% at March 31, 2020 compared~~forward yield curves related to ~~1.76% at December 31, 2019.~~the LIBOR. The Company is not a party to any derivatives that require collateral to be posted prior to settlement.

Foreign Currency Contracts

The Company used foreign currency contracts, primarily forward foreign currency contracts, to mitigate the foreign currency exposure of certain other foreign currency transactions. At June 30, 2021, the Company had 0 foreign currency contracts outstanding that are not designated as effective hedges for accounting purposes. Fair market value gains or losses on foreign currency contracts not designated as hedges were included in the results of operations and are classified in other (income) expense, net in the unaudited condensed consolidated statement of operations.

The Company recognized income of $0 and $1 in other (income) expense, net, during the three and six months ended June 30, 2021, respectively, and $0 during the three and six months ended June 30, 2020 related to derivatives that are not designated as hedging instruments.

As of December 31, 2020, foreign currency contracts carried a liability balance of $9 and an asset balance of less than $1.

Cash Flow Hedging

Currency exchange contracts utilized to maintain the functional currency value of expected financial transactions denominated in foreign currencies are designated as cash flow hedges. Gains and losses related to changes in the market value of these contracts are reported as a component of accumulated other comprehensive income (loss) (“AOCI”) within shareholders’ equity in the unaudited condensed consolidated balance sheets and reclassified to earnings in the same line item in the unaudited condensed consolidated statements of operations and in the same period as the recognition of the underlying hedged transaction. The Company periodically assesses whether its currency exchange contracts are effective, and when a contract is determined to be no longer effective as a hedge, the Company discontinues hedge accounting prospectively.

During the first quarter of 2021, the Company entered into cross-currency swaps with gross notional U.S. dollar equivalent amount of $120. The fair value of the cross-currency swaps was a liability of less than $1 as of June 30, 2021.

Net Investment Hedge

The Company has net investments in foreign subsidiaries subject to changes in foreign currency exchange rates. During the first quarter 2021, the Company entered into a $230 notional cross 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 included in AOCI in the unaudited condensed consolidated balance sheets. The fair value of the net investment hedge was an asset of $1 as of June 30, 2021.

~~Note 10. Property and Equipment, Net~~NOTE 9. PROPERTY AND EQUIPMENT, NET

The components of property and equipment ~~at March 31, 2020~~as of June 30, 2021 and December 31, ~~2019~~2020 are as follows:


	Estimated Useful Lives (In Years)		March 31, 2020			December 31, 2019			Estimated Useful Lives (In Years)	June 30, 2021			December 31, 2020
Land		N/A	$	20		$	19		N/A	$	27		$	26
Building		40		64			66		39		81			76
Machinery and equipment		3–15		179			174		2-20		231			217
Autos and trucks		5		73			67		5-10		99			92
Office equipment		3–7		67			66		3-7		24			24
Leasehold improvements		2–10		28			28		1-15		15			14

Total cost				431			420				477			449
Accumulated depreciation				(34	)		(18	)			(129	)		(94	)

Property and equipment, net			$	397		$	402			$	348		$	355

Depreciation expense related to property and equipment, including ~~capital~~finance leases, was ~~$18~~$20 and ~~$16 for~~$23 during the three months ended ~~March 31,~~June 30, 2021 and 2020, ~~(Successor)~~respectively, and ~~2019 (Predecessor), respectively,~~$39 and $41 during the six months ended June 30, 2021 and 2020, respectively. Depreciation expense is included within cost of revenues and selling, general and administrative expenses in the unaudited condensed consolidated statements of operations.

~~Note 11. Debt~~During the second quarter of 2020, the Company finalized the fair values of property and equipment acquired in the APi Acquisition. These measurement period adjustments resulted in a cumulative adjustment todepreciation expense. If the property and equipment fair values had been known at the date of the APi Acquisition, depreciation expense would have increased by $2 to $43 for the six months ended June 30, 2020.

NOTE 10. DEBT

Debt obligations consist of the following:

	Maturity Date	June 30, 2021			December 31, 2020
Term Loan Facility
Revolving Credit Facility	October 1, 2024	$	—		$	—
2019 Term Loan	October 1, 2026		1,140			1,188
2020 Term Loan	October 1, 2026		—			250
Senior Notes	July 15, 2029		350			—
Other Obligations			2			5
Total debt obligations			1,492			1,443
Less: unamortized deferred financing costs			(22	)		(28	)
Total debt, net of deferred financing costs			1,470			1,415
Less: short-term and current portion of long-term debt			(13	)		(18	)
Long-term debt		$	1,457		$	1,397

During the second quarter of 2021, APi Group DE, Inc, a wholly-owned subsidiary, completed a private offering of $350 aggregate principal amount of 4.125% Senior Notes (“Senior Notes”) issued under an indenture dated June 22, 2021 (the “Indenture”). The Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by the Company and certain of the Company’s existing and future domestic subsidiaries. The Company used the net proceeds from the sale of the Senior Notes to repay the $250 million 2020 Term Loan, prepay a portion of the 2019 Term Loan and fund general corporate purposes. In connection with the repayment of the 2020 Term Loan and prepayment on the 2019 Term Loan, the Company incurred a loss on debt extinguishment of $9 related to unamortized debt issuance costs, which was recorded within loss on debt extinguishment in the unaudited condensed consolidated statements of operations.

Description
   Maturity Date    March 31,
2020    December 31,
2019
Term Loan Facility

Term Loan
   October 1, 2026    $ 1,197    $ 1,200
Revolving Credit Facility
   October 1, 2024    200    —
Other Obligations
      10    14




Total debt obligations
      1,407    1,214
Less unamortized deferred financing costs
      (23 )    (24 )




Total debt, net of deferred financing costs
      1,384    1,190
Less current portion of long-term debt
      (217 )    (19 )




Long-term debt
      $ 1,167    $ 1,171

The Senior Notes contain customary terms and provisions (including representations, covenants, and conditions). Certain covenants, among other things, restrict the Company's and its subsidiaries' ability to incur indebtedness, grant liens, make investments and sell assets. The Senior Notes also contain customary events of default, covenants, and representations and warranties. Financial covenants include: a senior secured leverage ratio no greater than 3.5 to 1.0, a total net leverage ratio of 3.0 to 1.0, and a fixed charge coverage ratio of 2.0 to 1.0.

As of ~~March 31, 2020,~~June 30, 2021, there was ~~$1,197~~$1,140 of principal outstanding under the 2019 Term Loan. As of June 30, 2021, the Company had a 5-year interest rate swap with respect to $720 of notional value of the 2019 Term Loan, exchanging one-month LIBOR for a fixed rate of 1.62% per annum. Accordingly, the Company’s fixed interest rate per annum on the swapped $720 notional value of the 2019 Term Loan is 4.12% through its maturity. The remaining $420 of the 2019 Term Loan balance is bearing interest ~~of 3.49%~~at 2.59% per annum based onone-month LIBOR plus 250 basis points. In addition, during the first quarter 2021, the Company entered into a cross currency interest rate swap with a notional value of $230. The swap reduces the Company’s interest expense by approximately $3 annually and reduces its overall effective interest rate by approximately 20 basis points.

The interest rate applicable to borrowings under the ~~Revolving~~$300 five-year senior secured revolving credit facility (the “Revolving Credit ~~Facility~~Facility”) is, at the Company’s option, either (1) a base rate plus an applicable margin equal to 1.25%, or (2) a Eurocurrency rate (adjusted for statutory reserves) plus an applicable margin equal to 2.25%. ~~The weighted-average interest rate on~~

At June 30, 2021 and December 31, 2020, the Company had 0 amountsoutstanding under the Revolving Credit Facility, and $227 and $230 was ~~4.56% as of March 31, 2020.~~

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

~~During March 2020, the Company drew $200 on its Revolving Credit Facility, which was subsequently paid down during April 2020. At March 31, 2020~~available at June 30, 2021 and December 31, ~~2019, the Company had $200 and $0 outstanding under this Revolving Credit Facility, respectively, and $33 and $235 was available at March 31,~~ 2020, ~~and December 31, 2019,~~ respectively, after giving effect to ~~$67~~$73 and ~~$65~~$70 of outstanding letters of credit.

As of ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019,~~2020, the Company was in compliance with ~~the~~all applicable debt ~~covenants contained in the Credit Agreement.~~covenants.

~~One~~As of ~~the Company’s Canadian operations has a $20 unsecuredline-of-credit~~ ~~agreement with a variable-interest rate based upon the prime rate. The Company had no amounts outstanding under the line of credit as of March 31, 2020~~June 30, 2021 and December 31, ~~2019.~~

~~As of March 31,~~ 2020, ~~and December 31, 2019,~~ the Company had ~~$10~~$2 and ~~$14~~$5 in notes outstanding, respectively, for the acquisition of equipment and ~~vehicles, respectively.~~vehicles.

Note ~~12.~~11. Income Taxes

Historically, APi Group has elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code for federal tax purposes. As a result, APi Group’s income was not subject to U.S. federal income taxes or state income taxes in those states where the S Corporation status is recognized. In Predecessor periods, no provision or liability for federal or state income tax has been provided in its consolidated financial statements except for those taxing jurisdictions where the S Corporation status is not recognized. In connection with the APi Acquisition, APi Group’s S Corporation status was terminated and APG will be treated as a C Corporation under Subchapter C of the Internal Revenue Code and will be part of the consolidated tax group of the Company. The termination of the “S” Corporation election has had a material impact on the Company’s results of operations, financial condition, and cash flows as reflected in the March 31, 2020 consolidated financial statements. The effective tax rate has increased, and net income has decreased as compared to the Company’s “S” Corporation tax years, since the Company is now subject to U.S. federal and state corporate income taxes in addition to foreign corporate income taxes on its earnings.

The Company’s quarterly income tax provision is measured using an estimate of its consolidated annual effective tax rate, adjusted in the current period for discrete income tax items, within the periods presented. The comparison of the Company’s income tax provision between periods may be impacted by the level and mix of earnings and losses by tax jurisdiction, foreign income tax rate differentials and discrete items. The Company’s effective tax rate was ~~20.9%~~28.9% and ~~6.0%~~(49.0)% for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively, and ~~2019,~~17.0% and 28.5% for the six months ended June 30, 2021 and 2020, respectively. ~~The most significant item contributing to the change in the effective tax rate relate to the Company’s change in “S” Corporation to “C” Corporation status.~~ The difference between the effective tax rate and the statutory U.S. ~~Federal~~federal income tax rate of 21.0% for the ~~quarter~~six months ended ~~March 31, 2020~~June 30, 2021 is due to ~~an asset impairment charge benefit offsetting~~nondeductible permanent items, state taxes, and taxes on foreign earnings in jurisdictions that have higher tax rates.

As of ~~March 31, 2020,~~June 30, 2021, the Company’s deferred tax assets included a valuation allowance of $1$4 primarily related to certain deferred tax assets of the Company’s foreign ~~subsidiaries.~~subsidiaries and a capital loss carryforward in the U.S. 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.

As of ~~March~~June 30, ~~2020,~~2021, the Company had gross federal, state and foreign net operating loss carryforwards of approximately ~~$248,~~ $0, $15 and ~~$8,~~$9, respectively. The ~~federal~~state net operating losses have ~~carryback~~carryforward periods of five to twenty years ~~that can offset 100% of taxable income for periods~~and begin to expire in ~~which the Company was a “C” Corporation and can be carried forward indefinitely. The~~

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

~~carryforwards will be able to offset 80% of future taxable income for years beginning after 2020.~~2024. The foreign net operating losses generally have carryback periods of three years, carryforward periods of twenty years, or are indefinite and begin to expire in 2034.

The Company’s liability for unrecognized tax benefits is recorded within other~~non-current~~ noncurrent liabilities in the unaudited condensed consolidated balance sheets and recognizes interest and penalties accrued related to unrecognized tax benefits in the provision for income taxes in the income statement. As of ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019,~~2020, the total gross unrecognized tax benefits were $3 and ~~$4,~~$2, respectively. The Company had accrued gross interest and penalties as of ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019~~2020 of $1 and $1, respectively. During the ~~periods~~three and six months ended ~~March 31,~~June 30, 2021 and 2020, ~~and March 31, 2019,~~ the Company recognized net interest expense of $0 ~~and $0, respectively.~~for all periods.

If all of the Company’s unrecognized tax benefits as of ~~March 31, 2020~~June 30, 2021 were recognized, ~~the entire balance~~$2 would impact the Company’s effective tax rate. ~~We expect for $2~~The Company expects $1 of unrecognized tax benefits to expire in the next twelve months due to lapses in the statute of limitations.

~~The Company files income tax returns in the U.S. federal jurisdiction, various state, local and foreign jurisdictions. For periods ended September~~As of June 30, ~~2019 (predecessor) and prior,~~2021, with few immaterial exceptions, neither the Company ~~including its domestic subsidiaries, filed state income tax returns for those states that do not recognize Subchapter S corporations. As of March 31, 2020, with few exceptions, the Company or~~nor its subsidiaries are ~~no longer~~ subject to examination prior to tax year 2014. The U.S. federal jurisdiction ~~is under~~ exam for the period ended December 31, ~~2017.~~2017 is expected to close in the third quarter and is not expected to have a material impact on the consolidated financial statements. There are various other audits in state and foreign jurisdictions. No adjustments have been proposed and the Company does not expect the results of the ~~audit~~audits to have a material impact on the consolidated financial statements.

On ~~March~~December 27, 2020, the ~~Coronavirus Aid, Relief, and Economic Security (CARES)~~Consolidated Appropriations Act was signed into law, ~~making several changes to the Internal Revenue Code. The CARES Act, among other things, permits Net Operating Loss (“NOL“) carryovers to offset 100% of taxable income~~which included a temporary provision that allows for ~~tax years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019,~~a 100 percent deduction for business meals expenses purchased from a restaurant between December 31, 2020, and 2020 to be carried back to each of the five preceding tax years to generate a refund of previously paid income taxes. The CARES Act contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020. The modifications to Section 163(j) increase the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income. The CARES Act also accelerates the refund of AMT credits that were previously accumulated.January 1, 2023. The tax law changes in the ~~CARES~~Consolidated Appropriations Act did not have a material impact on the Company’s quarterly income tax provision.

Note ~~13.~~12. Employee Benefit Plans

Certain ~~of the Company’s~~Company subsidiaries, including certain subsidiaries in Canada, contribute amounts to multiemployer pension plans and other multiemployer benefit plans and trusts, ~~(“MEPPs”),~~ which are recorded as a component of employee wages and salaries within costs of revenue. Contributions are generally based on fixed amounts per hour per employee for employees covered under these plans. Multiemployer plan contribution rates are determined annually and assessed on a~~“pay-as-you-go”~~ pay-as-you-go basis based on union employee payrolls. Union payrolls cannot be determined for future periods because the number of union employees employed at a given time, and the plans in which they participate, vary depending upon the location and number of ongoing projects and the need for union resources in connection with those projects. Total consolidated contributions to multiemployer plans were $24 and ~~the related number of employees covered by these plans, including with respect to the Company’s Canadian operations, were $21 and $20~~$19 during the three months ended ~~March~~June 30, 2021 and 2020, respectively and $43 and $40 during the six months ended June 30, 2021 and 2020, respectively.

