UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 10-Q
(Mark One)
þ☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 20182020
or
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to  
Commission File Number: 1-8929
abm-20200131_g1.jpg
ABM INDUSTRIES INCORPORATED
(Exact name of registrant as specified in its charter)
 
Delaware
abm-20200131_g2.jpg
94-1369354
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
__________________________
One Liberty Plaza, 7th Floor
New York, New York 10006
(Address of principal executive offices)


(212) 297-0200
(Registrant’s telephone number, including area code)


None
(Former name, former address and former fiscal year, if changed since last report)
__________________________

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



Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.01 par valueABMNew 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  þ☑    No  o☐


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ☑    No  o☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerþ☑Accelerated filer¨☐Non-accelerated filer¨☐Smaller reporting company¨☐Emerging growth company¨☐
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 in Rule 12b-2 of the Exchange Act).   Yes   o☐  No þ☑
Number of shares of the registrant’s common stock outstanding as of March 1, 2018: 65,700,002
3, 2020: 66,630,814





ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
1
PART I. FINANCIAL INFORMATION
3
Item 1. Consolidated Financial Statements
3
FORWARD-LOOKING STATEMENTS
1
PART I. FINANCIAL INFORMATION
3
Item 1. Consolidated Financial Statements
3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
1926
Item 3. Quantitative and Qualitative Disclosures About Market Risk
3240
Item 4. Controls and Procedures
3240
PART II. OTHER INFORMATION
3240
Item 1. Legal Proceedings
3240
Item 1A. Risk Factors
3240
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
3340
Item 3. Defaults Upon Senior Securities
3341
Item 4. Mine Safety Disclosures
3341
Item 5. Other Information
3341
Item 6. Exhibits
3442
SIGNATURES
3543




FORWARD-LOOKING STATEMENTS
This Form 10-Q contains both historical and forward-looking statements regarding ABM Industries Incorporated (“ABM”) and its subsidiaries (collectively referred to as “ABM,” “we,” “us,” “our,” or the “Company”). We make forward-looking statements related to future expectations, estimates, and projections that are uncertain and often contain words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “may,” “outlook,” “plan,” “predict,” “should,” “target,” or other similar words or phrases. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and assumptions that are difficult to predict. Particular risks and uncertainties that could cause our actual results to be materially different from those expressed in our forward-looking statements include those listed below.
We may not realize the growth opportunities•Our success depends on our ability to gain profitable business despite competitive market pressures.
•Our business success depends on our ability to attract and cost synergies that are anticipated from the acquisition of GCA Services Group (“GCA”).retain qualified personnel and senior management and to manage labor costs.
We have incurred a substantial amount of debt to complete the acquisition of GCA. To service our debt we will require a significant amount of cash. •Our ability to generate cash depends on many factors beyondpreserve long-term client relationships is essential to our control. We also depend on the profitability of our subsidiaries to satisfy our cash needs. If we cannot generate the required cash, we may not be able to make the necessary payments required to service our indebtedness or we may be required to suspend certain discretionary payments, including our dividend.continued success.
•Changes to our businesses, operating structure, financial reporting structure, or personnel relating to the implementation of our 2020Visionstrategic transformation initiative, including our move to our Enterprise Services Center,transformations, enhanced business processes, and technology initiatives may not have the desired effects on our financial condition and results of operations.
Our success depends on•Acquisitions, divestitures, and other strategic transactions could fail to achieve financial or strategic objectives, disrupt our ability to gain profitableongoing business, despite competitive pressures and to preserve long-term client relationships.
Our business success depends on our ability to attract and retain qualified personnel and senior management.
Our use of subcontractors or joint venture partners to perform work under customer contracts exposes us to liability and financial risk.
Our international business involves risks different from those we face in the United States that could have an effect onadversely impact our results of operations and financial condition.operations.
Unfavorable developments in our class and representative actions and other lawsuits alleging various claims could cause us to incur substantial liabilities.
•We insuremanage our insurable risks through a combination of insurancethird-party purchased policies and self-insurance, and we retain a substantial portion of the risk associated with expected losses under these programs, which exposes us to volatility associated with those risks, including the possibility that changes in estimates ofadjustments to our ultimate insurance lossesloss reserves could result in a material chargecharges against our earnings.
•Our risk management and safety programs may not have the intended effect of reducing our liability for personal injury or property loss.
Impairment of goodwill and long-lived assets•Our international business involves risks different from those we face in the United States that could have a material adversean effect on our financial condition and results of operations.operations and financial condition.
Changes in general economic conditions, including changes in energy prices, government regulations,•Our use of subcontractors or changing consumer preferences,joint venture partners to perform work under customer contracts exposes us to liability and financial risk.
•We may experience breaches of, or disruptions to, our information technology systems or those of our third-party providers or clients, or other compromises of our data that could reduce the demand for facility services and, as a result, reduce our earnings and adversely affect our financial condition.business.
Our income tax provision•Unfavorable developments in our class and income tax liabilitiesrepresentative actions and other lawsuits alleging various claims could be adversely affected by the jurisdictional mix of earnings, changes in valuations of deferred tax assets and liabilities, and changes in tax treaties, laws, and regulations, including the U.S. Tax Cuts and Jobs Act of 2017, which effected significant changescause us to the U.S. corporate income tax system.incur substantial liabilities.
We could be subject to cyber-security risks, information technology interruptions, and business continuity risks.
•A significant number of our employees are covered by collective bargaining agreements that could expose us to potential liabilities in relationship to our participation in multiemployer pension plans, requirements to make contributions to other benefit plans, and the potential for strikes, work slowdowns or similar activities, and union-organizingunion organizing drives.
•Our business may be materially affected by changes to fiscal and tax policies. Negative or unexpected tax consequences could adversely affect our results of operations.
•Changes in general economic conditions, such as changes in energy prices, government regulations, or consumer preferences, could reduce the demand for facility services and, as a result, reduce our earnings and adversely affect our financial condition.
•Future increases in the level of our borrowings or in interest rates could affect our results of operations.
•Impairment of goodwill and long-lived assets could have a material adverse effect on our financial condition and results of operations.
•If we fail to maintain proper and effective internal control over financial reporting in the future, our ability to produce accurate and timely financial statements could be negatively impacted, which could harm our operating results and investors’investor perceptions of our companyCompany and as a result may have a material adverse effect on the value of our common stock.
•Our business may be negatively impacted by adverse weather conditions.

•Catastrophic events, disasters, and terrorist attacks could disrupt our services.
•Actions of activist investors could disrupt our business.
1

The list of factors above is illustrative and by no means exhaustive. Additional information regarding these and other risks and uncertainties we face is contained in our Annual Report on Form 10-K for the year ended October 31, 20172019 and in other reports we file from time to time with the Securities and Exchange Commission (including all amendments to those reports).
We urge readers to consider these risks and uncertainties in evaluating our forward-looking statements. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

2

PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except share and per share amounts)January 31, 2020October 31, 2019
ASSETS
Current assets
Cash and cash equivalents$69.8  $58.5  
Trade accounts receivable, net of allowances of $25.2 and $22.4
   at January 31, 2020 and October 31, 2019, respectively
1,000.7  1,013.2  
Costs incurred in excess of amounts billed79.6  72.6  
Prepaid expenses75.3  75.7  
Other current assets59.5  55.5  
Total current assets1,284.9  1,275.4  
Other investments9.9  14.0  
Property, plant and equipment, net of accumulated depreciation of $210.4 and $199.5
    at January 31, 2020 and October 31, 2019, respectively
146.7  150.3  
Right-of-use assets163.4  —  
Other intangible assets, net of accumulated amortization of $321.8 and $309.0
    at January 31, 2020 and October 31, 2019, respectively
284.6  297.2  
Goodwill1,836.1  1,835.4  
Other noncurrent assets121.4  120.3  
Total assets$3,847.1  $3,692.6  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt, net$72.3  $57.2  
Trade accounts payable242.6  280.7  
Accrued compensation144.7  189.3  
Accrued taxes—other than income65.2  63.6  
Insurance claims150.2  149.8  
Income taxes payable6.6  3.5  
Current portion of lease liabilities36.0  —  
Other accrued liabilities153.5  158.2  
Total current liabilities871.1  902.4  
Long-term debt, net786.3  744.2  
Long-term lease liabilities150.0  —  
Deferred income tax liability, net46.4  47.7  
Noncurrent insurance claims363.8  365.2  
Other noncurrent liabilities58.1  78.8  
Noncurrent income taxes payable11.6  12.2  
Total liabilities2,287.4  2,150.6  
Commitments and contingencies
Stockholders’ Equity
Preferred stock, $0.01 par value; 500,000 shares authorized; NaN issued—  —  
Common stock, $0.01 par value; 100,000,000 shares authorized;
66,753,004 and 66,571,427 shares issued and outstanding at
January 31, 2020 and October 31, 2019, respectively
0.7  0.7  
Additional paid-in capital711.8  708.9  
Accumulated other comprehensive loss, net of taxes(24.3) (23.9) 
Retained earnings871.6  856.3  
Total stockholders’ equity1,559.7  1,542.0  
Total liabilities and stockholders’ equity$3,847.1  $3,692.6  
(in millions, except share and per share amounts)January 31, 2018 October 31, 2017
ASSETS   
Current assets   
Cash and cash equivalents$68.6
 $62.8
Trade accounts receivable, net of allowances of $15.5
   and $25.5 at January 31, 2018 and October 31, 2017, respectively
1,020.0
 1,038.1
Prepaid expenses97.4
 101.8
Other current assets32.1
 32.8
Total current assets1,218.1
 1,235.5
Other investments18.8
 17.6
Property, plant and equipment, net of accumulated depreciation of $147.6
   and $136.4 at January 31, 2018 and October 31, 2017, respectively
141.6
 143.1
Other intangible assets, net of accumulated amortization of $206.1
   and $189.1 at January 31, 2018 and October 31, 2017, respectively
404.3
 430.1
Goodwill1,871.2
 1,864.2
Other noncurrent assets143.1
 122.1
Total assets$3,797.0
 $3,812.6
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities   
Current portion of long-term debt, net$7.0
 $16.9
Trade accounts payable203.5
 230.8
Accrued compensation143.1
 159.9
Accrued taxes—other than income62.5
 52.5
Insurance claims114.1
 112.5
Income taxes payable5.0
 13.4
Other accrued liabilities164.4
 171.8
Total current liabilities699.6
 757.8
Long-term debt, net1,173.4
 1,161.3
Deferred income tax liability, net32.8
 57.3
Noncurrent insurance claims387.3
 382.9
Other noncurrent liabilities63.5
 61.3
Noncurrent income taxes payable23.7
 16.3
Total liabilities2,380.2
 2,436.9
Commitments and contingencies

 

Stockholders’ Equity   
Preferred stock, $0.01 par value; 500,000 shares authorized; none issued—
 —
Common stock, $0.01 par value; 100,000,000 shares authorized;
65,686,394 and 65,502,568 shares issued and outstanding at
January 31, 2018 and October 31, 2017, respectively
0.7
 0.7
Additional paid-in capital677.1
 675.2
Accumulated other comprehensive income (loss), net of taxes2.7
 (20.3)
Retained earnings736.2
 720.1
Total stockholders’ equity1,416.8
 1,375.7
Total liabilities and stockholders’ equity$3,797.0
 $3,812.6


See accompanying notes to unaudited consolidated financial statements.