The Company also has a trustee-administered profit sharing retirement plan covering substantially all employees not covered by collective bargaining agreements and also adopted a profit sharing plan for employees in Canada (collectively, “Profit Sharing Plans”). The Profit Sharing Plans provide for annual discretionary contributions in amounts based on a performance grid as determined by the Company’s directors. The Company recognized $4 and $3 in expense during the three months ended June 30, 2021 and 2020, respectively and $7 and $6 in expense during the six months ended June 30, 2021 and 2020, respectively, in connection with these plans.

Effective January 1, 2021, most of the Company’s employees in the U.S and Canada, including named executive officers, are eligible to participate in the Company’s Employee Stock Purchase Plan (the “ESPP”). Sales of shares of the Company’s common stock under the ESPP are generally made pursuant to offerings that are intended to satisfy the requirements of Section 423 of the Internal Revenue Code. The ESPP permits employees of the Company to purchase common stock at a price equal to 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 $10,000 of common stock in a year under the ESPP. During the three and six months ended June 30, 2021, the Company has recognized $1 and $2 of expense, respectively, related to the ESPP.

Note 13. Related-Party Transactions

An annual dividend for Preferred Shares was declared as of December 31, 2020 and ~~2019, respectively.~~

~~Note 14. Related-Party Transactions and Investments~~

settled in shares during January 2021. The Company ~~(Successor) paid~~issued 12.4 million shares to Mariposa Acquisition IV, LLC, a ~~quarterly management fee~~related entity that is controlled by the co-chairperson of the Company’s Board of Directors. In addition, the Company incurred advisory fees of $1 during both the three months ended June 30, 2021 and 2020, respectively, and $2 during both the six months ended June 30, 2021 and 2020, payable to Mariposa Capital, LLC, an entity owned by ~~Sir Martin E. Franklin.~~the co-chairperson of the Company’s Board of Directors.

~~APi Group Corporation~~

~~Notes~~From time to ~~Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

time the Company also enters into other immaterial related party transactions.

Note ~~15.~~14. Earnings (Loss) Per Share

Net income is allocated between the Company’s ~~ordinary~~common shares and other participating securities based on their participation rights. The ~~Founder~~ Preferred Shares represent participating securities. Earnings attributable to ~~Founder~~ Preferred Shares are not included in earnings attributable to ~~ordinary~~common shares in calculating earnings per ~~ordinary~~common share (the ~~“two class method”)~~two-class method). For periods of net loss, there is no impact from thetwo-class method on earnings (loss) per share (“EPS”) as net loss is allocated to ~~ordinary~~common shares because ~~Founder~~ Preferred Shares are not contractually obligated to share the loss.

The following table sets forth the computation of earnings (loss) per ~~ordinary~~common share using thetwo-class method. The dilutive effect of outstanding ~~Founder~~ Preferred Shares and ~~restricted stock units (“RSUs”) issued by~~ the ~~Company~~Preferred Share dividend is reflected in diluted EPS using theif-converted method, and warrants, options, and restricted 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 ~~Founder~~ Preferred Shares, ~~RSUs,~~restricted and performance shares, warrants and stock options are ~~anti-dilutive.~~anti-dilutive (amounts in millions, except share and per share amounts):

   Three Months
Ended
March 31,
2020
Numerator:

Net loss
   $ (194 )
Adjustment for vested participating Founder Preferred shares
   —


Net loss attributable to ordinary shares
   $ (194 )


Denominator:

Weighted average shares outstanding - basic
   169,822,082
Dilutive securities⁽¹⁾
   —


Weighted average shares outstanding - diluted
   169,822,082


Basic and diluted loss per ordinary share
   $ (1.14 )
Ordinary shares issuable upon conversion of Founder Preferred Shares
   4,000,000

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Basic earnings (loss) per common share:
Net income (loss)	$	21		$	36		$	13		$	(158	)
Less income attributable to Preferred Shares		(3	)		(6	)		(2	)		—
Net income (loss) attributable to common shareholders - basic	$	18		$	30		$	11		$	(158	)

Weighted average shares outstanding - basic		201,281,939			169,294,244			196,782,691			169,558,163
Basic earnings (loss) per common share	$	0.09		$	0.18		$	0.06		$	(0.93	)

Diluted earnings (loss) per common share:
Net income (loss)	$	21		$	36		$	13		$	(158	)
Less income attributable to Preferred Shares		(3	)		(6	)		(2	)		—
Net income (loss) attributable to common shareholders - diluted	$	18		$	30		$	11		$	(158	)

Weighted average shares outstanding - basic		201,281,939			169,294,244			196,782,691			169,558,163
Dilutive securities:
RSUs, warrants and stock options ⁽¹⁾		660,735			483,162			2,302,651			—
Shares issuable pursuant to the annual Preferred Share dividend ⁽²⁾		4,435,765			6,481,822			3,409,844			—
Weighted average shares outstanding - diluted		206,378,439			176,259,228			202,495,186			169,558,163
Diluted earnings (loss) per common share	$	0.09		$	0.17		$	0.06		$	(0.93	)

~~(1)~~

~~There are~~⁽¹⁾

For all periods presented, 4,000,000 ~~Founder~~ Preferred Shares, ~~1,441,546 RSUs,~~which are convertible to the same number of common shares, have been excluded from the calculation of diluted shares, as their inclusion would be anti-dilutive. For the three months ended June 30, 2020, 162,500 stock options to purchase the same number of ~~ordinary~~common shares and 21,515,359 common shares that would be issuable upon exercise of 64,546,077 warrants exercisable to purchase ~~ordinary~~common shares on a 3:1 basis (21,515,359 ordinary share equivalents) ~~that represent potentially~~for which the exercise price exceeded the average market price, have been excluded from the calculation of diluted shares, as their inclusion would be anti-dilutive.

⁽²⁾

For the three and six months ended June 30, 2021, and the three months ended June 30, 2020, dilutive securities include common share equivalents which represent the annual dividend, payable in common shares, that ~~are excluded as their effect~~Preferred Shares would be ~~anti-dilutive.~~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 annual dividend amount is equal to 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 (the “Annual Dividend Amount”). During 2020, the Annual Dividend Amount was calculated based on the Company’s share price appreciation over the initial offering price of $10.00. During 2021, the Annual Dividend Amount was calculated based on the Company’s share price appreciation over the highest price previously used in calculating the Annual Dividend Amount of $17.8829.

~~Predecessor~~

The Company has not presented Predecessor earnings per member unit information because it is not meaningful or comparable to the required Successor EPS information presented above, as well as the fact that Predecessor units were not publicly traded.

Note ~~16.~~15. Segment Information

The Company manages its operations under ~~three~~3 operating segments which represent the Company’s three reportable segments: Safety Services, Specialty Services, and Industrial Services. ~~The~~This structure is generally focused on various businesses related to contracting services and maintenance of industrial and commercial facilities. All 3 reportable segments derive their revenue from installation, inspection, maintenance, service and repair, retrofitting and upgrading, engineering and design, distribution, fabrication, and various types of ~~service and contracts,~~other services primarily in the United States as well as Canada and ~~the United Kingdom.~~Europe.

The Safety Services segment ~~focuses~~focusing onend-to-end integrated occupancy systems (fire protection ~~services,~~solutions, HVAC and entry systems), including design, installation, inspection and service of these integrated systems. ~~This segment also provides mission critical services, including life safety, emergency communication systems and specialized mechanical services.~~ The work performed within this segment spans across industries and facilities and includes commercial, education, healthcare, high tech, industrial ~~residential, medical~~ andspecial-hazard settings.

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~

The Specialty Services segment provides ~~utility~~a variety of infrastructure services and specialized industrial plant services, ~~including~~which includes maintenance and repair of critical infrastructure such as underground electric, gas, water, sewer ~~telecom~~ and ~~broadband~~telecommunications infrastructure. This segment’s services include engineering and design, fabrication, installation, maintenance service and repair, and retrofitting and upgrading. Customers within this segment vary from ~~public~~private and ~~private~~public utilities, communications, healthcare, education, transportation, manufacturing, industrial plants and governmental agencies throughout the United States.

The Industrial Services segment provides a variety of ~~specialty contracting~~ services ~~and solutions~~ to the energy industry focused on transmission and distribution. ~~Services within this segment~~This segment’s services include ~~oil and gas~~ pipeline infrastructure, access and road construction, supporting facilities, and performing ongoing integrity management and ~~maintenance.~~maintenance

The accounting policies of the reportable segments are the same as those described in Note 2 – “Basis of Presentation and Significant Accounting ~~Policies”.~~Policies.” All intercompany transactions and balances are eliminated in consolidation. Intercompany ~~revenue~~revenues and costs between entities within a reportable segment are eliminated to arrive at segment totals and eliminations between segments are separately presented. Corporate results include amounts related to corporate functions such as administrative costs, professional fees, acquisition-related transaction costs (exclusive of acquisition integration costs, which are included within the segment results of the acquired businesses), and other discrete items.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is the measure of profitability used by management to manage its segments and, accordingly, in its segment reporting. As appropriate, the Company supplements the reporting of consolidated financial information determined in accordance with U.S. GAAP with certainnon-U.S. GAAP financial measures, including EBITDA. The Company believes thesenon-U.S. GAAP measures provide meaningful information and help investors understand the Company’s financial results and assess its prospects for future performance. The Company uses EBITDA to evaluate its performance, both internally and as compared with its peers, because it excludes certain items that may not be indicative of the Company’s core operating results for its reportable segments. Segment EBITDA is calculated in a manner consistent with consolidated EBITDA.

Summarized financial information for the Company’s reportable segments ~~are~~is presented and reconciled to consolidated financial information in the following tables, including a reconciliation of consolidated operating income to EBITDA. The tables below may contain slight summation differences due to rounding:

	Three Months Ended June 30, 2021
	Safety Services		Specialty Services		Industrial Services			Corporate and Eliminations			Consolidated
Net revenues	$	512	$	415	$	68		$	(17	)	$	978
EBITDA Reconciliation
Operating income (loss)	$	52	$	32	$	(8	)	$	(29	)	$	47
Plus:
Investment income and other, net		2		1		2			1			6
Loss on extinguishment of debt		—		—		—			(9	)		(9	)
Depreciation		1		10		7			2			20
Amortization		18		12		2			—			32
EBITDA	$	73	$	55	$	3		$	(35	)	$	96
Total assets	$	2,141	$	1,023	$	262		$	817		$	4,243
Capital expenditures		1		10		5			—			16

   Three Months Ended March 31, 2020 (Successor)
   Safety
Services Specialty
Services Industrial
Services Corporate and
Eliminations Consolidated
Net revenues
   $ 424 $ 300 $ 137 $ (3 ) $ 858
EBITDA Reconciliation

Operating loss
   $ (10 ) $ (136 ) $ (58 ) $ (30 ) $ (234 )
Plus:

Investment income and other, net
   1 2 —   —   3
Depreciation
   3 8 4 3 18
Amortization
   24 18 9 1 52


EBITDA
   $ 18 $ (108 ) $ (45 ) $ (26 ) $ (161 )


Total assets
   $ 1,721 $ 1,160 $ 441 $ 564 $ 3,886
Capital expenditures
   1 6 4 —   11

	Three Months Ended June 30, 2020
	Safety Services			Specialty Services		Industrial Services		Corporate and Eliminations			Consolidated
Net revenues	$	371		$	349	$	173	$	(4	)	$	889
EBITDA Reconciliation
Operating income (loss)	$	22		$	22	$	4	$	(21	)	$	27
Plus:
Investment income and other, net		4			6		—		1			11
Depreciation		(1	)		16		9		(1	)		23
Amortization		24			18		8		1			51
EBITDA	$	49		$	62	$	21	$	(20	)	$	112
Total assets	$	1,655		$	1,155	$	441	$	519		$	3,770
Capital expenditures		—			3		2		1			6

~~APi Group Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions, except shares and where noted otherwise)~~

~~(Unaudited)~~


	Three Months Ended March 31, 2019 (Predecessor)												Six Months Ended June 30, 2021
	Safety Services		Specialty Services		Industrial Services			Corporate and Eliminations			Consolidated		Safety Services		Specialty Services		Industrial Services			Corporate and Eliminations			Consolidated
Net revenues	$	426	$	286	$	213		$	(3	)	$	922	$	978	$	736	$	93		$	(26	)	$	1,781
EBITDA Reconciliation
Operating income (loss)	$	52	$	—	$	(9	)	$	(17	)	$	26	$	97	$	29	$	(23	)	$	(58	)	$	45
Plus:
Investment income and other, net		—		1		—			1			2		5		2		2			—			9
Loss on extinguishment of debt														—		—		—			(9	)		(9	)
Depreciation		1		8		4			3			16		3		21		12			3			39
Amortization		2		5		2			—			9		33		23		6			1			63

EBITDA	$	55	$	14	$	(3	)	$	(13	)	$	53	$	138	$	75	$	(3	)	$	(63	)	$	147

Total assets	$	780	$	813	$	356		$	116		$	2,065	$	2,141	$	1,023	$	262		$	817		$	4,243
Capital expenditures		4		11		7			—			22		2		21		11			—			34

	Six Months Ended June 30, 2020
	Safety Services		Specialty Services			Industrial Services			Corporate and Eliminations			Consolidated
Net revenues	$	795	$	649		$	310		$	(7	)	$	1,747
EBITDA Reconciliation
Operating income (loss)	$	12	$	(114	)	$	(54	)	$	(51	)	$	(207	)
Plus:
Investment income and other, net		5		8			—			1			14
Depreciation		2		24			13			2			41
Amortization		48		36			17			2			103
EBITDA	$	67	$	(46	)	$	(24	)	$	(46	)	$	(49	)
Total assets	$	1,655	$	1,155		$	441		$	519		$	3,770
Capital expenditures		1		9			6			1			17

Note ~~17. Subsequent Events~~16. SUBSEQUENT EVENTS

During July 2021, the Company completed an acquisition within the Safety Services segment for a purchase price of $34, primarily made up of cash paid at closing, and also closed several other individually immaterial acquisitions.

On ~~April 28, 2020,~~July 27, 2021, the Company ~~changed its jurisdiction~~announced it has entered into a definitive agreement to acquire the Chubb Limited (“Chubb”) fire and security business from Carrier Global Corporation for an enterprise value of ~~incorporation from the British Virgin Islands~~$3,100, which is comprised of $2,900 cash and approximately $200 of assumed liabilities, and other adjustments. The transaction is expected to ~~the State~~be funded through a combination of ~~Delaware (“the Domestication”). The business,~~cash on hand, perpetual preferred equity financing, and ~~assets~~debt, and ~~liabilities of the Company and its subsidiaries were the same immediately after the Domestication as they were immediately prior~~is expected to the Domestication. As a result of the Domestication, ordinary shares and Founder Preferred Shares were converted to shares of common stock and Series A Preferred Stock, respectively. Each holder of a warrant, option or restricted stock unit became a holder of a warrant, option or restricted stock unit of the domesticated Company. The number of shares outstanding did not change as a result of the Domestication, and the proportional equity interest of each shareholder remained the same.close around year-end 2021.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains “forward-looking statements”. These forward-looking statements are based on beliefs and assumptions as of the date such statements are made and are subject to risks and uncertainties. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms including ~~“expect,” “anticipate,” “project,” “will,” “should,” “believe,” “intend,” “plan,” “estimate,” “potential,” “target,” “would,”~~“expect”, “anticipate”, “project”, “will”, “should”, “believe”, “intend”, “plan”, “estimate”, “potential”, “target”, “would”, and similar expressions, although not all forward-looking statements contain these identifying terms.

These forward-looking statements are based on our current expectations and assumptions and on information currently available to management and include, among others, statements regarding, as of the date such statements are made:

~~our expectations regarding the impact of theCOVID-19~~ pandemic on our business, including the seasonal and cyclical volatility of our business, and future financial results, the precautionary measures we are taking in response to the pandemic and the impact of those measures on our business and future financial results;
•
our expectations regarding the impact of the COVID-19 pandemic on our business, including the seasonal and cyclical volatility of our business, and future financial results;

~~our beliefs regarding the recurring and repeat nature of our business;~~
•
our beliefs regarding the recurring and repeat nature of our business and its impact on our cash flows and organic growth opportunities;

~~our expectations regarding industry trends and their impact on our business, and our ability to capitalize on the opportunities presented in the markets we serve;~~
•
our expectations regarding industry trends and their impact on our business, and our ability to capitalize on the opportunities presented in the markets we serve;

~~our intent to continue to grow our business, both organically and through acquisitions, and our beliefs regarding the impact of our business strategies on our growth;~~
•
our intent to continue to grow our business, both organically and through acquisitions, and our beliefs regarding the impact of our business strategies on our growth;

~~our beliefs regarding our customer relationships;~~
•
our beliefs regarding our customer relationships;

~~our expectations and beliefs regarding accounting and tax matters; and~~
•
our beliefs regarding market risk and our ability to mitigate that risk;

our beliefs regarding the sufficiency of our current sources of liquidity to fund our future liquidity requirements, our expectations regarding the types of future liquidity requirements and our expectations regarding the availability of future sources of liquidity.
•
our expectations and beliefs regarding accounting and tax matters;

•

our expectations regarding future capital expenditures;

•

our expectations regarding the pending acquisition of the Chubb fire and security business, including the timing for closing and the sources of financing for the consideration; and

•

These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this quarterly report and in our Annual Report on Form~~S-4,~~ ~~effective as of May 1, 2020,~~ 10-K, filed on March 24, 2021, including those described under “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in such Form~~S-4,~~ 10-K, and other filings we make with the SEC. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this quarterly report may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Important factors that may materially affect the forward-looking statements include the following:

~~the impact of theCOVID-19~~ ~~pandemic on our business, markets, supply chain, customers and workforce, on the credit and financial markets, and on the global economy generally;~~
•
the impact of the COVID-19 pandemic on our business, markets, supply chain, customers and workforce, on the credit and financial markets, and on the global economy generally;

~~adverse developments in the credit markets that could adversely affect funding of construction projects;~~
•
adverse developments in the credit markets that could adversely affect funding of construction projects;

~~the ability and willingness of customers to invest in infrastructure projects;~~
•
the ability and willingness of customers to invest in infrastructure projects;

~~a decline in demand for our services or for the products and services of our customers;~~
•
a decline in demand for our services or for the products and services of our customers;

~~the fact that our revenues are derived primarily from contracts with durations of less than six months and the risk that customers will not renew or enter into new contracts;~~
•
the fact our revenues are derived primarily from contracts with durations of less than six months and the risk that customers will not renew or enter into new contracts;

~~our ability to successfully acquire other businesses, successfully integrate acquired businesses into our operations and manage the risks and potential liabilities associated with those acquisitions;~~
•
our ability to successfully acquire other businesses, successfully integrate acquired businesses into our operations and manage the risks and potential liabilities associated with those acquisitions;

~~the impact of our regional, decentralized business model on our ability to execute on our business strategies and operate our business successfully;~~
•
the impact of our regional, decentralized business model on our ability to execute on our business strategies and operate our business successfully;

~~our ability to compete successfully in the industries and markets we serve;~~
•
our ability to compete successfully in the industries and markets we serve;

•

our ability to properly manage and accurately estimate costs associated with specific customer projects, in particular for arrangements with fixed price terms;

~~our ability to properly manage and accurately estimate costs associated with specific customer projects, in particular for arrangements with fixed price terms;~~
•
increases in the cost, or reductions in the supply, of the materials we use in our business and for which we bear the risk of such increases;

~~increases in the cost, or reductions in the supply, of the materials we use in our business and for which we bear the risk of such increases;~~
•
our relationship with our employees, a large portion of which are covered by collective bargaining arrangements, and our ability to effectively manage and utilize our workforce;

~~our relationship with our employees, a large portion of which are covered by collective bargaining arrangements, and our ability to effectively manage and utilize our workforce;~~
•
the inherently dangerous nature of the services we provide and the risks of potential liability;

~~the inherently dangerous nature of the services we provide and the risks of potential liability;~~
•
the impact of customer consolidation;

~~the impact of customer consolidation;~~
•
the loss of the services of key senior management personnel and the availability of skilled personnel;

~~the loss of the services of key senior management personnel and the availability of skilled personnel;~~
•
the seasonality of our business and the impact of weather conditions;

~~the seasonality of our business and the impact of weather conditions;~~
•
the variability of our operating results between periods and the resulting difficulty in forecasting future operating results;

~~the variability of our operating results between periods and the resulting difficulty in forecasting future operating results;~~
•
the impact of the COVID-19 pandemic on our accounting estimates and assumptions;

~~litigation that results from our business, including costs related to any damages we may be required to pay as a result of general liability or workmanship claims brought against our customers;~~
•
litigation that results from our business, including costs related to any damages we may be required to pay as a result of general liability or workmanship claims brought by our customers;

~~the impact of health, safety and environmental laws and regulations, and the costs associated with compliance with such laws and regulations;~~
•
the impact of health, safety and environmental laws and regulations, and the costs associated with compliance with such laws and regulations;

~~our substantial level of indebtedness and the effect of restrictions on our operations set forth in the documents that govern such indebtedness; and~~
•
our substantial level of indebtedness and the effect of restrictions on our operations set forth in the documents that govern such indebtedness;

~~our compliance with certain financial maintenance covenants in our credit agreement and the effect on our liquidity of any failure to comply with such covenants.~~
•
our ability to successfully complete the pending acquisition of the Chubb fire and security business, including obtaining the necessary regulatory approvals and financing for the consideration; and

•

our compliance with certain financial maintenance covenants in our credit agreement and the effect on our liquidity of any failure to comply with such covenants.

The factors identified above are believed to be important factors, but not necessarily all of the important factors, that could cause actual results to differ materially from those expressed in any forward-looking statement made by us. Other factors not discussed herein could also have a material adverse effect on us. You should not rely upon forward-looking statements as predictions of future events. Although we believe ~~that~~ the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. These forward-looking statements speak only as of the date of this quarterly report. We assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future, except as required by applicable law.

All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in this quarterly report and hereafter in our other SEC filings and public communications. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) section should be read in conjunction with the Interim Statements and related notes included in this quarterly report, and the Consolidated Financial Statements, related notes and the ~~“APG Management’s Discussion and Analysis of Financial Condition and Results of Operations”~~MD&A section and other disclosures contained in our ~~Registration Statement~~Annual Report on Form~~S-4~~ ~~effective May 1, 2020 (the “FormS-4”),~~ 10-K, including financial results for the year ended December 31, ~~2019.~~2020. 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.

We prepare our financial statements in accordance with generally accepted accounting principles ~~generally accepted~~ in the United States of America (“U.S. GAAP”). To supplement our financial results presented in accordance with U.S. GAAP in this ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~MD&A section, we present EBITDA, which is anon-U.S. GAAP financial measure, to assist readers

in understanding our performance and provide an additional perspective on trends and underlying operating results on aperiod-to-period comparable basis.Non-U.S. GAAP financial measures either exclude or include amounts ~~that are~~ not reflected in the most directly comparable measure calculated and presented in accordance with U.S. GAAP. Where anon-U.S. GAAP financial measure is used, we have provided the most directly comparable measure calculated and presented in accordance with U.S. GAAP, a reconciliation to the U.S. GAAP measure and a discussion of the reasons why management believes this information is useful to it and may be useful to investors.

Unless the context otherwise requires, all references in this section to “APG”, the “Company”, “we”, “us”, ~~“our”,~~ and ~~“Successor”~~“our” refer to APi Group Corporation and its ~~subsidiaries for all periods subsequent to the APi Acquisition (as defined below). All references in this quarterly report on Form10-Q~~ ~~to our “Predecessor” refer to APi Group Inc., (“APi Group”) and its subsidiaries for all periods prior to the APi Acquisition.~~subsidiaries.

Overview

We were incorporated with limited liability under the laws of the British Virgin Islands under the BVI Companies Act on September 18, 2017 under the name J2 Acquisition Limited. We were originally formed for the purpose of acquiring a target company or business. On October 10, 2017, we raised gross proceeds of approximately $1.25 billion in connection with our initial public offering in the United Kingdom. On October 1, 2019, we completed our acquisition of APi Group (the “APi Acquisition”) and changed our name to APi Group Corporation in connection with the APi Acquisition. With over 90 years of history operating from over 200 locations, APi GroupAPG is a ~~market leading~~market-leading business services provider of safety, specialty and industrial services ~~operating~~in over 200 locations, primarily in ~~the United States, as well as~~North America and with an expanding platform in Canada and the United Kingdom with consolidated net revenues of approximately $985 million for the Successor in 2019, $3.1 billion for the Predecessor in 2019, and approximately $3.7 billion for the Predecessor in 2018. APi Group provides a variety of specialty contracting services, including engineering and design, fabrication, installation, inspection, maintenance, service and repair, and retrofitting and upgrading. APi providesEurope. We provide statutorily mandated and other contracted services to a strong base of long-standing customers across industries. We ~~also~~ have ~~an experienced management team and~~ a ~~strong~~winning leadership ~~development culture.~~culture driven by entrepreneurial business leaders to deliver innovative solutions for our customers.

We operate our business under three primary operating segments which are also our reportable segments:

•

Safety Services – A leading provider of safety services in North America and Europe, focusing onend-to-end integrated occupancy systems (fire protection solutions, ~~HVAC~~Heating, Ventilation, and Air Conditioning (“HVAC”) and entry systems), including design, installation, inspection and service of these integrated systems. ~~This segment also provides mission critical services, including life safety, emergency communication systems and specialized mechanical services.~~ The work performed within this segment spans across industries and facilities and includes commercial, education, healthcare, high tech, industrial ~~residential, medical~~ andspecial-hazard settings.

•

Specialty Services – A leading provider of ~~diversified, single-source infrastructure and specialty contractor solutions, focusing on~~a variety of infrastructure services and specialized industrial plant ~~solutions, including~~services, which include maintenance and repair of critical infrastructure such as underground electric, gas, water, sewer and ~~telecom~~telecommunications infrastructure. ~~The customers in~~Our services include engineering and design, fabrication, installation, maintenance service and repair, and retrofitting and upgrading. Customers within this segment vary from ~~public~~private and ~~private~~public utilities, communications, healthcare, education, transportation, manufacturing, industrial plants and governmental agencies throughout the United States.

•

Industrial Services – A leading provider of a variety of ~~specialty contracting~~ services to the energy industry focused on transmission and distribution. This segment’s services include ~~oil and gas~~ pipeline infrastructure, access and road construction, supporting facilities, and performing ongoing integrity management and maintenance.

We focus on growing our recurring revenue and repeat business from our diversified long-standing customers across a variety of end markets, which we believe provides us with stable cash flows and a platform for organic growth. Maintenance and service revenues are generally more predictable through contractual arrangements with typical terms ranging from days to three years, with the majority having durations of less than six months and are often recurring due to consistent renewal rates and long-standing customer relationships.

For financial information about our operating segments, see Note 1615 – “Segment Information” to our unaudited condensed consolidated financial statements included herein.

~~Prior to the APi Acquisition, we had no revenue or other operations other than the active solicitation~~Certain Factors and Trends Affecting our Results of ~~a target business with which to complete a business combination. We generated small amounts ofnon-operating~~ income in the form of unrealized and realized gains on marketable securities and interest income on cash and cash equivalents. We relied upon the proceeds from the initial public offering to fund our limited acquisition-related operations prior to the closing of the APi Acquisition. The historical financial information prior to the APi Acquisition has not been discussed below as these historical amounts are not considered meaningful.Operations

Effect of Seasonality and Cyclical Nature of Business

Our ~~revenue~~net revenues and results of operations can be subject to seasonal and other variations. These variations are influenced by weather and include impacts of customer spending patterns, bidding seasons, project schedules, holidays and timing, in particular, for large,non-recurring projects. Typically, our ~~revenue is~~net revenues are lowest atin the ~~beginning of the year and~~first quarter during the winter months in North America ~~during the first quarter~~ because cold, snowy or wet conditions can cause project delays. ~~Revenue is~~Continued cold and wet weather can often affect second quarter productivity. Net revenues are generally higher during the summer and fall months during the third and early fourth ~~quarters,~~quarter, due to increased demand for our services when favorable weather conditions exist in many of the regions in which we operate. ~~Continued cold and wet weather can often affect second quarter productivity.~~ In the fourth quarter, many projects tend to be completed by customers seeking to spend their capital budgets before the end of the year, which generally has a positive effect on our ~~revenue.~~net revenues. However, the holiday season and inclement weather can cause delays, which can reduce ~~revenue~~net revenues and increase costs on affected projects. ~~The effects of theCOVID-19~~ ~~pandemic could also result in greater seasonal and cyclical volatility than would otherwise exist under normal conditions.~~

Additionally, the industries we serve can be cyclical. Fluctuations inend-user demand within those industries, or in the supply of services within those industries, can affect demand for our services. As a result, our business may be adversely affected by industry declines or by delays in new projects. Variations or unanticipated changes in project schedules in connection with large projects can create fluctuations in ~~revenue.~~net revenues.

Economic, Industry and Market Factors

We closely monitor the effects of general changes in economic and market conditions on our customers. General economic and market conditions can negatively affect demand for our customers’ products and services, which can affect their planned capital and maintenance budgets in certain end markets. Market, regulatory and industry factors could affect demand for our services, including: (i) changes to customers’ capital spending plans; (ii) mergers and acquisitions among the customers we serve; (iii) new or changing regulatory requirements or other governmental policy changes or uncertainty; (iv) economic, market or political developments; (v) changes in technology, tax and other incentives; and (vi) access to capital for customers in the industries we serve. Availability of transportation and transmission capacity and fluctuations in market prices for energy and other fuel sources can also affect demand for our services for pipeline and power generation construction services. These fluctuations, as well as the highly competitive nature of our industries, can result, and has resulted, in lower proposals and lower profit on the services we provide. In the face of increased pricing pressure on key materials, such as steel, or other market developments, we strive to maintain our profit margins through productivity improvements, cost reduction programs, pricing adjustments, and business streamlining efforts. While we actively monitor economic, industry and market factors that could affect our business, we cannot predict the effect that changes in such factors may have on our future consolidated results of operations, liquidity and cash flows, and we may be unable to fully mitigate, or benefit from, such changes.