3

ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
Three Months Ended January 31,
(in millions, except per share amounts)20202019
Revenues$1,612.9  $1,607.9  
Operating expenses1,433.7  1,446.0  
Selling, general and administrative expenses117.6  112.7  
Restructuring and related expenses3.1  3.8  
Amortization of intangible assets12.6  15.2  
Operating profit45.8  30.3  
Income from unconsolidated affiliates0.9  0.9  
Interest expense(10.2) (13.5) 
Income from continuing operations before income taxes36.5  17.8  
Income tax provision(8.6) (4.7) 
Income from continuing operations27.9  13.0  
Income (loss) from discontinued operations, net of taxes0.1  (0.1) 
Net income28.0  13.0  
Other comprehensive income (loss)
Interest rate swaps(1.1) (8.7) 
Foreign currency translation0.4  3.1  
Income tax benefit0.3  2.4  
Comprehensive income$27.6  $9.7  
Net income per common share — Basic
Income from continuing operations$0.42  $0.20  
Income from discontinued operations—  —  
Net income$0.42  $0.20  
Net income per common share — Diluted
Income from continuing operations$0.41  $0.20  
Income from discontinued operations—  —  
Net income$0.42  $0.19  
Weighted-average common and common equivalent shares outstanding
Basic66.9  66.4  
Diluted67.2  66.7  
 Three Months Ended January 31,
(in millions, except per share amounts)2018 2017
Revenues$1,588.3
 $1,326.7
Operating expenses1,429.3
 1,195.1
Selling, general and administrative expenses109.0
 97.3
Restructuring and related expenses14.3
 5.0
Amortization of intangible assets16.2
 5.5
Operating profit19.5
 23.8
Income from unconsolidated affiliates, net0.5
 1.4
Interest expense(14.3) (3.2)
Income from continuing operations before income taxes5.8
 22.0
Income tax benefit (provision)22.2
 (5.9)
Income from continuing operations28.0
 16.1
Loss from discontinued operations, net of taxes(0.1) (72.9)
Net income (loss)27.8
 (56.8)
Other comprehensive income (loss)   
Unrealized gains on interest rate swaps, net of taxes of $5.0 and $1.1, respectively13.6
 1.6
Foreign currency translation9.4
 3.3
Comprehensive income (loss)$50.9
 $(51.9)
Net income (loss) per common share — Basic   
Income from continuing operations$0.42
 $0.29
Loss from discontinued operations—
 (1.30)
Net income (loss)$0.42
 $(1.01)
Net income (loss) per common share — Diluted   
Income from continuing operations$0.42
 $0.28
Loss from discontinued operations—
 (1.28)
Net income (loss)$0.42
 $(1.00)
Weighted-average common and common equivalent shares outstanding   
Basic65.9
 56.0
Diluted66.3
 56.6
Dividends declared per common share$0.175
 $0.170

See accompanying notes to unaudited consolidated financial statements.



4

ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
Three Months Ended January 31,
20202019
(in millions, except per share amounts)SharesAmountSharesAmount
Common Stock
Balance, beginning of period66.6  $0.7  66.0  $0.7  
Stock issued under employee stock purchase and share-based compensation plans0.2  —  0.2  —  
Balance, end of period66.8  0.7  66.2  0.7  
Additional Paid-in Capital
Balance, beginning of period708.9  691.8  
Taxes withheld under employee stock purchase and share-based compensation plans, net(2.0) (2.2) 
Share-based compensation expense4.9  4.5  
Balance, end of period711.8  694.1  
Accumulated Other Comprehensive Loss, Net of Taxes
Balance, beginning of period(23.9) (9.0) 
Other comprehensive loss(0.4) (3.2) 
Balance, end of period(24.3) (12.2) 
Retained Earnings
Balance, beginning of period856.3  771.2  
Net income28.0  13.0  
Dividends
Common stock ($0.185 and $0.180 per share)(12.3) (11.9) 
Stock issued under share-based compensation plans(0.4) (0.1) 
Cumulative effect adjustment for adoption of Accounting
       Standards Update 2014-09
—  6.5  
Balance, end of period871.6  778.6  
Total Stockholders’ Equity$1,559.7  $1,461.1  

See accompanying notes to unaudited consolidated financial statements.
5

ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended January 31,Three Months Ended January 31,
(in millions)2018 2017(in millions)20202019
Cash flows from operating activities   Cash flows from operating activities
Net income (loss)$27.8
 $(56.8)
Loss from discontinued operations, net of taxes0.1
 72.9
Net incomeNet income$28.0  $13.0  
(Income) loss from discontinued operations, net of taxes(Income) loss from discontinued operations, net of taxes(0.1) 0.1  
Income from continuing operations28.0
 16.1
Income from continuing operations27.9  13.0  
Adjustments to reconcile income from continuing operations to net cash provided by (used in) operating activities of continuing operations   
Adjustments to reconcile income from continuing operations to net cash used in operating activities of continuing operationsAdjustments to reconcile income from continuing operations to net cash used in operating activities of continuing operations
Depreciation and amortization29.0
 14.0
Depreciation and amortization24.4  26.7  
Deferred income taxes(30.3) 9.9
Deferred income taxes(1.0) (8.7) 
Share-based compensation expense3.8
 3.6
Share-based compensation expense4.9  4.5  
Provision for bad debt2.6
 0.4
Provision for bad debt2.4  3.0  
Discount accretion on insurance claims0.2
 0.1
Discount accretion on insurance claims—  0.2  
Gain on sale of assets(0.1) (0.1)
Income from unconsolidated affiliates, net(0.5) (1.4)
Loss on sale of assetsLoss on sale of assets0.3  —  
Income from unconsolidated affiliatesIncome from unconsolidated affiliates(0.9) (0.9) 
Distributions from unconsolidated affiliates—
 0.8
Distributions from unconsolidated affiliates—  1.7  
Changes in operating assets and liabilities, net of effects of acquisitions   
Trade accounts receivable15.7
 (65.4)
Changes in operating assets and liabilitiesChanges in operating assets and liabilities
Trade accounts receivable and costs incurred in excess of amounts billedTrade accounts receivable and costs incurred in excess of amounts billed3.0  (68.2) 
Prepaid expenses and other current assets1.4
 (2.4)Prepaid expenses and other current assets(8.5) (8.2) 
Right-of-use assetsRight-of-use assets4.1  —  
Other noncurrent assets(1.7) (7.5)Other noncurrent assets(1.6) —  
Trade accounts payable and other accrued liabilities(33.2) 18.1
Trade accounts payable and other accrued liabilities(88.9) (32.5) 
Long-term lease liabilitiesLong-term lease liabilities(4.2) —  
Insurance claims5.8
 8.3
Insurance claims(1.0) 11.1  
Income taxes payable10.9
 (11.0)Income taxes payable7.6  13.1  
Other noncurrent liabilities2.2
 6.8
Other noncurrent liabilities(2.8) 5.9  
Total adjustments5.8
 (25.8)Total adjustments(62.3) (52.3) 
Net cash provided by (used in) operating activities of continuing operations33.8
 (9.7)
Net cash used in operating activities of discontinued operations(0.1) (1.4)
Net cash provided by (used in) operating activities33.7
 (11.1)
Net cash used in operating activities of continuing operationsNet cash used in operating activities of continuing operations(34.5) (39.3) 
Net cash provided by (used in) operating activities of discontinued operationsNet cash provided by (used in) operating activities of discontinued operations0.2  (0.1) 
Net cash used in operating activitiesNet cash used in operating activities(34.3) (39.3) 
Cash flows from investing activities   Cash flows from investing activities
Additions to property, plant and equipment(10.6) (11.0)Additions to property, plant and equipment(11.5) (11.6) 
Proceeds from sale of assets0.3
 0.5
Proceeds from sale of assets4.2  0.2  
Adjustments to sale of business(1.9) —
Purchase of businesses, net of cash acquired(2.4) (18.6)
Investments in unconsolidated affiliates(0.6) —
Proceeds from redemption of auction rate securityProceeds from redemption of auction rate security5.0  —  
Net cash used in investing activities(15.3) (29.1)Net cash used in investing activities(2.3) (11.4) 
Cash flows from financing activities   Cash flows from financing activities
Taxes withheld from issuance of share-based compensation awards, net(2.0) (1.0)Taxes withheld from issuance of share-based compensation awards, net(2.4) (2.3) 
Repurchases of common stock—
 (7.9)
Dividends paid(11.5) (9.4)Dividends paid(12.3) (11.9) 
Deferred financing costs paid(0.1) —
Borrowings from credit facility304.3
 207.4
Borrowings from credit facility425.0  357.6  
Repayment of borrowings from credit facility(303.0) (169.7)Repayment of borrowings from credit facility(368.6) (309.6) 
Changes in book cash overdrafts(1.2) 5.1
Changes in book cash overdrafts6.4  7.2  
Financing of energy savings performance contracts—
 2.6
Financing of energy savings performance contracts1.1  1.7  
Repayment of capital lease obligations(0.8) (0.1)
Net cash (used in) provided by financing activities(14.3) 27.0
Repayment of finance leasesRepayment of finance leases(0.8) (0.8) 
Net cash provided by financing activitiesNet cash provided by financing activities48.4  42.0  
Effect of exchange rate changes on cash and cash equivalents1.7
 0.5
Effect of exchange rate changes on cash and cash equivalents(0.4) 0.3  
Net increase (decrease) in cash and cash equivalents5.8
 (12.7)Net increase (decrease) in cash and cash equivalents11.4  (8.5) 
Change in cash related to assets held for sale—
 (0.7)
Cash and cash equivalents at beginning of year62.8
 56.0
Cash and cash equivalents at beginning of year58.5  39.1  
Cash and cash equivalents at end of period$68.6
 $42.6
Cash and cash equivalents at end of period$69.8  $30.6  

See accompanying notes to unaudited consolidated financial statements.

6

ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. THE COMPANY AND NATURE OF OPERATIONS
ABM Industries Incorporated, which operates through its subsidiaries (collectively referred to as “ABM,” “we,” “us,” “our,” or the “Company”), is a leading provider of integrated facility services with a mission to make a difference, every person, every day. We are organized into five4 industry groups and one1 Technical Solutions segment:
fy2018industrygroups.jpgabm-20200131_g3.jpg
Through these groups, we offer janitorial, facilities engineering, parking, and specialized mechanical and electrical technical solutions, on a standalone basis or in combination with other services.
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with (i) United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and (ii) the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of our management, our unaudited consolidated financial statements and accompanying notes (the “Financial Statements”) include all normal recurring adjustments that are necessary for the fair statement of the interim periods presented. Interim results of operations are not necessarily indicative of results for the full year. The Financial Statements should be read in conjunction with our audited consolidated financial statements (and notes thereto) in our Annual Report on Form 10-K for the fiscal year ended October 31, 2017.2019 (“Annual Report”). Unless otherwise indicated, all references to years are to our fiscal year,years, which endsend on October 31.
Acquisition of GCA Services GroupPrior Year Reclassifications
On September 1, 2017 (the “Acquisition Date”), we completed the acquisition of GCA Services Group (“GCA”). Accordingly, our consolidated statements of comprehensive income (loss) and statements of cash flows include GCA’s results of operations in the three months ended January 31, 2018, but exclude GCA’s results of operations in the three months ended January 31, 2017, as that was prior to the Acquisition Date. See Note 3, “Acquisitions,” for further information on the acquisition of GCA.
Government Services
On May 31, 2017, we sold our Government Services business for $35.5 million and recorded a pre-tax gain of $1.2 million duringDuring the third quarter of 2017. The reported results for this business are through the date of sale. Future results could include run-off costs associated with this former business.
Discontinued Operations
Following the sale of our Security business in 2015, we record all costs associated with this former business in discontinued operations. Such costs generally relate to litigation we retained and insurance reserves.
Prior Year Reclassifications
Effective November 1, 2017,2019, we made changes to our operating structure asto better align the services and expertise of our Healthcare business with our other industry groups, allowing us to leverage our existing branch network to support the long-term growth of this business. As a result, of the GCA acquisition. To reflect these changes, certainour former Healthcare portfolio is now included primarily in our Business & Industry segment. Our prior year amounts, including operatingperiod segment data havein Note 12, “Segment Information,” has been reclassified to conform with our fiscal 2018current period presentation. These changesThis change had no impact on our previously reported consolidated balance sheets, statements of comprehensive income (loss), or statements of cash flows. See Note 12, “Segment Information,” for further details.

financial statements.
Rounding
We round amounts in the Financial Statements to millions and calculate all percentages and per-share data from the underlying whole-dollar amounts. Thus, certain amounts may not foot, crossfoot, or recalculate based on reported numbers due to rounding.
Discontinued Operations
Following the sale of our Security business in 2015, we record all costs associated with this former business in discontinued operations. Such costs generally relate to litigation we retained and insurance reserves.
7

Management Reimbursement Revenue by Segment
We operate certain parking facilities under managed locationmanagement reimbursement arrangements. Under these arrangements, we manage the parking facilityfacilities for a management feefees and pass through the revenuerevenues and expenses associated with the facilityfacilities to the owner.owners. These revenues and expenses are reported in equal amounts as costs reimbursed from our managed locations:
Three Months Ended January 31,
(in millions)20202019
Business & Industry$73.7  $71.0  
Aviation25.9  24.2  
Total$99.6  $95.2  
 Three Months Ended January 31,
(in millions)2018 2017
Business & Industry$63.0
 $57.8
Aviation25.5
 16.5
Healthcare4.9
 4.6
Total$93.4
 $78.9
Recently Adopted Accounting Standards
3. ACQUISITIONS

Acquisition of GCA during 2017
On September 1, 2017, we acquired all of the outstanding stock of GCA, a provider of integrated facility services to educational institutions and commercial facilities, for a purchase price of approximately $1.3 billion. AsOur significant accounting policies are described in Note 12, “Segment Information,” we integrated GCA’s operations into our industry group model effective November 1, 2017. As a result2, “Basis of the acquisition, we are now a leading facilities services provider in the education market.

Consideration Transferred
(in millions, except per share data)  
Shares of ABM common stock, net of shares withheld for taxes 9.4
ABM common stock closing market price at acquisition date $44.63
Fair value of ABM common stock at closing 421.3
Cash consideration 839.9
Total consideration transferred $1,261.3

Preliminary Purchase Price Allocation

Our preliminary purchase price allocation is based on information that is currently available,Presentation and we are continuing to evaluate the underlying inputs and assumptions usedSignificant Accounting Policies,” in our valuations. Accordingly, consideration and purchase price allocations are subjectAnnual Report. There have been no material changes to among other items: working capital adjustments; further analysis of tax accounts, including deferred tax liabilities; and final valuation of identifiable intangible assets. During the first quarter of 2018, we refined our valuation of customer relationships and certain other estimates.


The following table presents our preliminary estimates of fair values of the assets we acquired and the liabilities we assumed on the date of acquisition as previously reported at year-end 2017 and at the end of the first quarter of 2018.

 As reported at 
 As reported at
(in millions) October 31, 2017 Adjustments January 31, 2018
Cash and cash equivalents $2.5
 $(2.4) $0.1
Trade accounts receivable(1)
 118.1
 

 118.1
Prepaid expenses and other current assets 10.3
 

 10.3
Property, plant and equipment 41.4
 

 41.4
Customer relationships(2)
 340.0
 (10.0) 330.0
Trade name(2)
 9.0
 

 9.0
Goodwill(3)
 933.9
 0.4
 934.3
Other assets 4.2
 

 4.2
Trade accounts payable (9.1) 

 (9.1)
Insurance reserves (35.5) 

 (35.5)
Income taxes payable (16.5) 8.2
 (8.3)
Accrued liabilities (36.5) 4.9
 (31.6)
Deferred income tax liability, net (92.6) (1.0) (93.6)
Other liabilities (8.1) 

 (8.1)
Net assets acquired $1,261.3
 $—
 $1,261.3
(1) The gross amount of trade accounts receivable was $122.0 million, of which $3.9 million is expected to be uncollectible.

(2) The amortization periods for the acquired intangible assets are 15 years for customer relationships and 2 years for trade names.

(3) Goodwill is largely attributable to value we expect to obtain from long-term business growth, the established workforce, and buyer-specific synergies. This goodwill is not deductible for income tax purposes.

Financial Information

Forsignificant accounting policies during the three months ended January 31, 2020, other than as described below.
Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). Since the release of ASU 2016-02, the FASB issued the following additional ASUs further updating Topic 842:
•In January 2018, ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842
•In July 2018, ASU 2018-10, Codification Improvements to Topic 842
•In July 2018, ASU 2018-11, Leases (Topic 842): Targeted Improvements
•In March 2019, ASU 2019-01, Leases (Topic 842): Codification Improvements

Topic 842 replaces existing lease accounting guidance and is intended to provide enhanced transparency and comparability by requiring lessees to record most leases on the balance sheet. Under Topic 842, lessees are required to record on the balance sheet right-of-use (“ROU”) assets (the right to use an underlying asset for the lease term) and the corresponding lease liabilities (the obligation to make lease payments arising from the lease). The new guidance requires us to continue classifying leases as either operating or financing, with classification affecting the pattern of expense recognition in the statements of comprehensive income. In addition, the new standard requires enhanced disclosures surrounding the amount, timing, and uncertainty of cash flows arising from leasing arrangements.
We adopted Topic 842 on November 1, 2019 on a modified retrospective basis using the optional transition method permitted under ASU 2018-11 and have used this effective date as the initial application date. Comparative prior period financial statements have not been restated and continue to be reported under the accounting standards in effect for those prior periods presented.
Upon adoption, we recorded revenueelected the package of transition practical expedients that allowed us to carry forward prior conclusions related to: (i) whether any expired or existing contracts are or contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for existing leases. Additionally, we elected the practical expedient of not separating lease components from non-lease components for all asset classes. We also made an accounting policy election to not record ROU assets or lease liabilities for leases with an initial term of 12 months or less and will recognize payments for such leases in the consolidated statements of comprehensive income on a straight-line basis over the lease term. We did not elect the use of hindsight for determining the reasonably certain lease term.
The adoption of Topic 842 had a significant impact on our unaudited Consolidated Balance Sheet, but did not have a significant impact on our unaudited Consolidated Statement of Comprehensive Income, our unaudited Consolidated Statement of Stockholders' Equity, our unaudited Consolidated Statement of Cash Flows, our liquidity, or our compliance with the various covenants contained within our credit facility, as further described in Note 9, “Credit Facility.” The most significant impact was the recognition of ROU assets and lease liabilities for operating
8

leases, while our accounting for finance leases remained substantially unchanged. See Note 4, “Leases,” for additional information on our lease arrangements.
The impact of adoption of Topic 842 on our unaudited Consolidated Balance Sheet was as follows:
(in millions)Balance at
October 31, 2019		Adjustments Due to Adoption of Topic 842Balance at
November 1, 2019
ASSETS
Right-of-use assets(1)
$—  $167.5  $167.5  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of lease liabilities(2)
$—  $36.3  $36.3  
Other accrued liabilities(3)
158.2  (3.0) 155.2  
Long-term lease liabilities(4)
—  154.2  154.2  
Other noncurrent liabilities(5)
78.8  (20.0) 58.8  
(1) Represents capitalization of operating lease assets and reclassification of prepaid rent, deferred rent, lease exit impairment liabilities, and lease incentives and tenant improvements on operating leases.
(2) Represents the recognition of short-term operating lease liabilities.
(3) Represents short-term deferred rent reclassified to ROU assets.
(4) Represents the recognition of long-term operating lease liabilities.
(5) Represents long-term deferred rent, lease incentives and tenant improvements, and lease exit impairment liabilities reclassified to ROU assets.
No recently issued accounting pronouncements that we have not yet adopted are expected to have a significant impact on our fiscal 2021 consolidated financial statements.
9

3. REVENUES
Disaggregation of Revenues
We generate revenues under several types of contracts, as further explained below. The type of contract is determined by the nature of the services provided by each of our major service lines throughout our reportable segments; therefore, we disaggregate revenues from contracts with customers into major service lines. We have determined that disaggregating revenues into these categories best depicts how the nature, amount, timing, and uncertainty of revenues and cash flows are affected by economic factors. Our reportable segments are Business & Industry (“B&I”), Aviation, Technology and Manufacturing (“T&M”), Education, and Technical Solutions, as described in Note 12, “Segment Information.”
Three Months Ended January 31, 2020
(in millions)B&IAviationT&M  Education  Technical SolutionsTotal
Major Service Line
Janitorial(1)
$593.5  $34.6  $185.6  $186.2  $—  $1,000.0  
Parking(2)
125.9  84.9  8.1  0.7  —  219.6  
Facility Services(3)
101.4  11.7  40.2  21.0  —  174.3  
Building & Energy Solutions(4)
—  —  —  —  142.0  142.0  
Airline Services(5)
0.1  107.5  —  —  —  107.6  
$820.9  $238.7  $233.9  $208.0  $142.0  $1,643.6  
Elimination of inter-segment revenues(30.6) 
Total$1,612.9  