Recent Developments

~~Impairment of Goodwill and Intangibles~~Acquisitions

During the first ~~quarter~~six months of ~~2020,~~2021 we ~~concluded that a triggering event had occurred~~completed several individually immaterial acquisitions for ~~all~~aggregate consideration of ~~our reporting units as a result~~$13 million, made up of ~~theCOVID-19~~ ~~global pandemic and we recorded total non-cash charges~~cash paid at closing of $208 million to reflect the impairment of our goodwill and intangible assets as preliminary carrying values exceeded fair value. Pursuant to the authoritative literature, we performed impairment tests and determined that, as a result of the impact of~~COVID-19,~~ which has negatively impacted our operations, suppliers and other vendors, customer base, the demand for work within the oil and gas industry as a result of the volatility in oil prices and other factors outside of the control of management, certain of our goodwill and intangible assets were impaired. Specifically, we determined the goodwill associated with our Mechanical, Infrastructure/Utility, Fabrication, Specialty Contracting, Transmission and Civil reporting units were impaired by $34 million, $80 million, $17 million, $23 million, $45$12 million and ~~$4 million, respectively. We also determined that intangible assets~~accrued consideration of $1 million. The results of operations of these acquisitions are included in our unaudited condensed consolidated statement of operations from their respective dates of acquisition and were not material. See Note 4 – “Business Combinations” for further details.

On July 27, 2021, we announced we have entered into a definitive agreement to acquire the Chubb Limited (“Chubb”) fire and security business ~~classified as held~~from Carrier Global Corporation for ~~sale were impaired by $5 million.~~

~~The circumstances and global disruption caused byCOVID-19~~ has affected, and we believe it will continue to affect, our businesses, operating results, cash flows and financial condition, however the scope and duration of the impact is highly uncertain. In addition, some of the inherent estimates and assumptions used in determining the fairan enterprise value of ~~our reporting units are outside the control~~$3,100 million, which is comprised of ~~management, including interest rates, cost of capital, tax rates, industry growth, credit ratings, foreign exchange rates,~~$2,900 million cash and ~~labor inflation. Given the uncertainty of these factors, as well as the inherent difficulty in predicting the severity and duration of theCOVID-19~~ global pandemic and associated recovery and the uncertainties regarding the potential financial impact on our business and the overall economy, there can be no assurance that our estimates and assumptions made for purposes of the goodwill impairment testing performed during the first quarter of 2020 will prove to be accurate predictions of the impact in future periods.

While we believe we have made reasonable estimates and assumptions to calculate the fair values of our reporting units which were based on facts and circumstances known at such time, it is possible that existing or new events may result in forecasted cash flows, revenue and earnings that differ from those that formed the basis of our estimates and assumptions. For each of our reporting units, particularly if the global pandemic caused by~~COVID-19~~ continues to persist for an extended period of time, a reporting unit’s actual results could be materially different from our estimates and assumptions used to calculate fair value. If so, we may be required to recognize material impairments to goodwill or other long-lived assets. We will continue to monitor our reporting units for any triggering events or other signs of impairment. We may be required to perform additional impairment testing based on further deterioration of the global economic environment, continued disruptions to our businesses, further declines in operating results of our reporting units and/or tradenames, sustained deterioration of our market capitalization, and other factors, which could result in additional impairment charges in the future. Although we cannot predict when improvements in macroeconomic conditions will occur, if consumer confidence and consumer spending decline significantly in the future or if economic activity experiences a sustained deterioration from current levels, it is reasonably likely we will be required to record additional impairment charges in the future.

As of March 31, 2020, there was one reporting unit, Life Safety, with fair value exceeding its carrying value by less than 10%. Since the goodwill balances for each reporting unit are still preliminary, pending finalizing purchase price allocation from the APi Acquisition, it is possible the Life Safety reporting unit may experience an impairment charge even if there are no changes to the aforementioned discount rates. Based on a sensitivity analysis, a 10% increase in the carrying value of the Life Safety reporting unit would have resulted in an impairment charge of $27 million.

~~See Note 2 – “Basis of Presentation and Significant Accounting Policies” and Note 7 – “Goodwill and Intangibles” of the Interim Statements for additional information.~~

~~Credit Facilities~~

In late March 2020, we drew down $200 million under our $300 million Revolving Credit Facility. As of March 31, 2020, $33 million was available after giving effect to $67 million of outstanding letters of credit, which reduce availability. We were in compliance with all covenants contained in the Credit Agreement as of March 31, 2020. During April 2020, we repaid theapproximately $200 million of ~~borrowings~~assumed liabilities, and other adjustments. The transaction is expected to be funded through a combination of cash on ~~the Revolving Credit Facility.~~hand, perpetual preferred equity financing, and debt and is expected to close around year-end 2021.

~~Income Taxes~~

~~The three months ended March 31, 2020 were also impacted by certain discrete ornon-recurring~~ tax items. The income tax benefit of $51 for the three months ended March 31, 2020 was primarily due to impairment of goodwill and intangible assets. The tax law changes in the CARES Act had an impact of $0 on the Company’s income tax provision.

COVID-19 Update

We continue to monitor ~~the short-~~short and long-term impacts ofCOVID-19, a global pandemic that has caused a significant slowdown in the global economy beginning in March ~~2020. While we had some slowdown~~2020 and continues to impact ~~in March,~~ the ~~impacts~~global economy as countries experience surges of~~COVID-19~~ ~~were not seen as significant at that time. During the three months ended March 31, 2020, we continued to provide services to our customers and saw a relatively minor impact to our business.~~ COVID-19. To date, the services we provide have been deemed to be essential in most ~~instances.~~instances under various governmental orders. However, as theCOVID-19 situation has ~~evolved in April and May,~~continued to evolve, we have seen ~~various disruptions in~~impacts on our work due to the domino effects of ~~the~~ various local, state and national ~~jurisdictional“shelter-in-place”~~governmental orders, including but not limited to, ~~the impact on our~~reduced efficiency ~~to perform~~in performing our work while adhering to physical distancing protocols demanded byCOVID-19, customers deferring inspection and service projects, and temporary shutdowns of active projects as ~~they~~customers work throughCOVID-19 related matters. Due to the statutory nature of much of our work and the long-term investments being made across the public and private utility sector, to date we have not experienced significant cancellations. However,As a result, we are experiencing delays in certain projects and disruptions to the flow of our work to meetCOVID-19 working protocols. WeAlthough we are actively quoting new work for customers, ~~such as schools, universities, hotels, casinos and other customers that may be temporarily operating at less than capacity or closed. Should~~should the macro economy continue to be negatively impacted by theCOVID-19 pandemic or worsen due to surges in cases, it is possible ~~that some~~additional projects could be delayed indefinitely or cancelled, or that we ~~are~~may not ~~successful in accelerating~~be allowed access to our customers’ facilities to perform inspection and service projects.

~~As we~~ In addition, the effects of the COVID-19 pandemic have ~~monitored our activity~~resulted and could continue to result in ~~April~~greater seasonal and ~~May 2020, revenue period over period has been impacted by the level of~~cyclical volatility than would otherwise exist under normal conditions.

New or renewed shelter-in-place orders, closures or other mitigation efforts, and outbreaks of~~COVID-19,~~in jurisdictions in which ~~for certain larger projects, caused customers to temporarily halt~~we operate or at our project or work ~~to put inCOVID-19~~ ~~working protocols. Subsequent to March 31, 2020, all~~sites, could have a material negative impact on our net revenues and earnings. If a large number of our ~~segments have seen volume declines. Recently~~employees who are located in a particular jurisdiction or are working on a project or work site are exposed to or infected with COVID-19 and we are ~~seeing~~unable to hire qualified personnel due to labor shortages and other impacts of the COVID-19 outbreak, we may be required to delay projects or the provision of our services for a period of time. This could negatively impact our net revenues, have a material adverse impact on our operating results, and cause harm to our reputation.

Generally, during the latter half of 2020 and continuing into first half of 2021, we saw indications of stabilizing and some volume improvements ~~off previous lows~~ as our teams and customers ~~are adapting~~adapted to working in theCOVID-19 environment and with the easing of someshelter-in-place ~~orders.~~ orders as vaccination rates improve. There can be no assurance that this trend, which would allow us to recover prior year volume levels, will continue in a positive manner.

~~To date, we~~We have ~~been able~~begun to experience supply chain disruptions, which are negatively impacting the source ~~the~~and supply ~~and~~of materials needed for our ~~business with minimal disruptions. However, the~~business. The continued impact ofCOVID-19 on our vendors is evolving and could continue to make it difficult to obtain needed ~~materials.~~

materials and at reasonable prices. We ~~have~~ also implemented a preemptive cost reduction plan, which ~~we expect will save~~saved both expense and cash in ~~2020 if market conditions require us to maintain them throughout~~2020. As COVID-19 restrictions were easing and volumes were increasing from earlier lows, the ~~rest~~majority of these cost reductions were reinstated in the fourth quarter of 2020.

The United States Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency has warned that cybercriminals will take advantage of the ~~year.~~uncertainty created by COVID-19 and federal and state mandated quarantines to launch cybersecurity attacks. The risks could include more frequent malicious cybersecurity and fraudulent activities, as well as schemes which attempt to take advantage of employees’ use of various technologies to enable remote work activities. We believe the COVID-19 outbreak has incrementally increased our cyber risk profile, but we are unable to predict the extent or impacts of those risks at this time. A significant disruption in our information technology systems, unauthorized access to or loss of confidential information, or legal claims resulting from violation of privacy laws could each have a material adverse effect on our business.

While we cannot estimate the duration or future negative financial impact of theCOVID-19 pandemic on our business, we are currently experiencing some negative impact, which we expect to continue in the future.

In prior economic downturns, the impact on our business has generally lagged against the impact of other industries. We have no way of knowing if the economic crisis caused by COVID-19 will impact us similarly to past economic downturns.

Recent Accounting Pronouncements

A summary of recent accounting pronouncements is included in Note 3 – “Recent Accounting Pronouncements” to our ~~Interim Statements~~unaudited condensed consolidated financial statements included ~~in this quarterly report.~~herein.

Description of Key Line Items

Net Revenues

Revenue is generated from the sale of various types of contracted services, fabrication and distribution. We derive revenue primarily from ~~construction~~ services under contractual arrangements with

durations ranging from days to three years, with the majority having durations of less than six months, and which may provide the customer with pricing options that include a combination of fixed, unit, or time and ~~materials~~material pricing. Revenue for fixed price agreements is generally recognized over time using thecost-to-cost method of accounting which measures progress based on the cost incurred to total expected cost in satisfying our performance obligation.

Revenue from time and material contracts is recognized as the services are provided. Revenue earned is based on total contract costs incurred plus an ~~agreed-upon~~agreed upon markup. Revenue for these cost-plus contracts is recognized over time on an input basis as labor hours are incurred, materials are utilized, and services are performed. Revenue from wholesale or retail unit sales is recognized at apoint-in-time upon shipment.

Cost of Revenues

Cost of revenues consists of direct labor, materials, subcontract costs and indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Labor costs are considered to be incurred as the work is performed. Subcontractor labor is recognized as the work is performed.

Gross Profit

Our gross profit is influenced by direct labor, materials and subcontract costs. Our profit margins are also influenced by raw material costs, contract mix, weather and proper coordination with contract providers. Labor intensive contracts usually drive higher margins than those contracts that include material, subcontract and equipment costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of personnel, facility leases, advertising and marketing expenses, administrative expenses associated with accounting, finance, legal, information systems, leadership development, human resources and risk management and overhead associated with these functions. Selling expenses consist primarily of compensation and associated costs for sales and marketing personnel, costs of advertising, trade shows and corporate marketing. General and administrative expense consists primarily of compensation and associated costs for executive management, ~~finance, legal, information systems, leadership development and other administrative~~ personnel, facility leases, outside professional fees and other corporate expenses.

Amortization of Intangible Assets

Amortization expense reflects the charges incurred to amortize our finite-lived identifiable intangible assets, such as customer relationships, which are amortized over their estimated useful lives. There is a portion of amortization expense related to the backlog of intangible assets reflected in cost of revenues in the unaudited condensed consolidated statement of operations.

Impairment of Goodwill ~~Intangibles~~ and ~~Long-Lived~~Intangible Assets

Goodwill is tested for impairment annually, or more frequently as events and circumstances change. Expenses for impairment charges related to the write-down of goodwill balances and identifiable intangible assets balances are recorded to the extent their carrying values exceed their estimated fair values. Expenses for impairment charges related to the write-down of other long-lived assets (which includes amortizable intangibles) are recorded when triggering events indicate their carrying values may exceed their estimated fair values.

Critical Accounting Policies and Estimates

For information regarding our Critical Accounting Policies, see the “Critical Accounting Policies” section of the “APG Management’s Discussion and Analysis of Financial Condition and Results of

Operations” in our Form~~S-4.~~ ~~Additionally, see the “Use of estimates and risks and uncertainty ofCOVID-19”~~ ~~section of Note 2 – “Basis of Presentation and Significant Accounting Policies” to the Interim Statements for a discussion about the impact of theCOVID-19~~ ~~pandemic on asset impairment.~~ 10-K.

Results of Operations

The following is a discussion of our financial condition and results of operations during the three and six months ended ~~March 31, 2020 (the “Successor Period”)~~June 30, 2021 and the three and six months ended June 30, 2020.

Three months ended June 30, 2021 compared to the three months ended March 31, 2019 (the “Predecessor Period”). We did not own APi Group for the Predecessor period. Consequently, these results may not be indicative of the results that we would expect to recognize for future periods.June 30, 2020

~~Three Months Ended March 31, 2020 (Successor) compared to Three Months Ended March 31, 2019 (Predecessor)~~


	Three Months Ended March 31,
	2020			2019			Change					Three Months Ended June 30,						Change
($ in millions)	(Successor)			(Predecessor)			$			%		2021			2020			$			%
Net revenues	$	858		$	922		$	(64	)		(6.9)%	$	978		$	889		$	89			10.0	%
Cost of revenues		696			759			(63	)		(8.3)%		746			715			31			4.3	%

Gross profit		162			163			(1	)		(0.6)%		232			174			58			33.3	%
Selling, general, and administrative expenses		188			137			51			37.2%		185			147			38			25.9	%
Impairment of goodwill, intangibles and long-lived assets		208			—			208	��		NM

Operating income (loss)		(234	)		26			(260	)		NM

Operating income													47			27			20			74.1	%
Interest expense, net		14			6			8			133.3%		14			14			—			—
Loss on extinguishment of debt													9			—			9		NM
Investment income and other, net		(3	)		(2	)		(1	)		50.0%		(6	)		(11	)		5			45.5	%

Other expense, net		11			4			7			175.0%		17			3			14			466.7	%

Income (loss) before income taxes		(245	)		22			(267	)		NM
Income before income taxes													30			24			6			25.0	%
Income tax provision (benefit)		(51	)		1			(54	)		NM		9			(12	)		21			175.0	%

Net income (loss)	$	(194	)	$	21		$	(215	)		NM

Net income												$	21		$	36		$	(15	)		(41.7	)%

NM = Not meaningful

Net revenues

Net revenues for the three months ended ~~March 31, 2020~~June 30, 2021 were ~~$858~~$978 million compared to ~~$922~~$889 million for the same period in ~~2019, a decrease~~2020, an increase of ~~$64~~$89 million or ~~6.9%~~10.0%. The ~~decrease~~increase in net revenues was primarily ~~attributable to~~driven by significant increases in both the Safety and Specialty Services segments resulting from general market recoveries. In the second quarter of 2020, both segments experienced poor market conditions resulting from the negative impact of the COVID-19 pandemic. In addition, the Safety Services segment also benefited from additional revenues from acquisitions completed in the previous 12 months. These increases were partially offset by a ~~decrease in volume of projects~~decline in the Industrial Services segment, which was impacted by the sale of ~~$76~~two businesses that accounted for $40 million ~~due to more focused project selection~~in revenue during the ~~current year. This was partially offset by the Specialty Services segment, which increased revenues by $14 million, and consistent performance in the Safety Services segment, despite the impact ofCOVID-19~~ ~~during the first~~second quarter of ~~2020.~~2020 and difficult market conditions.

Gross profit

The following table presents our gross profit (net revenues less cost of revenues), and gross ~~profit~~ margin (gross profit as a percentage of net revenues) for ~~APG for~~ the three months ended ~~March 31,~~June 30, 2021 and 2020, ~~(Successor) and 2019 (Predecessor),~~ respectively:

   Three Months Ended March 31,
   2020 2019 Change
($ in millions)
   (Successor) (Predecessor) $            %
Gross profit
   $ 162 $ 163 $ (1 )    (0.6)%
Gross profit margin
   18.9 % 17.7 %

	Three Months Ended June 30,						Change
($ in millions)	2021			2020			$		%
Gross profit	$	232		$	174		$	58		33.3	%
Gross margin		23.7	%		19.6	%

Our gross profit for the three months ended ~~March 31, 2020~~June 30, 2021 was ~~$162~~$232 million compared to ~~$163~~$174 million for the same period in ~~2019, a decrease~~2020, an increase of $1$58 million, or ~~0.6%~~33.3%. ~~The~~Gross margin was 23.7%, an increase of 410 basis points compared to prior year, primarily due to a $21 million decrease in ~~gross profit~~backlog amortization expense, which positively impacted the rate by 210 basis points. Also driving the improvement was ~~primarily attributable to $22 million recognized~~a favorable mix from higher volumes in ~~cost of revenues from the amortization of backlog assets related to purchase accounting, offset by a~~ more ~~favorable contract mix with a greater percentage of~~profitable segments. Additionally, we divested two lower margin businesses during 2020 in our ~~revenues in 2020 coming from our higher margin segment, Safety Services, and improved gross profit in the~~ Industrial Services segment ~~of 715~~which contributed 80 basis points to the improvement. These increases were partially offset by project delays due to ~~improved project selection, conditions~~supply chain disruptions and ~~execution. This resulted~~downward pressure on margins caused by the impact of inflation, which we have not been able to fully recover in ~~a higher gross profit margin of 18.9% in 2020 versus 17.7% in 2019. The gross profit margin was negatively impacted by 2.5% due to~~ the ~~$22 million backlog amortization.~~ short term.

Operating expenses

The following table presents operating expenses and operating margin (operating income ~~(loss)~~ as a percentage of net revenues) for ~~APG for~~ the three months ended ~~March 31,~~June 30, 2021 and 2020, ~~(Successor) and 2019 (Predecessor),~~ respectively:


	Three Months Ended March 31,
	2020			2019			Change				Three Months Ended June 30,						Change
($ in millions)	(Successor)			(Predecessor)			$		%		2021			2020			$		%
Selling, general, and administrative expenses	$	188		$	137		$	51		37.2%
Impairment of goodwill, intangibles and long-lived assets		208			—			208		NM

Selling, general, and administrative expenses (excluding amortization expense)											$	155		$	119		$	36		30.3	%
Amortization expense												30			28			2		7.1	%
Total operating expenses	$	396		$	137		$	259		189.1%	$	185		$	147		$	38		25.9	%

Operating expenses as a percentage of net revenues		46.2	%		14.9	%						18.9	%		16.5	%
Operating margin		(27.3	%)		2.8	%						4.8	%		3.0	%

Our operating expenses for the three months ended ~~March 31, 2020~~June 30, 2021 were ~~$396~~$185 million compared to ~~$137~~$147 million for the same period in ~~2019,~~2020, an increase of ~~$259~~$38 million. Operating expenses as a percentage of net revenues were ~~46.2%~~18.9% for ~~2020~~2021 compared to ~~14.9%~~16.5% for ~~2019. The~~2020. In the second quarter of 2020, we took various actions in response to the COVID-19 pandemic which resulted in lowering operating expenses as a percentage of net revenues. This included implementing a preemptive cost reduction plan to lower expenses throughout 2020. However, as COVID-19 restrictions began to ease and volumes increased, we restored many of these costs in fourth quarter of 2020, resulting in an increase in operating expenses as a percentage of net revenues. Also driving the increase was higher levels of spending related to business process transformation projects, including system and process development costs and expenses associated with the implementation of compliance programs related to the Sarbanes-Oxley Act of 2002 during the second quarter of 2021.

Interest expense, net

Interest expense was $14 million for both the three months ended June 30, 2021 and 2020.

Loss on Extinguishment of Debt

During the second quarter of 2021 we completed a private offering of $350 million aggregate principal amount of senior notes. The proceeds from the offering were used to repay all outstanding indebtedness under the 2020 Term Loan, prepay a portion of the 2019 Term Loan, pay for transaction fees and expenses, and fund general corporate purposes. In connection with the repayment of the 2020 Term Loan and prepayment on a portion of the 2019 Term Loan, the Company incurred a loss on extinguishment of debt of $9 million related to unamortized debt issuance costs.

Income tax provision (benefit)

The income tax expense (benefit) for the three months ended June 30, 2021 was expense of $9 million compared to a benefit of $(12) million in the same period of the prior year. This change was driven by the fact that we had earned income for the first six months of 2021, compared to a loss position for the first six months of 2020 due to an impairment charge. The effective tax rate for the three months ended June 30, 2021 was 28.9%, compared to (49.0)% in the same period of 2020. The difference in the effective tax rate was driven by discrete and nondeductible permanent items which have a greater impact on the effective tax rate when income or losses are smaller. The difference between the effective tax rate and the statutory U.S. federal income tax rate of 21.0% is ~~primarily attributable~~due to ~~impairment charges of $208 million, intangible asset amortization expense, which increased~~the nondeductible permanent items, state taxes, and foreign earnings in jurisdictions that have higher tax rates.

Net income and EBITDA

The following table presents net income and EBITDA for the three months ended June 30, 2021 and 2020, respectively:

	Three Months Ended June 30,						Change
($ in millions)	2021			2020			$			%
Net income	$	21		$	36		$	(15	)		(41.7	)%
EBITDA		96			112			(16	)		(14.3	)%
Net income as a % of Net Revenues		2.1	%		4.0	%
EBITDA as % of Net Revenues		9.8	%		12.6	%

Our net income for the three months ended June 30, 2021 was $21 million ~~over~~compared to $36 million for the same period in 2020, a reduction of $15 million. Net income as a percentage of net revenues for the three months ended June 30, 2021 was 2.1% compared to 4.0% for the same period in 2020. The decline in net income and in EBITDA resulted from a $9 million loss on extinguishment of debt recognized in the second quarter of 2021, higher spending related to business process transformation projects to enhance systems and implement compliance programs related to Sarbanes-Oxley Act of 2002, and COVID-19 relief payments that were received by our Canadian subsidiaries during the second quarter of 2020 that did not repeat in the second quarter of 2021. Also driving the decline was the impact of supply chain disruptions and downward pressure on margins caused by inflation. These items were partially offset by improved profitability in the Safety Services segment.

Operating Segment Results for the three months ended June 30, 2021 versus the three months ended June 30, 2020

	Net Revenues
	Three Months Ended June 30,						Change
($ in millions)	2021			2020			$			%
Safety Services	$	512		$	371		$	141			38.0	%
Specialty Services		415			349			66			18.9	%
Industrial Services		68			173			(105	)		(60.7	)%
Corporate and Eliminations		(17	)		(4	)		(13	)		(325.0	)%
	$	978		$	889		$	89			10.0	%

	Operating Income (Loss)
	Three Months Ended June 30,						Change
($ in millions)	2021			2020			$			%
Safety Services	$	52		$	22		$	30			136.4	%
Safety Services operating margin		10.2	%		5.9	%
Specialty Services		32			22			10			45.5	%
Specialty Services operating margin		7.7	%		6.3	%
Industrial Services		(8	)		4			(12	)		(300.0	)%
Industrial Services operating margin		(11.8	)%		2.3	%
Corporate and Eliminations		(29	)		(21	)		(8	)		(38.1	)%
	$	47		$	27		$	20			74.1	%

	EBITDA
	Three Months Ended June 30,						Change
($ in millions)	2021			2020			$			%
Safety Services	$	73		$	49		$	24			49.0	%
Safety Services EBITDA as a % of net revenues		14.3	%		13.2	%
Specialty Services		55			62			(7	)		(11.3	)%
Specialty Services EBITDA as a % of net revenues		13.3	%		17.8	%
Industrial Services		3			21			(18	)		(85.7	)%
Industrial Services EBITDA as a % of net revenues		4.4	%		12.1	%
Corporate and Eliminations		(35	)		(20	)		(15	)		(75.0	)%
	$	96		$	112		$	(16	)		(14.3	)%

The following discussion breaks down the net revenues, operating income (loss) and EBITDA by operating segment for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

Safety Services

Safety Services net revenues for the three months ended June 30, 2021 increased by $141 million or 38.0% compared to the same period in the prior ~~year, increases~~year. This improvement was primarily driven by the general market recovery as compared to the poor market conditions in the second quarter of ~~$17 million due to business~~2020, which was negatively impacted by the COVID-19 pandemic. We experienced continued growth ~~focused on compensation~~in inspection and service revenues, driving specific improvements in both our Life Safety and HVAC service businesses. The segment also benefited from additional resources to drive our organic growth strategy, unabsorbed overhead costs of $3 million, and non-cash share-based compensation of $1 million. Additionally, we incurred $6 million of non-recurring business process transformation and public company registration, listing and compliance costs of $6 million, and corporate costs related to being a public company of $3 million.net revenues contributed by acquisitions completed in the prior 12 months.

~~Operating income and EBITDA~~

   Three Months Ended March 31,
   2020    2019    Change
($ in millions)
   (Successor)    (Predecessor)    $            %
Operating income (loss)
   $ (234 )    $ 26    $ (260 )    NM
EBITDA
   (161 )    53    (214 )    (403.8)%

~~Our~~Safety Services operating ~~loss~~margin for the three months ended ~~March 31,~~June 30, 2021 and 2020 was ~~$234~~approximately 10.2% and 5.9%, respectively. The improvement was primarily driven by higher volumes and leveraging operating expenses to improve profitability, shift to more inspection and service work generating a favorable project mix, and a $6 million decrease in amortization expense. Safety Services EBITDA as a percentage of net revenues for the three months ended June 30, 2021 and 2020 was approximately 14.3% and 13.2%, respectively. This improvement is primarily related to the higher volume and improved operating profitability described above.

Specialty Services

Specialty Services net revenues for the three months ended June 30, 2021 increased by $66 million or 18.9% compared to the same period in the prior year. The increase was primarily driven by higher demand and timing for fabrication and specialty contracting services during the second quarter of 2021, resulting from general improvements in market conditions compared to the prior year, which was negatively impacted by the COVID-19 pandemic. These increases were partially offset by lower volumes in infrastructure and certain utility businesses.

Specialty Services operating margin for the three months ended June 30, 2021 and 2020 was approximately 7.7% and 6.3%, respectively. The improvement was the result of increased volume, improvements in general market conditions compared to the second quarter of 2020 and decreased amortization expense of $6 million. These increases were partially offset by the downward pressure on margins caused by the impact of inflation and supply chain disruptions, which we have not been able to fully recover in the short term. Our Specialty Services EBITDA as a percentage of net revenues for the three months ended June 30, 2021 and 2020 was approximately 13.3% and 17.8%, respectively, due to the factors discussed above and decreased income from joint venture investments of $4 million.

Industrial Services

Industrial Services net revenues for the three months ended June 30, 2021 decreased by $105 million or (60.7)% compared to the same period in the prior year. The sale of two Industrial Services businesses accounted for $40 million of the decline. Also driving the decline was the suppression of demand for our services due to decisions by our customers to delay and suspend projects, strategic focus on improving margin resulting from disciplined project and customer selection, and difficult market conditions.

Industrial Services operating margin for the three months ended June 30, 2021 and 2020 was approximately (11.8)% and 2.3%, respectively. The decline was primarily driven by a lower volume of projects and was partially offset by a decline in amortization expense of $6 million. Industrial Services EBITDA as a percentage of net revenues was 4.4% and 12.1% for the three months ended June 30, 2021 and 2020, respectively, driven by the impacts of lower volumes described above.

Six months ended June 30, 2021 compared to the six months ended June 30, 2020

	Six Months Ended June 30,						Change
($ in millions)	2021			2020			$			%
Net revenues	$	1,781		$	1,747		$	34			1.9	%
Cost of revenues		1,368			1,411			(43	)		(3.0	)%
Gross profit		413			336			77			22.9	%
Selling, general, and administrative expenses		368			335			33			9.9	%
Impairment of goodwill and intangible assets		—			208			(208	)	NM
Operating income (loss)		45			(207	)		252			121.7	%
Interest expense, net		29			28			1			3.6	%
Loss on debt extinguishment		9			—			9		NM
Investment income and other, net		(9	)		(14	)		5			35.7	%
Other expense, net		29			14			15			107.1	%
Income (loss) before income taxes		16			(221	)		237			107.2	%
Income tax provision (benefit)		3			(63	)		66			104.8	%
Net income (loss)	$	13		$	(158	)	$	171			108.2	%

NM = Not meaningful

Net revenues

Net revenues for the six months ended June 30, 2021 and 2020 were $1,781 million compared to $1,747 million for the same period in 2020, an increase of $34 million or 1.9%. The increase in net revenues was primarily driven by significant increases in both the Safety and Specialty Services segments resulting from general market recoveries. During 2020, both segments were negatively impacted by poor market conditions resulting from the COVID-19 pandemic. Additionally, during 2021, the Safety Services segment benefited from additional revenues from acquisitions completed in the previous 12 months. These increases were partially offset by a decline in the Industrial Services segment, which was impacted by the sale of two businesses that accounted for $78 million in revenue during the six months ended June 30, 2020 and continues to be negatively impacted by decisions by our customers to delay and suspend projects during the six months ended June 30, 2021.

Gross profit

The following table presents our gross profit (net revenues less cost of revenues) and gross margin (gross profit as a percentage of net revenues) for the six months ended June 30, 2021 and 2020, respectively:

	Six Months Ended June 30,						Change
($ in millions)	2021			2020			$		%
Gross profit	$	413		$	336		$	77		22.9	%
Gross margin		23.2	%		19.2	%

Our gross profit for the six months ended June 30, 2021 was $413 million, compared to $336 million for the same period in 2020, an increase of $77 million or 22.9%. Gross margin was 23.2%, an increase of 400 basis points compared to prior year primarily due to a $42 million decrease in backlog amortization expense, which positively impacted the rate by 240 basis points. We also divested two lower margin businesses during 2020 in our Industrial Services segment, which contributed 90 basis points to the improvement. In addition, higher volumes in more profitable segments and disciplined project and customer selection drove higher gross margins. These increases were partially offset by project delays, jobsite conditions and suppression of demand in the energy industry.