Three Months Ended January 31, 2019
(in millions)B&IAviationT&M  Education  Technical SolutionsTotal
Major Service Line
Janitorial(1)
$584.0  $31.1  $187.2  $187.5  $—  $989.8  
Parking(2)
128.1  85.8  7.4  0.8  —  222.1  
Facility Services(3)
116.6  18.0  41.4  20.7  —  196.7  
Building & Energy Solutions(4)
—  —  —  —  116.1  116.1  
Airline Services(5)
0.2  117.5  —  —  —  117.7  
$828.8  $252.4  $236.1  $208.9  $116.1  $1,642.3  
Elimination of inter-segment revenues(34.4) 
Total$1,607.9  
(1) Janitorial arrangements provide a wide range of essential cleaning services for commercial office buildings, airports and other transportation centers, educational institutions, government buildings, health facilities, industrial buildings, retail stores, and stadiums and arenas. These arrangements are often structured as monthly fixed-price, square-foot, cost-plus, and tag services contracts.
(2) Parking arrangements provide parking and transportation services for clients at various locations, including airports and other transportation centers, commercial office buildings, educational institutions, health facilities, hotels, and stadiums and arenas. These arrangements are structured as management reimbursement, leased location, and allowance contracts. Certain of these arrangements are considered service concession agreements and are accounted for under the guidance of Topic 853; accordingly, rent expense related to GCAthese arrangements is recorded as a reduction of $251.6the related parking service revenues.
(3) Facility Services arrangements provide onsite mechanical engineering and technical services and solutions relating to a broad range of facilities and infrastructure systems that are designed to extend the useful life of facility fixed assets, improve equipment operating efficiencies, reduce energy consumption, lower overall operational costs for clients, and enhance the sustainability of client locations. These arrangements are generally structured as monthly fixed-price, cost-plus, and tag services contracts.
(4) Building & Energy Solutions arrangements provide custom energy solutions, electrical, HVAC, lighting, and other general maintenance and repair services for clients in the public and private sectors and are generally structured as Energy Savings and Fixed-Price Repair and Refurbishment contracts. We also franchise certain operations under franchise agreements relating to our Linc Network and TEGG brands, pursuant to franchise contracts.
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(5) Airline Services arrangements support airlines and airports with services such as passenger assistance, catering logistics, and airplane cabin maintenance. These arrangements are often structured as monthly fixed-price, cost-plus, transaction price, and hourly contracts.
Contract Types
We have arrangements under various contract types, as described in Note 2, “Basis of Presentation and Significant Accounting Policies,” in our Annual Report.
Certain arrangements involve variable consideration (primarily per transaction fees, reimbursable expenses, and sales-based royalties). We do not estimate the variable consideration for these arrangements; rather, we recognize these variable fees as they are earned.
The majority of our contracts include performance obligations that are primarily satisfied over time as we provide the related services; these contract types include: monthly fixed-price; square-foot; cost-plus; tag services; transaction-price; hourly; management reimbursement; leased location; allowance; energy savings contracts; and fixed-price repair and refurbishment contracts, as well as our franchise and royalty fee arrangements. We recognize revenue as the services are performed using a measure of progress that is determined by the contract type. Generally, most of our contracts are cancelable by either party without a substantive penalty, and the majority have a notification period of 30 to 60 days.
We primarily account for our performance obligations under the series guidance, using the as-invoiced practical expedient when applicable. We apply the as-invoiced practical expedient to record revenue as the services are provided, given the nature of the services provided and the frequency of billing under the customer contracts. Under this practical expedient, we recognize revenue in an amount that corresponds directly with the value to the customer of our performance completed to date and for which we have the right to invoice the customer.
Remaining Performance Obligations
At January 31, 2020, performance obligations that were unsatisfied or partially unsatisfied for which we expect to recognize revenue totaled $178.4 million. We expect to recognize revenue on approximately 77% of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter.
These amounts exclude variable consideration primarily related to: (i) contracts where we have determined that the contract consists of a series of distinct service periods and revenues are based on future performance that cannot be estimated at contract inception; (ii) parking contracts where we and the customer share the gross revenues or operating profit for the location; and (iii) contracts where transaction prices include performance incentives that are based on future performance and therefore cannot be estimated at contract inception. We apply the practical expedient that permits exclusion of information about the remaining performance obligations with original expected durations of one year or less.
Contract Balances
The timing of revenue recognition, billings, and cash collections results in contract assets and contract liabilities, as further explained below. The timing of revenue recognition may differ from the timing of invoicing to customers.
Contract assets primarily consist of billed trade receivables, unbilled trade receivables, and costs incurred in excess of amounts billed. Billed and unbilled trade receivables represent amounts from work completed in which we have an unconditional right to bill our customer. Costs incurred in excess of amounts billed typically arise when the revenue recognized on a project exceeds the amount billed to the customer. These amounts are transferred to billed trade receivables when the rights become unconditional. Contract assets also include the capitalization of incremental costs of obtaining a contract with a customer, primarily commissions. Commissions expense is recognized on a straight-line basis over a weighted average expected customer relationship period.
Contract liabilities consist of deferred revenue and advance payments and billings in excess of revenue recognized. We generally classify contract liabilities as current since the related contracts are generally for a period of one year or less. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation.
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The following tables present the balances in our contract assets and contract liabilities:
(in millions)January 31, 2020October 31, 2019
Contract assets
Billed trade receivables(1)
$962.5  $978.7  
Unbilled trade receivables(1)
63.4  56.9  
Costs incurred in excess of amounts billed(2)
79.6  72.6  
Capitalized commissions(3)
21.6  21.8  
(1) Included in trade accounts receivable, net, on the consolidated balance sheets. The fluctuations correlate directly to the execution of new customer contracts and to invoicing and collections from customers in the normal course of business.
(2) The increase is primarily due to the timing of payments on our contracts measured using the cost-to-cost method of revenue recognition.
(3) Included in other current assets and other noncurrent assets on the consolidated balance sheets. During the three months ended January 31, 2020, we capitalized $3.5 million of new costs and amortized $3.7 million of previously capitalized costs. There was 0 impairment loss recorded on the costs capitalized.
(in millions)Three Months Ended
January 31, 2020
Contract liabilities(1)
Balance at beginning of period$38.0 
Additional contract liabilities73.5 
Recognition of deferred revenue(74.6)
Balance at end of period$36.9 
(1) Included in other accrued liabilities on the consolidated balance sheets.
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4. LEASES
We primarily lease office space, parking facilities, warehouses, vehicles, and equipment. We determine if an arrangement is a lease at inception and begin recording lease activity at the commencement date, which is generally the date in which we take possession of or control the physical use of the asset. ROU assets and lease liabilities are recognized based on the present value of lease payments over the lease term with lease expense recognized on a straight-line basis. We use our incremental borrowing rate to determine the present value of future lease payments unless the implicit rate is readily determinable. Our incremental borrowing rate is the rate of interest we would have to pay to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. This incremental borrowing rate is applied to the minimum lease payments within each lease agreement to determine the amounts of our ROU assets and lease liabilities. Our incremental borrowing rate as of November 1, 2019 was utilized for the initial measurement of operating lease liabilities upon adoption of Topic 842, as described in Note 2, “Basis of Presentation and Significant Accounting Policies,” and for new leases entered into during the quarter ended January 31, 2020.
Our lease terms range from 1 to 30 years. Some leases include one or more options to renew, with renewal terms that can extend the lease term. We typically include options to extend the lease in a lease term when it is reasonably certain that we will exercise that option and when doing so is at our sole discretion. Certain equipment and vehicle leases may also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term unless there is a transfer of title or purchase option reasonably certain of exercise. Typically, if we decide to cancel or terminate a lease before the end of its term, we would owe the lessor the remaining lease payments under the term of such lease. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. We may rent or sublease to third parties certain real estate assets that we no longer use.
Lease agreements may contain rent escalation clauses, rent holidays, or certain landlord incentives, including tenant improvement allowances. Prior to November 1, 2019, we recognized lease expense related to operating leases on a straight-line basis over the terms of the leases and, accordingly, recorded the difference between cash rent payments and recognition of rent expense as a deferred rent liability or prepaid rent. Landlord-funded leasehold improvements were also recorded as deferred rent liabilities and were amortized as a reduction of rent expense over the noncancelable term of the related operating lease. The ROU assets recognized upon adoption of Topic 842 include cumulative prepaid or accrued rent on the adoption date, unamortized lease incentives, and unamortized initial direct costs initially recognized prior to adoption of Topic 842. Following adoption of Topic 842, ROU assets include amounts for scheduled rent increases and are reduced by lease incentive amounts.
Certain of our lease agreements include variable rent payments, consisting primarily of rental payments adjusted periodically for inflation and amounts paid to the lessor based on cost or consumption, such as maintenance and utilities. Certain of our parking arrangements also contain variable rent payments that are a percentage of parking services revenue based on contractual levels. Variable rent lease components are not included in the lease liability.
Service concession arrangements within the scope of ASU No. 2017-10, Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services, are excluded from the scope of Topic 842. Lease costs associated with these arrangements are recorded as a reduction of revenues. See Note 3, “Revenues,” for further discussion.
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The components of lease assets and liabilities and their classification on our unaudited Consolidated Balance Sheets as of January 31, 2020 were as follows:
Balance at
(in millions)ClassificationJanuary 31, 2020
Lease assets
Operating leasesRight-of-use assets$163.4 
Finance leases
Property, plant and equipment, net(1)
9.1 
Total lease assets$172.5 
Lease liabilities
Current liabilities
Operating leasesCurrent portion of lease liabilities$36.0 
Finance leasesOther accrued liabilities4.5 
Noncurrent liabilities
Operating leasesLong-term lease liabilities150.0 
Finance leasesOther noncurrent liabilities2.2 
Total lease liabilities$192.7 
(1) Finance lease assets are recorded net of accumulated amortization of $11.1 million as of January 31, 2020.

Total lease costs for the three months ended January 31, 2020 was $27.8 million, including operating leases of $26.6 million and operating profitfinance leases of $5.0$1.2 million. The components of lease costs and classification within the unaudited Consolidated Statements of Comprehensive Income were as follows:

Three Months Ended
(in millions)January 31, 2020
Operating lease costs:
Operating expenses(1)(2)
$21.0 
Selling, general and administrative expenses(3)
5.6 
Finance lease costs:
Operating expenses(4)
1.1 
Interest expense(5)
0.1 
Total lease costs$27.8 
(1) Related to certain parking arrangements.
(2) Includes short-term lease costs and variable lease costs.
(3) Includes short-term lease costs.
(4) Represents amortization of leased assets.
(5) Interest on lease liabilities.
The following table presents information on short-term and variable lease costs:
Three Months Ended
(in millions)January 31, 2020
Short-term lease costs$14.5 
Variable lease costs2.0 
Total short-term and variable lease costs$16.5 

Sublease income generated during the three months ended January 31, 2020 was immaterial.
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The amounts of future undiscounted cash flows related to the lease payments over the lease terms and the reconciliation to the present value of the lease liabilities as recorded on our unaudited pro forma resultsConsolidated Balance Sheets as though the GCA acquisition occurred on November 1, 2015. The pro forma results include adjustmentsof January 31, 2020 are as follows:
(in millions)Operating
Lease Liabilities		Finance
Lease Liabilities		Total
Remainder of fiscal 2020$32.6  $2.6  $35.2  
Fiscal 202138.9  2.9  41.8  
Fiscal 202232.9  1.5  34.4  
Fiscal 202327.8  0.8  28.6  
Fiscal 202422.7  —  22.7  
Thereafter58.3  —  58.3  
Total lease payments213.2  7.8  221.0  
Less: imputed interest27.2  1.1  28.3  
Present value of lease liabilities$186.0  $6.7  $192.7  
Future sublease rental income was excluded for the estimated amortizationperiods shown above, as the amounts are immaterial.
We have entered into operating lease arrangements as of intangibleJanuary 31, 2020 that are effective for future periods. The total amount of ROU assets interest expense,and lease liabilities related to these arrangements is immaterial.
The following table includes the weighted-average remaining lease terms, in years, and the income tax impactweighted-average discount rate used to calculate the present value of operating lease liabilities:
As of
January 31, 2020
Weighted-average remaining lease term (years)
Operating leases6.4
Finance leases2.6
Weighted-average discount rate
Operating leases4.05 %
Finance leases4.38 %
The following table includes supplemental cash and non-cash information related to operating leases:
Three Months Ended
(in millions)January 31, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$11.4 
Operating cash flows from finance leases0.1 
Financing cash flows from finance leases0.8 
Lease assets obtained in exchange for new operating lease liabilities(1)
5.2 
(1) Excludes the pro forma adjustments atamount initially capitalized in conjunction with the statutory rateadoption of 41%. These pro forma results do not reflect the cost of integration activities or benefits from expected revenue enhancements and synergies. Accordingly, the pro forma information is not necessarily indicative of the results that would have been achieved if the acquisition had been effective on November 1, 2015.Topic 842.