Operating expenses

The following table presents operating expenses and operating margin (operating income as a percentage of ~~$26~~net revenues) for the six months ended June 30, 2021 and 2020, respectively:

	Six Months Ended June 30,						Change
($ in millions)	2021			2020			$			%
Selling, general, and administrative expenses (excluding amortization expense)	$	308		$	277		$	31			11.2	%
Amortization expense		60			58			2			3.4	%
Impairment of goodwill and intangible assets		—			208			(208	)	NM
Total operating expenses	$	368		$	543		$	(175	)		(32.2	)%
Operating expenses as a percentage of net revenues		20.7	%		31.1	%
Operating margin		2.5	%		(11.8	)%

Our operating expenses for the six months ended June 30, 2021 were $368 million, compared to $543 million for the same period in 2020, a decrease of ~~$260~~$175 million. Operating ~~margin decreased to approximately (27.3)% in 2020 from 2.8% in 2019. The decrease was primarily attributable to impairment expense of $208 million, increased~~ expenses ~~related to intangible asset amortization expense, which increased $43 million over the prior year, and other increases in operating expenses discussed above. EBITDA~~ as a percentage of net revenues ~~decreased~~were 20.7% for 2021 compared to ~~(18.8)%~~31.1% for 2020, improving primarily due to the $208 million impairment charge related to goodwill and intangible assets recorded in the first quarter of 2020 ~~from 5.7%~~that did not repeat during 2021. This decline was offset by an increase of 11.2% in ~~2019. The decrease was primarily driven by~~selling, general, and administrative expenses (excluding amortization) due to higher spending related to business process transformation projects to enhance systems and implement compliance programs related to Sarbanes-Oxley Act of 2002 and the ~~increased operating~~preemptive cost reduction plan we implemented in the second quarter of 2020 to reduce expenses ~~discussed above.~~in response to the COVID-19 pandemic. As COVID-19 restrictions began to ease, we restored many of these costs in the fourth quarter of 2020, resulting in an increase in selling, general, and administrative expenses.

Interest expense, net

Interest expense was ~~$14~~$29 million for the ~~three~~six months ended ~~March 31, 2020 compared to $6~~June 30, 2021 which is slightly higher than $28 million for the same period of the prior year.

Income tax provision (benefit)

The $8income tax expense (benefit) for the six months ended June 30, 2021 was expense of $3 million ~~increase~~compared to a benefit of $(63) million in ~~interest expense~~the same period of the prior year. This change was ~~primarily~~driven by the fact that we had earned income for the first six months of 2021, compared to being in a loss position in the first six months of 2020 due to an increase in average outstanding borrowings and higher average borrowing costs reflecting the APi Acquisition in which APi Group’s previous debt totaling $595 million as of March 31, 2019, was settled and replaced by our Credit Facilities that include the issuance of a $1.2 billion Term Loan.

~~Income tax provision~~

impairment charge. The effective tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2021 was 17.0% compared to (28.5)% in the same period of 2020. The difference in the effective tax rate was driven by discrete and nondeductible permanent items, which have a greater impact on the effective tax rate when income or losses are smaller. 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, state taxes and foreign earnings in jurisdictions that have higher tax rates.

Net income (loss) and EBITDA

The following table presents net income and EBITDA for the six months ended June 30, 2021 and 2020, respectively:

	Six Months Ended June 30,						Change
($ in millions)	2021			2020			$		%
Net income (loss)	$	13		$	(158	)	$	171		108.2	%
EBITDA		147			(49	)		196		400.0	%
Net income (loss) as a % of Net Revenues		0.7	%		(9.0	)%
EBITDA as % of Net Revenue		8.3	%		(2.8	)%

Our net income (loss) for the six months ended June 30, 2020 was ~~20.9%, after discrete and non-recurring tax items. The income tax benefit of $51~~$13 million compared to $(158) million for the ~~three~~same period in 2020, an improvement of $171 million. Net income (loss) as a percentage of net revenues for the six months ended ~~March 31,~~June 30, 2020 was 0.7% compared to (9.0)% for the same period in 2020. The change was principally from an impairment charge that occurred in the first quarter of 2020 related to goodwill and intangible assets of $208 million that did not recur, an improved gross margin rate and lower operating expenses (discussed above). EBITDA as a percentage of net revenues for the six months ended June 30, 2020 was 8.3% compared to (2.8)% for the same period in 2020. Improvements in EBITDA were primarily a result of the non-recurrence of the impairment charge of $208 million recorded in the first quarter of 2020 and an improved gross margin rate. See the discussion and reconciliation of our non-U.S. GAAP financial measures below.

Operating Segment Results for the six months ended June 30, 2021 versus the six months ended June 30, 2020

	Net Revenues
	Six Months Ended June 30,						Change
($ in millions)	2021			2020			$			%
Safety Services	$	978		$	795		$	183			23.0	%
Specialty Services		736			649			87			13.4	%
Industrial Services		93			310			(217	)		(70.0	)%
Corporate and Eliminations		(26	)		(7	)		(19	)		(271.4	)%
	$	1,781		$	1,747		$	34			1.9	%

	Operating Income (Loss)
	Six Months Ended June 30,						Change
($ in millions)	2021			2020			$			%
Safety Services	$	97		$	12		$	85			708.3	%
Safety Services operating margin		9.9	%		1.5	%
Specialty Services		29			(114	)		143			125.4	%
Specialty Services operating margin		3.9	%		(17.6	)%
Industrial Services		(23	)		(54	)		31			57.4	%
Industrial Services operating margin		(24.7	)%		(17.4	)%
Corporate and Eliminations		(58	)		(51	)		(7	)		(13.7	)%
	$	45		$	(207	)	$	252			121.5	%

	EBITDA
	Six Months Ended June 30,						Change
($ in millions)	2021			2020			$			%
Safety Services	$	138		$	67		$	71			106.0	%
Safety Services EBITDA as a % of net revenues		14.1	%		8.4	%
Specialty Services		75			(46	)		121			263.0	%
Specialty Services EBITDA as a % of net revenues		10.2	%		(7.1	)%
Industrial Services		(3	)		(24	)		21			87.5	%
Industrial Services EBITDA as a % of net revenues		(3.2	)%		(7.7	)%
Corporate and Eliminations		(63	)		(46	)		(17	)		(37.0	)%
	$	147		$	(49	)	$	196			399.5	%

The following discussion breaks down the net revenues, operating income and EBITDA by operating segment for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

Safety Services

Safety Services net revenues for the six months ended June 30, 2021 increased by $183 million or 23.0% compared to the same period in the prior year. This increase is primarily driven by 2020 acquisitions and higher volumes from increased demand for our HVAC and Life Safety Services.

Safety Services operating margin for the six months ended June 30, 2021 and 2020 was approximately 9.9% and 1.5%, respectively. The improvement was primarily driven by an impairment charge of $34 million recorded in the first quarter of 2020 that did not recur. In addition, the improvement was driven by favorable contract mix which shifted to more inspection and service work, disciplined project and customer selection, and a decrease in amortization expense of $15 million. Safety Services EBITDA as a percentage of net revenues for the six months ended June 30, 2021 and 2020 was approximately 14.1% and 8.4%, respectively. This improvement is primarily related improved project mix and impairment charges recorded in the first quarter of 2020 that did not recur.

Specialty Services

Specialty Services net revenues for the six months ended June 30, 2021 increased by $87 million or 13.4% compared to the same period in the prior year. The increase was primarily driven by demand and timing for our fabrication and specialty contracting services during the six months ended June 30, 2021. These increases were partially offset by project deferrals and jobsite disruptions driven by unfavorable weather conditions in the first quarter of 2021.

Specialty Services operating margin for the six months ended June 30, 2021 and 2020 was approximately 3.9% and (17.6)%, respectively. The improvement was the result of an impairment charge of $120 million recorded in the first quarter of 2020 that did not recur, and decreased amortization expense of $13 million. Our Specialty Services EBITDA as a percentage of net revenues for the six months ended June 30, 2021 and 2020 was approximately 10.2% and (7.1)%, respectively. This improvement is primarily related to the impairment ~~of goodwill and intangible assets. The tax law changes~~charge recorded in the ~~CARES Act had an immaterial impact on~~first quarter of 2020 that did not recur, partially offset by a decrease in income from joint venture investments of $5 million.

Industrial Services

Industrial Services net revenues for the ~~Company’s income tax provision during the three~~six months ended ~~March 31, 2020.~~June 30, 2021 decreased by $217 million or (70.0)% compared to the same period in the prior year. The sale of two Industrial Services businesses accounted for $78 million of the decline. The revenue decline was also impacted by a suppression of demand for our services due to general market weakness, our strategic focus on improving margin resulting from disciplined project and customer selection, and a general slowing in the energy industry.

Industrial Services operating margin for the six months ended June 30, 2021 and 2020 was approximately (24.7)% and (17.4)%, respectively. The decline was primarily driven by a lower volume of projects while certain indirect costs for leases and equipment remained consistent with prior periods, partially offset by an impairment charge of $49 million recorded in the first quarter of 2020 that did not recur and decreased amortization expense of $11 million. Industrial Services EBITDA as a percentage of net revenues was (3.2)% and (7.7)% for the six months ended June 30, 2021 and 2020, respectively. This improvement is primarily related to the impairment charge of $49 million in 2020 that did not recur, partially offset by impacts of lower volumes described above.

Non-GAAP Financial Measures (Unaudited)

We supplement our reporting of consolidated financial information determined in accordance with U.S. GAAP with ~~earnings before interest, taxes, depreciation and amortization (“EBITDA”)~~EBITDA (defined below), which is anon-U.S. GAAP financial measure. ~~Management believes this measure provides meaningful information and helps investors understand our financial results and assess our prospects for future performance.~~ We use EBITDA to evaluate our performance, both internally and as compared with our peers, because it excludes certain items that may not be indicative of our core operating results. Management believes this measure is useful to investors since it (a) permits investors to view the Company’s performance using the same tools that management uses to evaluate the Company’s past performance, reportable business segments and prospects for future performance, (b) permits investors to compare the Company with its peers and (c) determines certain elements of management’s incentive compensation. Specifically, earnings before interest, taxes, depreciation and amortization (“EBITDA”) is the measure of profitability used by management to manage its segments and, accordingly, in its segment reporting. The Company supplements the reporting of its consolidated financial information with EBITDA. The Company believes this non-U.S. GAAP measure provides meaningful information and help investors understand the Company’s financial results and assess its prospects for future performance. Consolidated EBITDA is calculated in a manner consistent with segment EBITDA, which is a measure of segment profitability.

Thisnon-U.S. GAAP financial measure, however, has limitations as an analytical tool and should not be considered in isolation from, a substitute for, or superior to, the related financial information that we report in accordance with U.S. GAAP. The principal limitation of thisnon-U.S. GAAP financial measure is that it excludes significant expenses that are required by U.S. GAAP to be recorded in our financial statements and may not be comparable to similarly titled measures of other companies due to potential differences in calculation methods. In addition, this measure is subject to inherent limitations as it reflects the exercise of judgment by management about which items are excluded or included in determining this~~non-~~ ~~U.S.~~ non-U.S. GAAP financial measure. Investors are encouraged to review the following reconciliation of thisnon-U.S. GAAP financial measure to its most comparable U.S. GAAP financial measure ~~included in this quarterly report~~ and not to rely on any single financial measure to evaluate our business.

The following table presents a reconciliation of net income ~~(loss)~~ to EBITDA for the periods indicated:


	Three Months Ended March 31,					Three Months Ended June 30,
($ in millions)	2020 (Successor)			2019 (Predecessor)		2021		2020
Reported net income (loss)	$	(194	)	$	21
Adjustments to reconcile net income (loss) to EBITDA:
Reported net income						$	21	$	36
Adjustments to reconcile net income to EBITDA:
Interest expense, net		14			6		14		14
Income tax provision (benefit)		(51	)		1		9		(12	)
Depreciation		18			16		20		23
Amortization		52			9		32		51

EBITDA	$	(161	)	$	53	$	96	$	112

	Six Months Ended June 30,
($ in millions)	2021		2020
Reported net income (loss)	$	13	$	(158	)
Adjustments to reconcile net income (loss) to EBITDA:
Interest expense, net		29		28
Income tax provision (benefit)		3		(63	)
Depreciation		39		41
Amortization		63		103
EBITDA	$	147	$	(49	)

~~Operating Segment Results for the Three Months Ended March 31, 2020 (Successor) versus Three Months Ended March 31, 2019 (Predecessor)~~

   Net Revenues
   Three Months Ended March 31,
   2020    2019    Change
($ in millions)
   (Successor)    (Predecessor)    $            %
Safety Services
   $ 424    $ 426    $ (2 )    (0.5)%
Specialty Services
   300    286    14    4.9%
Industrial Services
   137    213    (76 )    (35.7)%
Corporate and Eliminations
   (3 )    (3 )    —      0.0%







   $ 858    $ 922    $ (64 )    (6.9)%







   Operating Income (loss)
   Three Months Ended March 31,
   2020    2019    Change
($ in millions)
   (Successor)    (Predecessor)    $            %
Safety Services
   $ (10 )    $ 52    $ (62 )    (119.2)%
Specialty Services
   (136 )    —      (136 )    NM
Industrial Services
   (58 )    (9 )    (49 )    NM
Corporate and Eliminations
   (30 )    (17 )    (13 )    76.5%







   $ (234 )    $ 26    $ (260 )    NM







   EBITDA
   Three Months Ended March 31,
   2020    2019    Change
($ in millions)
   (Successor)    (Predecessor)    $            %
Safety Services
   $ 18    $ 55    $ (37 )    (67.3)%
Specialty Services
   (108 )    14    (122 )    NM
Industrial Services
   (45 )    (3 )    (42 )    NM
Corporate and Eliminations
   (26 )    (13 )    (13 )    100.0%







   $ (161 )    $ 53    $ (214 )    NM

~~The following discussion breaks down the net revenues, operating income and EBITDA by operating segment for the three months ended March 31, 2020 compared to the three months ended March 31, 2019.~~

~~Safety Services~~

Safety Services net revenues for the three months ended March 31, 2020 decreased by $2 million, or 0.5% compared to the same period in the prior year. This is due to timing of larger contract revenues during the year-over-year period, combined with some impact of~~COVID-19~~ ~~andshelter-in-place~~ ~~orders during the last half of March.~~

Safety Services operating margin for the three months ended March 31, 2020 and 2019 was approximately (2.4)% and 12.2%, respectively. The decrease was primarily driven by impairment charges of $34 million and intangible asset amortization expense, which was $22 million higher for the three months ended March 31, 2020 compared to the same period in the prior year as a result of the APi Acquisition and the step up in fair values for intangible assets. Safety Services EBITDA as a percentage of net revenues for the three months ended March 31, 2020 and 2019 was approximately 4.2% and 12.9%, respectively. The decrease was primarily driven by impairment charges.

~~Specialty Services~~

Specialty Services net revenues for the three months ended March 31, 2020 increased by $14 million, or 4.9% compared to the same period in the prior year. Segment revenue growth was primarily driven by increased demand from our customers and timing of projects, slightly offset by negative impacts of COVID-19 during the last half of March.

Specialty Services operating margin for the three months ended March 31, 2020 and 2019 was approximately (45.3)% and 0.0%, respectively. The decrease was primarily driven by impairment charges of $120 million, and intangible asset amortization expense, which was $13 million higher for the three months ended March 31, 2020 compared to the same period in the prior year as a result of the APi Acquisition and the step up in fair values for intangible assets and contract mix. Specialty Services EBITDA as a percentage of net revenues for the three months ended March 31, 2020 and 2019 was approximately (36.0)% and 4.9%, respectively. The decrease was primarily driven by impairment charges.

~~Industrial Services~~

Industrial Services net revenues for the three months ended March 31, 2020 decreased by $76 million, or 35.7% compared to the same period in the prior year. This decrease was primarily due to decreased volume of projects as a result of our focus on project selection and reduced market demand in our Canadian operations.

Industrial Services operating margin for the three months ended March 31, 2020 and 2019 was approximately (42.3)% and (4.2)%, respectively. The decline was primarily driven by impairment charges of $49 million, and intangible asset amortization expense, which was $7 million higher for the three months ended March 31, 2020 compared to the same period in the prior year as a result of the APi Acquisition and the step up in fair values for intangible assets. This was partially offset by productivity increases due to better project selection and jobsite conditions. Industrial Services EBITDA as a percentage of net revenues, was (32.8)% and (1.4)% for the three months ended March 31, 2020 and 2019, respectively. The decrease was primarily driven by impairment charges, partially offset by contract selection, productivity and favorable jobsite conditions.

Liquidity and Capital Resources

Overview

Our primary sources of liquidity are cash flows from the operating activities of our consolidated subsidiaries, available cash and cash equivalents, and our access to our Revolving Credit Facility. We believe ~~that~~ these sources will be sufficient to fund our liquidity requirements for at least the next twelve months. As of March 31, 2020, we had $499 million of total liquidity, comprising $436 million in cash and cash equivalents and $33 million ($100 million less outstanding letters of credit of approximately $67 million) of available borrowings under our Revolving Credit Facility.

~~Given the uncertainties regarding theCOVID-19~~ global pandemic and in preparation for its potential unforeseen impacts, in late March 2020, we drew down $200 million under our Revolving Credit Facility. As of March 31, 2020, we had $1.2 billion of indebtedness outstanding under the Term Loan, and $200 million outstanding under the $300 million Revolving Credit Facility. As of March 31, 2020, $33 million was available after giving effect to $67 million of outstanding letters of credit, which reduce availability. Subsequently, in April 2020, we repaid the full amount borrowed on the Revolving Credit Facility.

We also expect to continue to raise cash through equity and debt offerings when capital market conditions are favorable and other sources of liquidity are not sufficient. Our principal liquidity requirements have been, and we expect will be, any contingent consideration due to selling shareholders, including tax payments in connection therewith, for working capital and general corporate purposes,

including capital expenditures and debt service, as well as to identify, execute and integrate strategic acquisitions and business transformation. Our capital expenditures were approximately $11 and $22 million in the three months ended March 31, 2020 and 2019, respectively.

~~Including our current assessment of the potential effects of theCOVID-19~~ pandemic on our results of operations, we anticipate that funds generated from operations, available borrowings under our Credit Facility and our cash balances will be sufficient to meet our working capital requirements, anticipated capital expenditures, debt service obligations, insurance and performance collateral requirements, letter of credit needs,~~earn-out~~ ~~obligations, required income tax payments, acquisition and other investment funding requirements, share repurchase activity and other liquidity needs for at least the next twelve months.~~

~~Credit Facilities~~

We have a credit agreement which provides for (1) a term loan facility, pursuant to which we incurred a $1.2 billion Term Loan, which we used to fund a part of the cash portion of the purchase price in the APi Acquisition and (2) a $300 million Revolving Credit Facility of which up to $150 million can be used for the issuance of letters of credit.

Although we believe we have sufficient resources to fund our future cash requirements, there are many factors with the potential to influence our cash flow position including weather, seasonality, commodity prices, market conditions, and prolonged impacts ofCOVID-19 andshelter-in-place governmental action, over which we have no control. As of June 30, 2021, we had $913 million of total liquidity, comprising $686 million in cash and cash equivalents and $227 million ($300 million less outstanding letters of credit of approximately $73 million, which reduce availability) of available borrowings under our Revolving Credit Facility. During the six months ended June 30, 2021, we received approximately $230 million of cash proceeds from the exercise of approximately 60 million outstanding warrants, resulting in the issuance of approximately 20 million shares of common stock.

~~Effective~~During the second quarter of 2021, we completed a private offering of $350 million aggregate principal amount of 4.125% Senior Notes due 2029 (the “Senior Notes”). The Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by us and certain of our existing and future domestic subsidiaries. The proceeds from the sale of the Senior Notes were used to repay all outstanding indebtedness under the term loan incurred on October 22, 2020 (the “2020 Term Loan”), prepay a portion of the term loan incurred on October 1, 2019 (the “2019 Term Loan”), pay for transaction fees and expenses, and fund general corporate purposes. In connection with the repayment of the 2020 Term Loan and partial repayment on the 2019 Term Loan, we ~~entered into~~incurred a ~~$720~~loss on debt extinguishment of $9 million related to unamortized debt issuance costs, which was recorded within loss on debt extinguishment in the unaudited condensed consolidated statements of operations.

We expect to continue to be able to access the capital markets through equity and debt offerings for liquidity purposes as needed. Our principal liquidity requirements have been, and we expect will be, any accrued consideration due to selling shareholders, including tax payments in connection therewith, for working capital and general corporate purposes, including capital expenditures and debt service, as well as to identify, execute and integrate strategic acquisitions and business transformation. We expect to fund the acquisition of the Chubb fire and security business, anticipated to close around year-end 2021, through a combination of cash on hand, perpetual preferred equity financing, and debt financing.

Our capital expenditures were approximately $34 million and $17 million in the six months ended June 30, 2021 and 2020, respectively. The increase in capital spending is due to the reduction in capital expenditures that occurred in 2020 as a result of COVID-19, and as we return to a more normalized level of spending, capital spending has increased in the current period, and is expected to be less than 2% of net revenues annually.

In December 2020, our Board of Directors authorized a share repurchase program, authorizing the purchase of up to an aggregate of $100 million of ~~notional value5-year~~ ~~interest rate swap, exchangingone-month~~ ~~LIBOR for a fixed rate~~shares of ~~1.62% per annum. Accordingly, our fixed interest rate per annum on~~common stock. There were no stock repurchases during the ~~swapped $720~~six months ended June 30, 2021 under the share repurchase program and approximately $70 million of ~~Term Debt is 4.12%.~~repurchases remained authorized.

One of APi Group’s Canadian subsidiaries had a $20 million unsecured line of credit agreement with a variable interest rate based upon the prime rate. APi Group had no amounts outstanding under the line of credit at March 31, 2020.

~~We were in compliance with all covenants contained in the Credit Agreement as of December 31, 2019 and March 31, 2020.~~

Cash Flows

The following table summarizes net cash flows with respect to our operating, investing and financing activities for the periods indicated:

   Three Months Ended March 31,
   2020    2019
($ in millions)
   (Successor)    (Predecessor)
Net cash provided by operating activities
   $ 55    $ 25
Net cash used in investing activities
   (15 )    (22 )
Net cash provided by (used in) financing activities
   139    (16 )
Effect of foreign currency exchange rate change on cash and cash equivalents
   1    —




Net increase (decrease) in cash and cash equivalents
   $ 180    $ (13 )




Cash and cash equivalents at the end of the period
   $ 436    $ 41

	Six Months Ended June 30,
($ in millions)	2021			2020
Net cash provided by operating activities	$	19		$	232
Net cash used in investing activities		(35	)		(16	)
Net cash provided by financing activities		187			(96	)
Effect of foreign currency exchange rate change on cash and cash equivalents		3			1
Net increase in cash and cash equivalents	$	174		$	121
Cash, cash equivalents, and restricted cash at the end of the period	$	689		$	377

Net Cash Provided by Operating Activities

Net cash provided by operating activities was ~~$55~~$19 million for the ~~three~~six months ended ~~March 31, 2020~~June 30, 2021 compared to ~~$25~~$232 million for the same period in ~~2019.~~2020. Cash flow from operations is primarily ~~influenced~~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~~During 2020, the decline in ~~cash flows provided by operating activities in 2020 compared~~volume of business due to the ~~same~~COVID-19 pandemic drove a significant decrease in our working capital, which generated substantial operating cash flows. During the first six months of 2021, we have begun to recover from the impacts of COVID-19 and the volume of business has expanded, driving higher working capital requirements and leading to lower operating cash flows. This is in line with historical period ~~in 2019 was primarily driven by changes~~increases in working capital ~~levels.~~during the first six months as we move through a typical business cycle.

Net Cash Used in Investing Activities

Net cash used in investing activities was ~~$15~~$35 million for the ~~three~~six months ended ~~March 31, 2020~~June 30, 2021 compared to ~~$22~~$16 million for the same period in ~~2019.~~2020. The ~~decrease~~increase in cash used in investing activities was ~~attributed~~attributable to ~~reduction~~an increase in purchases of property and equipment during the current period as we return to more normalized levels of spending after management enacted reductions to capital expenditures in response to COVID-19 during the prior year.

Net Cash Provided by ~~(Used in)~~ Financing Activities

Net cash provided by (used in) financing activities was ~~$139~~$187 million for ~~three~~the six months ended ~~March 31, 2020~~June 30, 2021 compared to ~~net cash used in financing activities~~a usage of ~~$16~~$(96) million for the same period in ~~2019.~~2020. The increase in cash provided by financing activities was primarily due to $230 million of proceeds from the issuance of common shares in connection with the warrant exercises which occurred during the first quarter of 2021 and net proceeds from long-term debt of $32 million, which were partially offset by payments made on acquisition-related consideration.

Credit Facilities

During the second quarter of 2021, we completed a private offering of $350 million aggregate principal amount of Senior Notes, issued under an indenture, dated June 22, 2021 (the “Indenture”). The Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by us and certain existing and future domestic subsidiaries. We used the net proceeds from the sale of the Senior Notes to repay the $250 million 2020 Term Loan, prepay a portion of the 2019 Term Loan and for general corporate purposes. As of June 30, 2021, we had $350 million aggregate principal amount of Senior Notes outstanding.

The Indenture contains customary terms and provisions (including representations, covenants, and conditions). Certain covenants, among other things, restrict our ~~borrowing~~ability to incur indebtedness, grant liens, make investments and sell assets. The Indenture also contains customary events of ~~$200~~default, covenants and representations and warranties. Financial covenants include: a senior secured leverage ratio no greater than 3.5 to 1.0, a total net leverage ratio of 3.0 to 1.0, and a fixed charge coverage ratio of 2.0 to 1.0.

The Senior Notes will mature on July 15, 2029, unless redeemed earlier, and bear interest at a rate of 4.125% per year until maturity. Interest will be payable in cash, semi-annually in arrears, on January 15 and July 15 of each year, beginning on January 15, 2022. The Senior Notes are subject to redemption in whole or in part at any time on or after July 15, 2024 at the redemption prices set forth in the Indenture. In addition, before July 15, 2024, up to 35% of the aggregate principal amount of the Senior Notes may be redeemed with the net proceeds of certain equity offerings at the redemption price set forth in the Indenture, subject to certain conditions. Further, all or a portion of the Senior Notes may be redeemed at any time prior to July 15, 2024 at a price equal to 100% of the principal amount, plus a “make-whole” premium and accrued interest, if any, to the date of redemption.

As of June 30, 2021, we have a credit agreement (the “Credit Agreement”) which provides for: (1) a term loan facility, pursuant to which we incurred the $1,200 million 2019 Term Loan used to fund a part of the cash portion of the purchase price in the APi Acquisition, and (2) a $300 million five-year senior secured revolving credit facility (the “Revolving Credit Facility”) of which up to $150 million can be used for the issuance of letters of credit. As of June 30, 2021, we had $1,140 million of indebtedness outstanding on the 2019 Term Loan and had no amounts outstanding under the Revolving Credit Facility, under which $227 million was available after giving effect to $73 million of outstanding letters of credit, which reduce availability.

One of our Canadian subsidiaries had a $20 million unsecured line of credit agreement with a variable interest rate based upon the prime rate. This line of credit was closed during ~~March 2020 due~~the first quarter of 2021.

The Credit Agreement contains customary affirmative and negative covenants, including limitations on additional indebtedness, dividends and other distributions, entry into new lines of business, use of loan proceeds, capital expenditures, restricted payments, restrictions on liens on assets, transactions with affiliates, and dispositions. To the extent total outstanding borrowings under the Revolving Credit Facility (excluding undrawn letters of credit up to $40 million) is greater than 30% of the ~~uncertainty~~total commitment amount of the Revolving Credit Facility, our first lien net leverage ratio shall not exceed: (i) 4.50 to 1.00 for each fiscal quarter ending in 2020; (ii) 4.00 to 1.00 for each fiscal quarter ending in 2021; and ~~unforeseen potential consequences associated with theCOVID-19~~ ~~pandemic, which we subsequently repaid in April 2020.~~

~~Off-Balance~~ ~~Sheet Financing Arrangements~~(iii) 3.75 to 1.00 for each fiscal quarter ending thereafter. Our first lien net leverage ratio as of June 30, 2021 was 1.13:1.00.

We ~~have no obligations, assets or liabilities which would be consideredoff-balance~~ ~~sheet arrangements. We do not participate~~were in ~~transactions that create relationships~~compliance with ~~unconsolidated entities or financial partnerships, often referred to~~all covenants contained in the Indenture and Credit Agreement as ~~variable interest entities, which would have been established for~~of June 30, 2021 and, in the ~~purpose~~case of ~~facilitatingoff-balance~~ ~~sheet arrangements.~~

~~We have not entered into anyoff-balance~~ ~~sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments~~the Credit Agreement, as of ~~other entities, or entered into anynon-financial~~ ~~agreement involving assets.~~December 31, 2020.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

~~There~~Interest Rate Risk

As of June 30, 2021, our variable interest rate debt was primarily related to our $1,200 million 2019 Term Loan and the $300 million Revolving Credit Facility. As of June 30, 2021, excluding letters of credit outstanding of $73 million, we had no amounts of outstanding revolving loans and $1,140 million outstanding on the 2019 Term Loan. As of June 30, 2021, we had a 5-year interest rate swap with respect to $720 million of notional value of the 2019 Term Loan, exchanging one-month LIBOR for a fixed rate of 1.62% per annum. Accordingly, our fixed interest rate per annum on the swapped $720 million notional value of the 2019 Term Loan is 4.12% through its maturity. The remaining $420 million of our 2019 Term Loan balance is bearing interest at 2.59% per annum based on one-month LIBOR plus 250 basis points. Additionally, during the first quarter of 2021, we entered into a cross currency interest rate swap with a notional value of $230 million. The swap reduces our interest expense by approximately $3 million annually and reduces our overall effective interest rate by approximately 20 basis points. A 100-basis point increase in the applicable interest rates under our credit facilities (including the unhedged portion of our 2019 Term Loan debt) would have ~~been~~increased our interest expense by approximately $3 million for the six months ended June 30, 2021.

While we cannot predict our ability to refinance existing debt or the impact interest rate movements will have on our existing debt, we continue to evaluate our financial position on an ongoing basis. In addition, there is currently uncertainty about whether LIBOR will continue to exist after 2021. The ICE Benchmark Administration intends to cease the publication of U.S. dollar LIBOR as follows: the 1 week and 2 month tenors on December 31, 2021 and all other tenors on June 30, 2023. The discontinuation of LIBOR after 2021 and the replacement with an alternative reference rate may adversely impact interest rates and our interest expense could increase.

Foreign Currency Risk

Our foreign operations are primarily in Canada and Europe. Revenues generated from foreign operations represented approximately 10% of our consolidated net revenues for the six months ended June 30, 2021. 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 six months ended June 30, 2021. Translation gains or losses, which are recorded in accumulated other comprehensive loss in the unaudited condensed consolidated balance sheets, result from translation of the assets and liabilities of our foreign subsidiaries into U.S. dollars. Foreign currency translation losses (gains) totaled approximately $(4) million and $(6) million for the three months ended June 30, 2021 and 2020, respectively, and $0 million for the six months ended June 30, 2021, and 2020.