15

 Three Months Ended
(in millions)January 31, 2017
Pro forma revenue$1,578.9
Pro forma income from continuing operations14.5

Other 2017 Acquisitions

Effective December 1, 2016, we acquired all of the outstanding stock of Mechanical Solutions, Inc. (“MSI”), a provider of specialized HVAC, chiller, and plumbing services, for a purchase price of $12.6 million. The purchase price includes up to $1.0 million of undiscounted contingent consideration that is based on the expected achievement of certain pre-established revenue goals. See Note 6, “Fair Value of Financial Instruments,” regarding our valuation of contingent consideration liabilities. As of December 1, 2016, the operations of MSI are includedpreviously disclosed in our Technical Solutions segment.Annual Report, the amounts of minimum future commitments under non-cancelable operating and capital leases as of October 31, 2019 in accordance with Topic 840 were as follows:

(in millions)
Operating and Other(1)
CapitalTotal
Fiscal 2020$42.8  $3.1  $45.9  
Fiscal 202135.5  2.5  38.0  
Fiscal 202230.3  1.3  31.6  
Fiscal 202325.6  0.6  26.2  
Fiscal 202420.5  —  20.5  
Thereafter51.8  —  51.8  
Total(2)
$206.5  $7.5  $214.0  
Effective December 1, 2016, we also acquired all(1) Includes total estimated sublease rental income of the outstanding stock of OFJ Connections Ltd (“OFJ”), a provider of airport transportation services in the United Kingdom, for a purchase price of $6.3$15.8 million. As of December 1, 2016, the operations of OFJ are included in our Aviation segment.

(2) Total undiscounted future minimum payments.
Pro Forma and Other Supplemental Financial Information
Except for GCA, we do not present pro forma and other financial information for our other acquisitions, as they are not considered material business combinations individually or on a combined basis.
4.5. RESTRUCTURING AND RELATED COSTS
GCA Restructuring
Following theWe may periodically engage in various restructuring activities intended to drive long-term profitable growth and increase operational efficiency, which can include streamlining and realigning our overall organizational structure and reallocating resources. These activities may result in restructuring costs related to employee severance, other project fees, external support fees, lease exit costs, and asset impairment charges. Recently, our significant restructuring activities have been primarily associated with integrating our acquisition of GCA duringServices Group (“GCA”) and implementing our 2020Visioninitiative, as described below.
GCA Restructuring and Other Initiatives
During the first quarter of 2018, we initiated a restructuring program to achieve cost synergies fromfollowing the acquisition of GCA. We incurred the majority of our combined operations. We expect our GCAseverance expense associated with this restructuring and related activities to be complete byprogram in the secondfirst half of 2018. During 2019, our restructuring activities primarily related to the continued integration of GCA and other initiatives, including standardizing our financial systems and streamlining our operations by migrating and upgrading several key management platforms, such as our human resources information systems, enterprise resource planning system, and labor management system. We also continued consolidating our real estate leases. Severance and other expenses associated with our Healthcare reorganization during 2019 were immaterial. As we continue our technology-based modernization efforts, including standardizing our financial systems, we expect to incur additional charges related to these initiatives in 2020.
2020Vision Restructuring
During the fourth quarter of 2015, our Boardwe initiated a restructuring plan as part of Directors approved a comprehensive strategy intended to have a positive transformative effect on ABM (the “2020Vision”). As partThese actions were substantially completed by the end of the 2020Vision, we identified key priorities to differentiate ABM in the marketplace, accelerate revenue growth for certain industry groups, and improve our margin profile. We incurred additional expenses primarily related to external support fees during the first quarterfiscal 2019 at a cumulative cost of 2018 relating to this strategy. We do not expect to incur significant 2020Vision restructuring and related expenses in the future, other than in connection with the continued consolidation of our real estate leases.$66.5 million.
Rollforward of Restructuring and Related Liabilities
(in millions)Balance,
October 31, 2019
Costs Recognized(1)
PaymentsNon-Cash ItemsBalance,
January 31, 2020
Employee severance$3.0  $0.2  $(1.0) $—  $2.2  
Other project fees0.7  3.0  (2.6) (0.2) 1.0  
Lease exit costs and asset impairment2.7  —  (0.2) (2.2) 0.4  
External support fees0.5  —  (0.5) —  —  
Total$7.0  $3.1  $(4.3) $(2.3) $3.5  
(in millions) 
Balance,
October 31, 2017
 
Costs Recognized(1)
 Payments Non-Cash Items 
Balance,
January 31, 2018
Employee severance $2.7
 $8.7
 $(3.3) $—
 $8.1
External support fees 2.5
 4.0
 (2.5) —
 4.0
Lease exit 2.8
 0.5
 (0.3) 0.2
 3.2
Other project fees 0.4
 1.0
 (0.6) —
 0.8
Total $8.4
 $14.3
 $(6.7) $0.2
 $16.1
(1) We include these costs within corporate expenses.
16

Cumulative Restructuring and Related Charges
(in millions)External Support FeesEmployee SeveranceOther Project FeesLease Exit CostsAsset ImpairmentTotal
GCA and Other$3.5  $18.2  $15.4  $0.7  $—  $37.7  
2020 Vision
30.0  13.0  10.7  7.7  5.2  66.5  
Total$33.4  $31.2  $26.0  $8.4  $5.2  $104.2  

(in millions)
External Support Fees
Employee Severance
Other Project Fees
Lease Exit Costs
Asset Impairment
Total
GCA
$2.0

$10.5

$0.8

$—

$—

$13.3
2020 Vision

30.0

13.7

10.6

6.3

4.7

65.1
Total
$32.0

$24.2

$11.4

$6.3

$4.7

$78.4


5.6. NET INCOME PER COMMON SHARE
Basic and Diluted Net Income Per Common Share Calculations
 Three Months Ended January 31,
(in millions, except per share amounts)2018 2017
Income from continuing operations$28.0
 $16.1
Loss from discontinued operations, net of taxes(0.1) (72.9)
Net income (loss)$27.8
 $(56.8)
    
Weighted-average common and common equivalent shares outstanding — Basic65.9
 56.0
Effect of dilutive securities   
Restricted stock units0.2
 0.3
Stock options0.1
 0.2
Performance shares0.1
 0.1
Weighted-average common and common equivalent shares outstanding — Diluted66.3
 56.6
    
Net income (loss) per common share — Basic   
Income from continuing operations$0.42
 $0.29
Loss from discontinued operations—
 (1.30)
Net income (loss)$0.42
 $(1.01)
    
Net income (loss) per common share — Diluted   
Income from continuing operations$0.42
 $0.28
Loss from discontinued operations—
 (1.28)
Net income (loss)$0.42
 $(1.00)
Three Months Ended January 31,
(in millions, except per share amounts)20202019
Income from continuing operations$27.9  $13.0  
Income (loss) from discontinued operations, net of taxes0.1  (0.1) 
Net income$28.0  $13.0  
Weighted-average common and common equivalent shares
outstanding — Basic		66.9  66.4  
Effect of dilutive securities
Restricted stock units0.1  0.1  
Stock options0.1  0.1  
Performance shares0.1  0.1  
Weighted-average common and common equivalent shares
outstanding — Diluted		67.2  66.7  
Net income per common share — Basic
Income from continuing operations$0.42  $0.20  
Income from discontinued operations—  —  
Net income$0.42  $0.20  
Net income per common share — Diluted
Income from continuing operations$0.41  $0.20  
Income from discontinued operations—  —  
Net income$0.42  $0.19  
Anti-Dilutive Outstanding Stock Awards Issued Under Share-Based Compensation Plans
Three Months Ended January 31,
(in millions)20202019
Anti-dilutive0.2  0.4  

17

 Three Months Ended January 31,
(in millions)2018 2017
Anti-dilutive0.2

—


6.7. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair Value Hierarchy of Our Financial Instruments
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
(in millions)Fair Value HierarchyJanuary 31, 2020October 31, 2019
Cash and cash equivalents(1)
1$69.8  $58.5  
Insurance deposits(2)
10.8  0.8  
Assets held in funded deferred compensation plan(3)
12.5  2.5  
Credit facility(4)
2864.8  808.4  
Interest rate swap liabilities(5)
214.1  14.6  
Investments in auction rate securities(6)
3—  5.0  
(in millions)Fair Value Hierarchy January 31, 2018 October 31, 2017
Cash and cash equivalents(1)
1 $68.6
 $62.8
Insurance deposits(2)
1 10.2
 11.2
Assets held in funded deferred compensation plan(3)
1 4.6
 4.6
Credit facility(4)
2 1,192.5
 1,191.2
Interest rate swaps(5)
2 21.5
 2.9
Investments in auction rate securities(6)
3 8.0
 8.0
Contingent consideration liability(7)
3 0.9
 0.9

(1) Cash and cash equivalents are stated at nominal value, which equals fair value.
(2) Represents restricted deposits that are used to collateralize our insurance obligations and are stated at nominal value, which equals fair value. These insurance deposits are included in “Other noncurrent assets” on the accompanying unaudited consolidated balance sheets. See Note 8, “Insurance,” for further information.
(3) Represents investments held in a Rabbi trust associated with one of our deferred compensation plans, which we include in “Other noncurrent assets” on the accompanying unaudited consolidated balance sheets. The fair value of the assets held in the funded deferred compensation plan is based on quoted market prices.
(4) Represents gross outstanding borrowings under our syndicated line of credit and term loan. Due to variable interest rates, the carrying value of outstanding borrowings under our line of credit and term loan approximates the fair value. See Note 9, “Credit Facility,” for further information.
(5) Represents interest rate swap derivatives designated as cash flow hedges. The fair values of the interest rate swaps are estimated based on the present value of the difference between expected cash flows calculated at the contracted interest rates and the expected cash flows at current market interest rates using observable benchmarks for LIBORthe London Interbank Offered Rate (“LIBOR”) forward rates at the end of the period. TheseAt January 31, 2020 and October 31, 2019, our interest rate swaps are included in “Other noncurrent assets”liabilities” on the accompanying unaudited consolidated balance sheets. See Note 9, “Credit Facility,” for further information.
(6) The fair value of investments in auction rate securities is based on discounted cash flow valuation models, primarily utilizing unobservable inputs, including assumptions about the underlying collateral, credit risks associated with the issuer, credit enhancements associated with financial insurance guarantees, and the possibility of the security being re-financed by the issuer or having a successful auction. These amounts are
At October 31, 2019 we held an investment in 1 auction rate security that had an original principal amount, amortized cost, and fair value of $5.0 million that was included in “Other investments” on the accompanying unaudited consolidated balance sheets. See Note 7, “Auction Rate Securities,”During the first quarter of 2020, this auction rate security was called by the issuer, and we received proceeds for further information.
(7) Certain of our acquisitions involve the payment of contingent consideration. The fair value of these liabilities is basedthis debt instrument of $5.0 million. There were 0 unrealized gains or losses on the expected achievement of certain pre-established revenue goals. Our contingent consideration liability isthis auction rate security included in “Other accrued liabilities” and “Other noncurrent liabilities” on the accompanying unaudited consolidated balance sheets.accumulated other comprehensive income (“AOCI”). At January 31, 2020 we had 0 investments in auction rate securities.
During the three months ended January 31, 2018,2020, we had no transfers of assets or liabilities between any of the above hierarchy levels.
Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis
WeIn addition to assets and liabilities that are measured at fair value on a recurring basis, we are also required to measure certain assetsitems at fair value on a non-recurring basis, which are subject to fair value adjustments in certain circumstances.basis. These assets can include: goodwill; intangible assets; property, plant and equipment; lease-related ROU assets; and long-lived assets that have been reduced to fair value when they are held for sale.
On November 1, 2017, we reorganized our reportable segments and goodwill reporting units. In connection with this reorganization, we performed a qualitative goodwill If certain triggering events occur, or if an annual impairment test immediately before and afteris required, we would evaluate these non-financial assets for impairment. If an impairment were to occur, the segment realignment. In analyzingasset would be recorded at the results of operations and business conditions of the goodwill reporting units, we determined the likelihood of a goodwill impairment did not reach the more-likely-than not threshold specified in U.S. GAAP for any of the reporting units that were evaluated. Accordingly, we concluded that goodwill related to those reporting units was not impaired and further quantitative testing was not required.
7. AUCTION RATE SECURITIES
At January 31, 2018 and October 31, 2017, we held investments in auction rate securities from two different issuers that had an aggregate original principal amount of $10.0 million and an amortized cost andestimated fair value, of $8.0 million. These two auction rate securities are debt instruments with stated maturities in 2036 and 2050. The interest rates for these securities are designed to be reset through Dutch auctions approximately every thirty days, but auctions for these securities have not occurred since August 2007.using primarily unobservable Level 3 inputs.
At January 31, 2018 and October 31, 2017, there were no unrealized gains or losses on our auction rate securities included in accumulated other comprehensive income (loss), net of taxes (“AOCI”), and the total amount of other-than-temporary impairment credit loss on our auction rate security investments included in our retained earnings was $2.0 million.
Significant Assumptions Used to Determine the Fair Values of Our Auction Rate Securities
18

8. INSURANCE
AssumptionJanuary 31, 2018October 31, 2017
Discount ratesL + 0.53% and L + 1.18%
L + 0.42% and L + 0.79%
Yields2.15%, L + 2.00%2.15%, L + 2.00%
Average expected lives4 – 10 years4 – 10 years
L – One Month LIBOR
8. INSURANCE
We use a combination of insured and self-insurance programs to cover workers’ compensation, general liability, automobile liability, property damage, and other insurable risks. For the majority of these insurance programs, we retain the initial $1.0 million of exposure on a per-occurrence basis, either through deductibles or self-insured retentions. Beyond the retained exposures, we have varying primary policy limits ranging between $1.0 million and $5.0 million per occurrence. To cover general liability and automobile liability losses above these primary limits, we maintain commercial umbrella insurance policies that provide aggregate limits of $200.0 million. Our insurance policies generally cover workers’ compensation losses to the full extent of statutory requirements. Additionally, to cover property damage risks above our retained limits, we maintain policies that provide per occurrence limits of $75.0 million. We are also self-insured for certain employee medical and dental plans. We maintain stop-loss insurance for our self-insured medical plan under which we retain up to $0.4$0.5 million of exposure on a per-participant, per-year basis with respect to claims.
The adequacy ofWe maintain our reserves for workers’ compensation, general liability, automobile liability, and property damage insurance claims is based upon known trends and events and the actuarial estimates of required reserves considering the most recently completed actuarial reports. We use all available information to develop our best estimate of insurance claims reserves as information is obtained. The results of actuarial studiesreviews are used to estimate our insurance rates and insurance reserves for future periods and to adjust reserves, if appropriate, for prior years.
Actuarial Review Performed During the First Quarter of 20182020
We review our self-insurance liabilities on a regular basis and adjust our accruals accordingly. Actual claims activity or development may vary from our assumptions and estimates, which may result in material losses or gains. As we obtain additional information that affects the assumptions and estimates used in our reserve liability calculations, we adjust our self-insurance rates and reserves for future periods and, if appropriate, adjust our reserves for claims incurred in prior accounting periods.
During the three months ended January 31, 2018,first quarter of 2020, we performed ana comprehensive actuarial review of the majority of our casualty insurance programs that consideredevaluated all changes in claim developmentsmade to claims reserves and claimclaims payment activity for the period commencingof May 1, 2017 and ending2019 through October 31, 2017 for all policy years2019 (the “Actuarial Review”). The Actuarial Review was comprehensive in which open claims existed.nature and was based on loss development patterns, trend assumptions, and underlying expected loss costs during the period analyzed.
The actuarial review indicated the claims reduction and safety initiatives we implemented have had a positive impact on our claims costs in the most recent years. Most notably, over the past two years there has been a decrease in claim frequency for workers’ compensation lost-time claims and general liability bodily injury claims. However, there have been unfavorable developments in ultimate losses beyond our estimates for general liability and workers’ compensation claims related to prior years, as described below.
The actuarial review indicated a continued decrease over the most recent years in the total number of reported claims related to our general liability program, particularly with respect to bodily injury claims. However, in prior year claims we experienced adverse developments that are largely attributable to adjustments related to certain bodily injury claims and to losses for property damage.

We are experiencing a reduced frequency of claims in our workers’ compensation program. However, due to increases in projected costs and severity of claims in certain prior fiscal years, we increased our estimate of ultimate losses for workers’ compensation claims. Statutory, regulatory, and legal developments have contributed to the increase in our estimated losses.
Based on the results of the actuarial review and subsequent developments,Actuarial Review, at January 31, 2020 we increaseddecreased our total reserves for knownprior periods by $6.6 million. This adjustment compares to a $5.0 million increase to prior year claims as well as our estimate of the loss amounts associated with incurred but not reported claims by $2.0 million during the three months ended January 31, 2018. This adjustment was $3.0 million lower than the total adjustment related to prior year claims of $5.0 million during the three months ended January 31, 2017.2019. We will continue to assess ongoing developments, which may result in further adjustments to reserves.
Insurance Related Balances and Activity
(in millions)January 31, 2020October 31, 2019
Insurance claim reserves, excluding medical and dental$507.2  $507.8  
Medical and dental claim reserves6.8  7.2  
Insurance recoverables64.5  64.5  
(in millions)January 31, 2018 October 31, 2017
Insurance claim reserves excluding medical and dental$490.7
 $485.6
Medical and dental claim reserves10.7
 9.8
Insurance recoverables74.9
 73.1
At January 31, 20182020 and October 31, 2017,2019, insurance recoverables are included in both “Other current assets” and “Other noncurrent assets” on the accompanying unaudited consolidated balance sheets.
Instruments Used to Collateralize Our Insurance Obligations
(in millions)January 31, 2020October 31, 2019
Standby letters of credit$144.0  $141.0  
Surety bonds87.8  90.8  
Restricted insurance deposits0.8  0.8  
Total$232.6  $232.6  

19
(in millions)January 31, 2018 October 31, 2017
Standby letters of credit$136.7
 $137.6
Surety bonds77.5
 77.5
Restricted insurance deposits10.2
 11.2
Total$224.4
 $226.3

9. CREDIT FACILITY
On September 1, 2017, we refinanced and replaced our then-existing $800.0 million credit facility with a new senior, secured five-year syndicated credit facility (the “Credit Facility”), consisting of a $900.0 million revolving line of credit and an $800.0 million amortizing term loan scheduled to mature on September 1, 2022. TheIn accordance with the terms of the Credit Facility, the line of credit reduceswas reduced to $800.0 million after one year.on September 1, 2018. The Credit Facility also provides for the issuance of up to $300.0 million for standby letters of credit and the issuance of up to $75.0 million in swingline advances. The obligations under the Credit Facility are secured on a first-priority basis by a lien on substantially all of our assets and properties, subject to certain exceptions.
Borrowings under the Credit Facility bear interest at a rate equal to 1-month LIBOR plus a spread that is based upon our leverage ratio. The spread ranges from 1.00% to 2.25% for Eurocurrency loans and 0.00% to 1.25% for base rate loans. At January 31, 2018,2020, the weighted average interest rate on our outstanding borrowings was 3.74%3.53%. We also pay a commitment fee, based on our leverage ratio, and payable quarterly in arrears, ranging from 0.200% to 0.350% on the average daily unused portion of the line of credit.credit that is paid quarterly in arrears. For purposes of this calculation, irrevocable standby letters of credit, which are issued primarily in conjunction with our insurance programs, and cash borrowings are included as outstanding under the line of credit.
The Credit Facility, as amended, contains certain covenants, including a current maximum leverage ratio of 4.754.00 to 1.0 whichthat steps down by 25 basis points annually each July to 3.50 to 1.0 by July 2020,2021 and a minimum fixed charge coverage ratio of 1.50 to 1.0, as well as other financial and non-financial covenants. In the event of a material acquisition, as defined in the Credit Facility, we may elect to increase the leverage ratio to 3.75 to 1.0 for a total of four fiscal quarters, provided the leverage ratio had already been reduced to 3.50 to 1.0. Our borrowing capacity is subject to, and limited by, compliance with the covenants described above. At January 31, 2018,2020, we were in compliance with these covenants.
The Credit Facility also includes customary events of default, including failure to pay principal, interest, or fees when due, failure to comply with covenants, the occurrence of certain material judgments, or a change in control of the Company. If an eventcertain events of default occurs,occur, including certain cross-defaults, insolvency, change in control, or violation of specific covenants, the lenders can terminate or suspend our access to the Credit Facility, and declare all amounts outstanding (including all accrued interest and unpaid fees) to be immediately due and payable, and require that we cash collateralize the outstanding standby letters of credit.
Total deferred financing costs related to the Credit Facility were $18.7 million, consisting of $13.4 million related to the term loan and $5.2 million related to the line of credit, which are being amortized to interest expense over the term of the Credit Facility.
Credit Facility Information
(in millions)January 31, 2020October 31, 2019
Current portion of long-term debt
Gross term loan$75.0  $60.0  
Unamortized deferred financing costs(2.7) (2.8) 
Current portion of term loan$72.3  $57.2  
Long-term debt
Gross term loan$650.0  $680.0  
Unamortized deferred financing costs(3.5) (4.1) 
Total noncurrent portion of term loan646.5  675.9  
Line of credit(1)(2)
139.8  68.4  
Long-term debt$786.3  $744.2  
(in millions) January 31, 2018 October 31, 2017
Current portion of long-term debt    
Gross term loan $10.0
 $20.0
Less: unamortized deferred financing costs (3.0) (3.1)
Current portion of term loan $7.0
 $16.9
     
Long-term debt    
Gross term loan $770.0
 $780.0
Less: unamortized deferred financing costs (9.1) (9.9)
Total noncurrent portion of term loan 760.9
 770.1
Line of credit(1)(2)
 412.5
 391.2
Long-term debt $1,173.4
 $1,161.3
(1)Standby letters of credit amounted to $145.5$153.5 million at January 31, 2018.2020.

(2) At January 31, 2018,2020, we had borrowing capacity of $330.5 million,$499.9 million; however, covenant restrictions limited our actual borrowing capacity to $245.5$353.2 million.



20

Term Loan Maturities

During the first quarter,three months ended January 31, 2020, we made $20.0 millionprincipal payments under the term loan of principal payments.$15.0 million. As of January 31, 2018,2020, the following principal payments are required under the term loan:loan.
(in millions) 2019 2020 2021 2022(in millions)202020212022
Debt maturities $40.0
 $60.0
 $120.0
 $560.0
Debt maturities$45.0  $120.0  $560.0  
Interest Rate Swaps

We enter into interest rate swaps to manage the interest rate risk associated with our floating-rate, LIBOR-based borrowings under our Credit Facility.borrowings. Under these arrangements, we typically pay a fixed interest rate in exchange for LIBOR-based variable interest throughout the life of the agreement. We initially report the derivative’s mark-to-market gain or loss on a derivative as a component of AOCI and subsequently reclassify the gain or loss into earnings when the hedged transactions occur and affect earnings. Interest payables and receivables under the swap agreements are accrued and recorded as adjustments to interest expense. All of our interest rate swaps werehave been designated and accounted for as cash flow hedges from inception. See Note 6,7, “Fair Value of Financial Instruments,” regarding the valuation of our interest rate swaps.
Interest Rate Swaps Information
Notional AmountsAmountFixed Interest RatesRateEffective DatesDateMaturity DatesDate
$ 105.090.0 million1.05%2.83% 
November 1, 2018April 7, 2016 and
May 11, 2016
April 7,30, 2021 and
May 11, 2021
$ 215.090.0 million1.65%2.84% November 1, 20172018October 31, 2021
$ 130.0 million 2.86% November 1, 2018April 30, 2022
$ 130.0 million 2.84% November 1, 2018September 1, 2022
$ 285.0 million1.69%November 13, 2017September 1, 2022
At January 31, 20182020 and October 31, 2017,2019, amounts recorded in AOCI for interest rate swaps were $15.7$1.4 million, net of taxes of $5.8$0.9 million, and $1.7$2.2 million, net of taxes of $1.2 million, respectively. Additionally, atThese amounts included the gain associated with the interest rate swaps we terminated in 2018, which is being amortized to interest expense as interest payments are made over the term of our Credit Facility. During the three months ended January 31, 2018,2020, we amortized $1.2 million, net of taxes of $0.4 million, of that gain and we amortized $1.0 million, net of taxes of $0.4 million, during the three months ended January 31, 2019. At January 31, 2020, the total amount expected to be reclassified from AOCI to earnings during the next twelve months was $5.0 million.is a net loss of $0.2 million (taxes are de minimis).