Our exposure to fluctuations in foreign currency exchange rates has increased as a result of the SKG Acquisition and will continue to increase in the future if we continue to expand our operations outside of the United States. We seek to manage foreign currency exposure by minimizing our consolidated net asset and liability positions in currencies other than the functional currency, which exposure was not significant to our consolidated financial position as of June 30, 2021.

Other Market Risk

We are also exposed to market risks impacting our customer base due to the potential related impact on accounts receivable or contract assets on uncompleted contracts. The amounts recorded may be at risk if our customers’ ability to pay these obligations is negatively impacted by economic conditions. We continually monitor the creditworthiness of our customers and maintain ongoing discussions with customers regarding contract status with respect to change orders and billing terms. Therefore, management believes it takes appropriate action to manage market and other risks, but there is no ~~material changes~~assurance management will be able to reasonably identify all risks with respect to the collectability of these assets. See also “Revenue Recognition from ~~the information previously reported~~Contracts with Customers” under the ~~heading “APG Management’s Discussion~~Critical Accounting Policies section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

In addition, we are exposed to various supply chain risks, including market risk of price fluctuations or availability of copper, steel, cable optic fiber and ~~Analysis~~other materials used as components of ~~Financial Condition—Qualitative and Quantitative Disclosures about Market Risk”~~supplies or materials utilized in our ~~FormS-4.~~operations. We are also exposed to increases in energy prices, particularly as they relate to gasoline prices for our vehicle fleet. Disruptions in our supply 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, 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.

Significant declines in market prices for oil and gas and other fuel sources may also impact our operations. Prolonged periods of low oil and gas prices may result in projects being delayed or cancelled and in a low oil and gas price environment, certain of our businesses could become less profitable or incur losses.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures ~~that are~~ designed to provide reasonable assurance that information ~~which is~~ required to be disclosed by ~~the~~ us in the reports ~~that~~ we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required ~~disclosure.~~disclosures. In designing and evaluating such controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

As required by Rule13a-15(b) of the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this ~~quarterly~~annual report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded ~~that~~ our disclosure controls and procedures are not effective at ~~March 31, 2020,~~June 30, 2021 due to the material weakness in internal control over financial reporting described below, which was previously disclosed in ~~the “Risk Factors” section~~Item 9A. “Controls and Procedures” of our Form~~S-4.~~ 10-K for the year ended December 31, 2020.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility ~~that~~ a material misstatement of annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

As indicated above, control deficiencies in our internal control over financial reporting have been identified which constitute material weaknesses relating to inadequate design and implementation of:

~~information technology general controls that prevent the information systems from providing complete and accurate information consistent with financial reporting objectives and current needs;~~
•
information technology general controls that prevent the information systems from providing complete and accurate information consistent with financial reporting objectives and current needs;

~~internal controls over the preparation of the financial statements, including the insufficient review and oversight over financial reporting, journal entries along with related file documentation;~~
•
internal controls over the preparation of the financial statements, including the insufficient review and oversight over financial reporting, journal entries and related file documentation;

~~internal controls to identify and manage segregation of certain accounting duties;~~
•
internal controls to identify and manage segregation of certain accounting duties;

~~internal controls over estimated costs of completion on contracts where revenue is recognized over time; and~~
•
internal controls over estimated costs of completion on contracts where revenue is recognized over time; and

~~management review controls over projected financial information used in fair value financial models used for purchase accounting and intangible asset valuations.~~
•
management review controls over projected financial information used in fair value financial models used for purchase accounting and intangible asset valuations

Management ~~is in the process of developing a remediation plan.~~has undertaken various steps to begin remediating such control deficiencies. The material weaknesses will not be considered remediated until management designs and implements effective controls that operate for a sufficient period of time and management has concluded through testing that these controls are effective. We will monitor the effectiveness of our remediation plans and will make changes management determines to be appropriate. Steps taken by management include the following:

•

development of an Internal Audit team responsible for a detailed work plan to assess and document the adequacy of internal control over financial reporting, continued steps to improve control processes as appropriate, validation through testing that controls are functioning as documented, and implementation of a continuous reporting and improvement process for internal control over financial reporting;

•

adding new members to our accounting and finance team with the appropriate qualified experience in financial reporting, consolidations, technical accounting, and application of U.S. GAAP;

•

engaging a third-party firm to assist us in implementing a global consolidation and planning system;

•

implementing new controls over revenue recognition for both contracts that are recognized over time and time and material contracts;

•

identifying and mitigating segregation of duties concerns within various accounting areas; and

•

implementing new controls and changes to our procedures and processes in our financial consolidation and reporting processes.

We plan to continue our efforts to improve, design and implement integrated processes to enhance our internal control over financial reporting, including:

•

implementing changes to our accounting systems, new controls, procedures and processes in our financial statement close process and, importantly, adding new members to our accounting and finance team with the appropriate qualified experience in financial reporting, consolidations, tax, technical accounting, internal audit and internal controls;

•

adding further qualified resources to tax, financial planning and analysis, and internal audit teams as we further enhance our internal control structure; and

•

providing training and education programs for financial personnel responsible for the performance of newly implemented processes and controls.

Changes in Internal Control Over Financial Reporting

We are ~~developing a remediation~~executing our plan to remediate the material weaknesses relating to our internal control over financial reporting, as described above. This plan includes a detailed risk and controls assessment, detailed flowcharts, key process walkthroughs, and documentation, training, and execution of determined key controls. Except as otherwise described herein, there were no material changes to our internal control over financial reporting (as defined in Rules13a-15(f) and15d-15(f) under the Exchange Act) that occurred during the quarter ended ~~March 31, 2020~~June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls and Procedures

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. However, our management, including our Chief Executive Officer and Chief Financial Officer, does not expect ~~that~~ our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance ~~that~~ its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our company have been detected.

~~Part~~PART II. OTHER INFORMATION

Item 1A. Risk Factors

~~The following disclosures update certain risk factors previously disclosed in our FormS-4.~~ ~~Other than as set forth below, there were no material changes~~In addition to the risk factors disclosed in the section entitled “Risk Factors” of our Form~~S-4.~~ 10-K, we have identified the following risks related to the Chubb acquisition:

~~The impact~~Our ability to complete the acquisition of Chubb is subject to various closing conditions, including the ~~coronavirus(COVID-19)~~ ~~pandemic or similar global health concerns, could lead to project delays or cancellations,~~receipt of consents and approvals from governmental authorities, which may impose conditions that could adversely affect ~~our ability~~us or cause the acquisition not to ~~timely complete projects~~be completed.

On July 26, 2021, we entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Carrier Global Corporation (“Carrier”), Carrier Investments UK Limited and ~~source~~Chubb Limited (“Chubb”). Pursuant to the ~~supplies~~Purchase Agreement, on the terms and subject to the conditions therein, we ~~need,~~agreed to acquire the Chubb fire and ~~may impact labor availability~~security business through the acquisition of Chubb (the “Acquisition”). The Acquisition is subject to a number of conditions to closing as specified in the Purchase Agreement. These closing conditions include, among others, the receipt of certain regulatory approvals pursuant to any Competition and ~~productivity,~~Foreign Investment Laws (as defined in the Purchase Agreement). No assurance can be given that the required governmental and ~~could result in impairment risks, each of which could adversely impact our business, financial condition~~regulatory consents and ~~results of operations.~~

~~The coronavirus outbreak in China in December 2019~~approvals will be obtained or that the required conditions to closing will be satisfied, and, if all required consents and approvals are obtained and the ~~subsequent spread~~required conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such consents and approvals. Any delay in completing the Acquisition could cause us not to realize, or to be delayed in realizing, some or all of the ~~virus throughout~~benefits that we and Chubb expect to achieve if the ~~world has resulted in widespread infections and fatalities. Governments in affected countries,~~Acquisition is successfully completed within its expected time frame.

Additionally, either we or Carrier may terminate the Purchase Agreement under certain circumstances, including, among other reasons, if the ~~United States, have launched measures to combat the spread ofCOVID-19,~~ ~~including travel bans, quarantines and lock-downs of affected areas that include closures ofnon-essential~~ ~~businesses. We rely on the availability of our skilled workforce and third-party contractors to meet contractual milestones and timely complete projects. If theCOVID-19~~ pandemic or similar outbreak were to require us to discontinue operations, or to cause shortages of our workforce or third-party contractors, it could result in cancellations or deferrals of project work, which could lead to a decline in revenue and an increase in costs. In addition, such outbreak may impact the availability of the commodities, supplies and materials needed for projects, and we may experience difficulties obtaining such commodities, supplies and materials from suppliers or vendors whose supply chains are impactedAcquisition is not completed by the outbreak. If we are unable to source the essential commodities, supplies and materials in adequate quantities, at acceptable prices and in a timely manner, our business, financial condition and results of operations could be adversely affected. Similarly, our customersJuly 26, 2022 (which date may be ~~impacted by theCOVID-19~~ ~~pandemic, which could cause them to cancel or defer project work, which could have a negative impact on our business.~~extended under certain circumstances).

In addition, our results of operations are materially affected by conditions in the credit and financial markets and the economy generally. Global credit and financial markets have experienced extreme volatility and disruptions as a result of the~~COVID-19~~ pandemic including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. ThereWe can beprovide no assurance that ~~deterioration in credit~~the various closing conditions will be satisfied and ~~financial markets and confidence in economic~~that the necessary approvals will be obtained, or that any required conditions will not ~~occur or be sustained as a result of~~materially adversely affect us following the~~COVID-19~~ ~~pandemic. Any protracted economic disruption or recession could lead customers to delay or cancel projects, which would negatively impact our revenues, earnings and financial condition.~~ Acquisition. In addition, ~~our general business strategy may be adversely affected by~~we can provide no assurance that these conditions will not result in the abandonment or delay of the Acquisition. The occurrence of any ~~such economic downturn, volatile business environment~~of these events individually or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, or do not improve, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. Failure by us or our customers to secure any necessary financing in ~~a timely manner and on favorable terms~~combination could have a material adverse effect on our ~~growth strategy, financial performance~~results of operations and ~~stock~~the trading price ~~and could require us to delay or abandon current or expected projects.~~of our common stock.

Our collective bargaining agreements generally require us to participate with other companies in multiemployer pension plans. Our future contribution obligations and potential withdrawal liability exposure with respect to these plans could increase significantly based on the investment and actuarial performance of those plans, the insolvency of other companies that contribute to those plans and other factors, which could be negatively impacted as a resultThe termination of the ~~unfavorable~~Purchase Agreement could negatively impact our business.

If the Acquisition is not completed for any reason, our ongoing business may be adversely affected and, ~~uncertain economic and financial market conditions resulting from the ongoingCOVID-19~~ ~~pandemic and related issues.~~

~~Furthermore, some~~without realizing any of the ~~inherent estimates and assumptions used~~expected benefits of having completed the Acquisition, we would be subject to a number of risks, including the following:

•

we may experience negative reactions from the financial markets, including negative impacts on our stock price;

•

we may experience negative reactions from our customers, suppliers, distributors and employees;

•

we will be required to pay our costs relating to the Acquisition, such as financial advisory, legal, financing and accounting costs and associated fees and expenses, whether or not the Acquisition is completed;

•

we could be subject to time-consuming and costly litigation related to the Acquisition; and

•

matters relating to the Acquisition (including integration planning) require substantial commitments of time and resources by our management, which could otherwise have been devoted to day-to-day operations or to other opportunities that may have been beneficial to our business.

We will incur significant acquisition-related costs in ~~determining~~connection with the fair value of our reporting units are outside the control of management, including interest rates, cost of capital, tax rates, industry growth, credit ratings, foreign exchange rates, and labor inflation. As a result of the impact of~~COVID-19~~ which has negatively impacted our operations, suppliers and other vendors, customer base, and other factors outside of the control of management, in the first quarter of 2020 we determined that certain of our goodwill and intangible assets were impaired as the preliminary carrying values exceeded fair valueAcquisition, and we ~~recorded~~could incur substantial expenses related to the integration of Chubb.

We have incurred and expect to incur a~~non-cash~~ ~~charge~~ number of ~~approximately $208 million. Given~~non-recurring costs associated with the ~~uncertainty~~integration of

~~these factors,~~ Chubb into our business, as well as transaction fees and other costs related to the ~~inherent difficulty in predicting~~Acquisition. These costs and expenses include fees paid to financial, legal and accounting advisors, facilities and systems consolidation costs, severance and other potential employment-related costs, including severance payments that may be made to certain Chubb employees, filing fees, printing expenses and other related charges. We will need to pay some of these costs regardless of whether the ~~severity~~Acquisition is completed.

Item 4. Mine Safety Disclosures

Information regarding mine safety violations and ~~duration~~other regulatory matters required by Section 1503(a) of the~~COVID-19~~ ~~global pandemic~~ Dodd-Frank Wall Street Reform and ~~associated recovery~~Consumer Protection Act and ~~the uncertainties regarding the potential financial impact on our business and the overall economy, there can be no assurance that our estimates and assumptions made for purposes~~Item 104 of ~~the goodwill testing performed during the first quarter of 2020 will prove~~Regulation S-K is included in Exhibit 95.1 to be accurate predictions of the impact in future periods. While we believe we have made reasonable estimates and assumptions to calculate the fair values of our reporting units which were based on facts and circumstances known at such time, it is possible that existing or new events may result in forecasted cash flows, revenue and earnings that differ from those that formed the basis of our estimates and assumptions, which could be materially different from our estimates and assumptions. If so, we may be required to record additional impairment charges in the future, which could be material.this quarterly report.

~~The circumstances and global disruption caused byCOVID-19~~ has affected, and we believe will continue to affect, our businesses, operating results, cash flows and financial condition, however the scope and duration of the impact is highly uncertain. The full extent to which the~~COVID-19~~ pandemic impacts our business, markets, supply chain, customers and workforce will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the~~COVID-19~~ ~~pandemic and the actions to treat or contain it or to otherwise limit its impact, among others.~~

Item 6. Exhibits


Exhibit No.		Description of Exhibits

31.1* 10.20*		Purchase Agreement for 4.125% Senior Notes due 2029.

31.1*		Certification by Russell A. Becker, Chief Executive Officer, pursuant to Exchange Act Rules13a-14 and15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification by Thomas A. Lydon, Chief Financial Officer, pursuant to Exchange Act Rules13a-14 and15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certifications by Russell A. Becker, Chief Executive Officer, and Thomas A. Lydon, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS* 95.1*		Mine Safety Disclosures.

101.INS*		XBRL Instance Document.

101.SCH*		XBRL Taxonomy Extension Schema Document.

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document.

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document.

*	Filed herewith

**	Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized.

	APi GROUP CORPORATION

August 11, 2021			~~APi GROUP CORPORATION~~ /s/ Russell A. Becker
	Russell A. Becker
	Chief Executive Officer
	(Duly Authorized Officer)

~~June 2, 2020~~		August 11, 2021	~~/s/ Russell Becker~~
			~~Russell Becker~~
			~~Chief Executive Officer~~
			~~(Duly Authorized Officer)~~

~~June 2, 2020~~			/s/ Thomas A. Lydon
			Thomas A. Lydon
			Chief Financial Officer
			(Principal Financial Officer)

4546

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company