21

10. COMMITMENTS AND CONTINGENCIES
Letters of Credit and Surety Bonds
We use letters of credit and surety bonds to secure certain commitments related to insurance programs and for other purposes. As of January 31, 2018,2020, these letters of credit and surety bonds totaled $145.5$153.5 million and $470.0$596.3 million, respectively. Included in the total amount of surety bonds is $2.3 million of bonds with an effective date starting after January 31, 2020.
Guarantees
In some instances, we offer clients guaranteed energy savings under certain energy savings contracts. At January 31, 2018,2020, total guarantees were $164.6$186.0 million and extend through 2038. We accrue for the estimated cost of guarantees when it is probable that a liability has been incurred and the amount can be reasonably estimated. Historically, we have not incurred any material losses in connection with these guarantees.
In connection with an unconsolidated joint venture in which one of our subsidiaries has a 33% ownership interest, that subsidiary and the other joint venture partners have each jointly and severally guaranteed the obligations of the joint venture to perform under certain contracts extending through 2019.2024. Annual revenues relating to the underlying contracts are approximately $35$41 million. Should the joint venture be unable to perform under these contracts, the joint venture partners would be jointly and severally liable for any losses incurred by the client due to the failure to perform.
Sales Tax Audits
We collect sales tax from clients and remit those collections to the applicable states. When clients fail to pay their invoices, including the amount of any sales tax that we paid on their behalf, in some cases we are entitled to seek a refund of that amount of sales tax from the applicable state.
Sales tax laws and regulations enacted by the various states are subject to interpretation, and our compliance with such laws is routinely subject to audit and review by such states. Audit risk is concentrated in several states, and these states are conducting ongoing audits. The outcomes of ongoing and any future audits and changes in the states’ interpretation of the sales tax laws and regulations could materially adversely impact our results of operations.
Legal Matters
We are a party to a number of lawsuits, claims, and proceedings incident to the operation of our business, including those pertaining to labor and employment, contracts, personal injury, and other matters, some of which allege substantial monetary damages. Some of these actions may be brought as class actions on behalf of a class or purported class of employees.
At January 31, 2018,2020, the total amount accrued for all probable litigation losses where a reasonable estimate of the loss could be made was $10.0$7.0 million. This $10.0 million includes an accrual of $3.8 million in connection with the Hussein case discussed below.
Litigation outcomes are difficult to predict and the estimation of probable losses requires the analysis of multiple possible outcomes that often depend on judgments about potential actions by third parties. If one or more matters are resolved in a particular period in an amount in excess of, or in a manner different than, what we anticipated, this could have a material adverse effect on our financial position, results of operations, or cash flows.
We do not accrue for contingent losses that, in our judgment, are considered to be reasonably possible but not probable. The estimation of reasonably possible losses also requires the analysis of multiple possible outcomes that often depend on judgments about potential actions by third parties. Our management currently estimates the range of loss for all reasonably possible losses for which a reasonable estimate of the loss can be made is between zero0 and $8$9 million. Factors underlying this estimated range of loss may change from time to time, and actual results may vary significantly from this estimate.
In some cases, although a loss is probable or reasonably possible, we cannot reasonably estimate the maximum potential losses for probable matters or the range of losses for reasonably possible matters. Therefore, our accrual for probable losses and our estimated range of loss for reasonably possible losses do not represent our maximum possible exposure.

22

While the results of these lawsuits, claims, and proceedings cannot be predicted with any certainty, our management believes that the final outcome of these matters will not have a material adverse effect on our financial position, results of operations, or cash flows.
Certain Legal Proceedings
Certain lawsuits to which we are a party are discussed below. In determining whether to include any particular lawsuit or other proceeding in our disclosure below, we consider both quantitative and qualitative factors. These factors include, but are not limited to: the amount of damages and the nature of any other relief sought in the proceeding; if such damages and other relief are specified, our view of the merits of the claims; whether the action is or purports to be a class action, and our view of the likelihood that a class will be certified by the court; the jurisdiction in which the proceeding is pending; and the potential impact of the proceeding on our reputation.

The Consolidated Cases of Bucio and Martinez v. ABM Janitorial Services filed on April 7, 2006, pending in the Superior Court of California, County of San Francisco (the “Bucio case”)

The Bucio case is a class action pending in San Francisco Superior Court that alleges we failed to provide legally required meal periods and make additional premium payments for such meal periods, pay split shift premiums when owed, and reimburse janitors for travel expenses. There is also a claim for penalties under the California Labor Code Private Attorneys General Act (“PAGA”). On April 19, 2011, the trial court held a hearing on plaintiffs’ motion to certify the class. At the conclusion of that hearing, the trial court denied plaintiffs’ motion to certify the class. On May 11, 2011, the plaintiffs filed a motion to reconsider, which was denied. The plaintiffs appealed the class certification issues. The trial court stayed the underlying lawsuit pending the decision in the appeal. The Court of Appeal of the State of California, First Appellate District (the “Court of Appeal”), heard oral arguments on November 7, 2017. On December 11, 2017, the Court of Appeal reversed the trial court’s order denying class certification and remanded the matter for certification of a meal period, travel expense reimbursement, and split shift class. The case was remitted to the trial court for further proceedings on class certification, discovery, dispositive motions, and trial.

HusseinOn September 20, 2018, the trial court entered an order defining 4 certified subclasses of janitors who were employed by the legacy ABM janitorial companies in California at any time between April 7, 2002 and Hirsi v. Air Serv Corporation filedApril 30, 2013, on January 20, 2016, pending in the United States District Courtclaims based on alleged previous automatic deduction practices for the Western Districtmeal breaks, unpaid meal premiums, unpaid split shift premiums, and unreimbursed business expenses, such as mileage reimbursement for use of Washington at Seattle (the “Hussein case”) and

Isse et al. v. Air Serv Corporation filed on February 7, 2017 in the Superior Court of Washington for King County (the “Isse” case)

The Hussein case was a certified class action involving a class of certain hourly Air Serv employees at Seattle-Tacoma International Airport in SeaTac, Washington. The plaintiffs alleged that Air Serv violated a minimum wage requirement in an ordinance applicablepersonal vehicles to certain employers in the local city of SeaTac (the “Ordinance”). Plaintiffs sought retroactive wages, double damages, interest, and attorneys’ fees. This matter was removed to federal court. In a separate lawsuit brought by Filo Foods, LLC, Alaska Airlines, and several other employers at SeaTac airport, the King County Superior Court issued a decision that invalidated the Ordinance as it applied to workers at SeaTac airport. Subsequently, the Washington Supreme Court reversed the Superior Court’s decision.travel between worksites. On February 7, 2017,1, 2019, the Isse case was filed against Air Serv on behalf of 60 individual plaintiffs (whotrial court held that the discovery related to PAGA claims allegedly arising after April 30, 2013 would otherwise be membersstayed until after the class and PAGA claims accruing prior to April 30, 2013 had been tried. The parties engaged in mediation in July 2019, which did not result in settlement of the Hussein class), whocase. On October 17, 2019, the plaintiffs filed a motion asking the trial court to certify additional classes based on an alleged failure to comply with bothmaintain time records, an alleged failure to provide accurate wage statements, and an alleged practice of combining meal and rest breaks. The trial court denied the minimum wage provisionplaintiffs’ motion to certify additional classes on December 26, 2019. The case was re-assigned to a new judge on January 6, 2020. Since that time, Plaintiffs have filed discovery and sanctions motions, and ABM has filed summary adjudication motions, which are pending. The class action claims accruing prior to April 30, 2013 are set for trial on October 26, 2020. Prior to trial, we will have the sick and safe time provisionopportunity to, among other things, seek decertification of the Ordinance. The Isse plaintiffs sought retroactive wages and sick benefits, double damages for wages and sick benefits, interest, and attorneys’ fees. The Isse case later expandedclasses or engage in further mediation if we deem such actions appropriate. We expect to approximately 220 individual plaintiffs.engage in one or more such activities in upcoming quarters.

In mediations on November 2 and 3, 2017, and without admitting liability in either matter, we agreed to settle the Hussein and Isse cases for a combined total of $8.3 million, inclusive of damages, interest, attorneys’ fees, and employer payroll taxes. Eligible employees will be able to participate in either the Hussein or Isse settlements, but cannot recover in both settlements. The settlements in both cases require court approval because of the nature of the claims being released. On December 8, 2017, the Superior Court of Washington for King County approved the settlement agreement for the 220 Isse plaintiffs, and we subsequently made a settlement payment of $4.5 million to the Isse plaintiffs. The Hussein settlement documents have not been finalized and will be subject to court approval.
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Castro and Marmolejo v. ABM Industries, Inc., et al., filed on October 24, 2014, pending in the United States District Court for the Northern District of California (the “Castro” case)

On October 24, 2014, Plaintiff Marley Castro filed a class action lawsuit alleging that ABM did not reimburse janitorial employees in California for using their personal cell phones for work-related purposes, in violation of California Labor Code section 2802. On January 23, 2015, Plaintiff Lucia Marmolejo was added to the case as a named plaintiff. On October 27, 2017, plaintiffs moved for class certification seeking to represent a class of all employees who were, are, or will be employed by ABM in the State of California with the Employee Master Job Description Code “Cleaner” (hereafter referred to as “Cleaner Employees”) beginning from October 24, 2010. ABM filed its opposition to class certification on November 27, 2017. On January 26, 2018, the district court granted plaintiffs’ motion for class certification. The court rejected plaintiffs’ proposed class, instead certifying three classes that the court formulated on its own: (1) all employees who were, are, or will be employed by ABM in the State of California as Cleaner Employees who used a personal cell phone to punch in and out of the EPAY system and who (a) worked at an ABM facility that did not provide a biometric clock and (b) were not offered an ABM-provided cell phone during the period beginning on January 1, 2012, through the date of notice to the Class Members that a class has been certified in this action; (2) all employees who were, are, or will be employed by ABM in the State of California as Cleaner Employees who used a personal cell phone to report unusual or suspicious circumstances to supervisors and were not offered (a) an ABM-provided cell phone or (b) a two-way radio during the period beginning four years prior to the filing of the original complaint, October 24, 2014, through the date of notice to the Class Members that a class has been certified in this action; and (3) all employees who were, are, or will be employed by ABM in the State of California as Cleaner Employees who used a personal cell phone to respond to communications from supervisors and were not offered (a) an ABM-provided cell phone or (b) a two-way radio during the period beginning four years prior to the filing of the original complaint, October 24, 2014, through the date of notice to the Class Members that a class has been certified in this action. On February 9, 2018, ABM filed a petition for permission to appeal the district court’s order granting class certification with the United States Court of Appeals for the Ninth Circuit.
11. INCOME TAXES
The Tax Cuts and Jobs Act (the “Tax Act”), which was enacted on December 22, 2017, represents the most significant overhaul of the U.S.
Our quarterly tax code in more than 30 years. Among other provisions, the Tax Act provides for a reduction of the federal corporate incomeprovision is calculated using an estimated annual tax rate from 35%that is adjusted for discrete items occurring during the period to 21% and a “transition tax” to be levied on the deemed repatriation of indefinitely reinvested earnings of international subsidiaries. Since we have an October 31 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of 23.3% for fiscal 2018 and 21% for subsequent fiscal years. Other provisions under the Tax Act will not be effective for us until fiscal 2019, including limitations on deductibility of interest and executive compensation as well as anti-deferral provisions on Global Intangible Low-Taxed Income (“GILTI”). As a result, in 2019 we expectarrive at our effective tax rate to increase from the 2018 rate.
Due to the complexities of implementing the provisions of the Tax Act, the staff of the U.S. Securities and Exchange Commission issued Staff Accounting Bulletin 118 (“SAB 118”), which provides guidance on accounting for tax effects of the Tax Act and permits a measurement period not to exceed one year from the enactment date for companies to complete the required analyses and accounting. As permitted under SAB 118, some elements of the tax adjustments recorded in the first quarter of 2018 due to the enactment of the Tax Act, including the remeasurement of deferred tax assets and liabilities and the transition tax, are based on reasonable estimates and are considered provisional.
We remeasured certain deferred tax assets and liabilities based on the new rates at which they are expected to reverse in the future and recorded a net discrete tax benefit of $28.7 million during During the three months ended January 31, 2018. In addition,2020 and 2019, we recorded an expensehad effective tax rates of $7.023.6% and 26.4%, respectively, resulting in provisions for taxes of $8.6 million for the one-time transitionand $4.7 million, respectively. There were no significant discrete items that impacted our effective tax on the deemed repatriation of indefinitely reinvested earnings of our international subsidiaries. rate during either period.
We plan to reinvest our foreign earnings to fund future non-U.S. growth and expansion. Weexpansion, and we do not anticipate remitting such earnings to the United States, and whileStates. While U.S. federal tax expense has been recognized as a result of the Tax Cuts and Jobs Act of 2017, no deferred tax liabilities with respect to federal and state income taxes or foreign withholding taxes have been recognized.
We continue to analyze certain aspects of the Tax Act and refine our calculation of the impact on our deferred tax balances, which could potentially affect the measurement of these balances. The provisional amount recorded is based on our estimate of the expected reversals of certain tax assets and liabilities, which may be revised in future quarters during the one-year measurement period as additional information becomes available. The final impact related to the one-time transition tax may differ from our current estimate due to the complexity of calculating and supporting U.S. tax attributes involved in foreign tax credit calculations, such as accumulated foreign earnings and

profits, foreign tax paid, and other tax components. Changes to our estimates over the one-year measurement period could be material, due to, among other things, changes in interpretations of the Tax Act, future legislative action to address questions that arise because of the Tax Act, changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates we have utilized to calculate the provisional amounts.
Beginning in fiscal year 2019, provisions under GILTI could result in incremental taxability of our foreign subsidiaries’ income in excess of an allowed return on certain tangible property. The Financial Accounting Standards Board has determined that filers have a policy choice to account for this tax on either a period basis or a deferred tax basis. We are still evaluating the impacts of GILTI on our business model and have not yet made any accounting adjustments or policy decisions regarding this new source of incremental U.S. taxable income.
Our quarterly provision for income taxes from continuing operations is calculated using an estimated annual effective income tax rate, which is adjusted for discrete items that occur during the reporting period. During the three months ended January 31, 2018, we had an income tax benefit on income from continuing operations of $22.2 million. The three months ended January 31, 2018 was favorably impacted by a net discrete tax benefit of $21.7 million related to the enactment of the Tax Act.
During the three months ended January 31, 2017, we had an income tax provision on income from continuing operations of $5.9 million. The three months ended January 31, 2017 was favorably impacted by $2.0 million of excess tax benefits related to the vesting of share-based compensation awards and the 2017 work opportunity tax credit.
12. SEGMENT INFORMATION
Effective November 1, 2017, we reorganized our reportable segments to reflect the integration of GCA into our industry group model.
Our current reportable segments consist of Business & Industry (“B&I”),&I, Aviation, Technology & Manufacturing (“T&M”),&M, Education, and Technical Solutions, and Healthcare, as further described below. Refer to Note 2, “Basis of Presentation and Significant Accounting Policies,” for information related to the reorganization of our former Government Services business.
Healthcare business into our other industry groups, primarily B&I, during the third quarter of 2019.
REPORTABLE SEGMENTS AND DESCRIPTIONS
B&IB&I, our largest reportable segment, encompasses janitorial, facilities engineering,services, and parking services for commercial real estate properties, and sports and entertainment venues.venues, and traditional hospitals and non-acute healthcare facilities. B&I also provides vehicle maintenance and other services to rental car providers (“Vehicle Services Contracts”).providers.
AviationAviation supports airlines and airports with services ranging from parking and janitorial to passenger assistance, catering logistics, air cabin maintenance, and transportation.
T&MT&M combines our legacy Industrial & Manufacturing business, which was previously included in our B&I segment, with our legacy High Tech industry group, which was previously reported as part of our Emerging Industries Group. T&M provides janitorial, facilities engineering,services, and parking services.services to industrial and high-tech manufacturing facilities.
EducationEducation delivers janitorial, custodial, landscaping and grounds, facilities engineering, and parking services for public school districts, private schools, colleges, and universities. This business was previously reported as part of our Emerging Industries Group.
Technical SolutionsTechnical Solutions specializes in mechanical and electrical services. These services can also be leveraged for cross-selling across all of our industry groups, both domestically and internationally.
HealthcareHealthcare offers janitorial, facilities management, clinical engineering, food and nutrition, laundry and linen, parking and guest services, and patient transportation services at traditional hospitals and non-acute facilities. This business was previously reported as part of our Emerging Industries Group.


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Financial Information by Reportable Segment
Three Months Ended January 31,
(in millions)20202019
Revenues
Business & Industry$820.9  $828.8  
Aviation238.7  252.4  
Technology & Manufacturing233.9  236.1  
Education208.0  208.9  
Technical Solutions142.0  116.1  
Elimination of inter-segment revenues(30.6) (34.4) 
$1,612.9  $1,607.9  
Operating profit (loss)
Business & Industry$38.2  $36.8  
Aviation5.6  3.9  
Technology & Manufacturing16.7  18.2  
Education11.2  10.3  
Technical Solutions8.3  6.8  
Corporate(33.3) (44.7) 
Adjustment for income from unconsolidated affiliates, included in Aviation(0.9) (0.9) 
45.8  30.3  
Income from unconsolidated affiliates0.9  0.9  
Interest expense(10.2) (13.5) 
Income from continuing operations before income taxes$36.5  $17.8  
 Three Months Ended January 31,
(in millions)2018 2017
Revenues   
Business & Industry$722.1
 $655.6
Aviation256.2
 231.9
Technology & Manufacturing232.0
 171.5
Education206.3
 67.0
Technical Solutions104.0
 107.7
Healthcare67.7
 61.7
Government Services—
 31.4
 $1,588.3
 $1,326.7
Operating profit (loss)   
Business & Industry$28.5
 $27.1
Aviation5.8
 4.6
Technology & Manufacturing16.9
 12.6
Education9.2
 3.6
Technical Solutions5.5
 7.9
Healthcare2.7
 2.5
Government Services(0.7) 1.9
Corporate(47.4) (34.6)
Adjustment for income from unconsolidated affiliates, net, included in Aviation and Government Services(0.6) (1.3)
Adjustment for tax deductions for energy efficient government buildings, included in Technical Solutions(0.3) (0.5)
 19.5
 23.8
Income from unconsolidated affiliates, net0.5
 1.4
Interest expense(14.3) (3.2)
Income from continuing operations before income taxes$5.8
 $22.0
The accounting policies for our segments are the same as those disclosed within our significant accounting policies in Note 2, “Basis of Presentation and Significant Accounting Policies.” Our management evaluates the performance of each reportable segment based on its respective operating profit results, which include the allocation of certain centrally incurred costs. Corporate expenses not allocated to segments include certain CEO and other finance and human resource departmental expenses, certain information technology costs, share-based compensation, certain legal costs and settlements, restructuring and related costs, certain actuarial adjustments resulting from actuarial developments ofto self-insurance reserves, and direct acquisition costs.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to facilitate an understanding of the results of operations and financial condition of ABM Industries Incorporated and its subsidiaries (collectively referred to as “ABM,” “we,” “us,” “our,” or the “Company”). This MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited consolidated financial statements and the accompanying notes (“Financial Statements”) and our Annual Report on Form 10-K for the year ended October 31, 20172019 (“Annual Report”), which has been filed with the Securities and Exchange Commission (“SEC”). This MD&A contains forward-looking statements about our business, operations, and industry that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations, and intentions. Our future results and financial condition may be materially different from those we currently anticipate. See “Forward-Looking Statements” for more information.
Throughout the MD&A, amounts and percentages may not recalculate due to rounding. Unless otherwise indicated, all information in the MD&A and references to years are based on our fiscal year,years, which endsend on October 31.
Business Overview
ABM is a leading provider of integrated facility services, customized by industry, with a mission to make a difference, every person, every day.
2020VisionStrategic Priorities
In September 2015,Strategic Growth
We remain focused on long-term, profitable growth related to both new and existing clients within our industry groups and across our many service lines. We believe operational leverage from our strategic growth initiatives, coupled with our continued focus on efficiency, will increase profitability.
Systems and Technology Transformation
We continue our technology-based modernization efforts that we announced a comprehensive transformation initiativebelieve will enable us to operate more efficiently and provide us with greater data to enhance our business management capabilities.
•Human Resources and Labor Management: We continue furthering our use of technology to help centralize and standardize key human resources practices, such as hiring, and to help enable our operators to manage labor more efficiently by making more informed, data-driven decisions.
•Enterprise Resource Planning: We continue to make progress with the multi-phased development of our new enterprise resource planning (“ERP”) system, which we anticipate will streamline the operational and financial execution of our business and promote more effective decision making in the future.
We believe these new tools and systems will equip us for long-term success and position us for an even stronger and more prosperous future.
Developments and Trends
Economic Labor Outlook
While uncertainty regarding the global macroeconomy currently exists in 2020,Vision”) the U.S. economy has demonstrated positive underlying fundamentals over the last several years, which has led to historically low levels of both unemployment and underemployment across the country. These factors have contributed to the lower availability of qualified labor for our business and higher turnover in certain markets, as our employees have more job opportunities both inside and outside our industry. This in turn has caused, and may continue to cause, higher labor and related personnel costs.

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Restructuring and Related Costs
We may periodically engage in various restructuring activities intended to drive long-term profitable growth through an industry-based go-to-market approach. Our 2020Vision involves three phases: During Phase 1, completed on November 1, 2016,and increase operational efficiency, which can include streamlining and realigning our overall organizational structure and reallocating resources. These activities may result in restructuring costs related to employee severance, other project fees, external support fees, lease exit costs, and asset impairment charges.
GCA Restructuring and Other Initiatives
As we realignedcontinue our organization; in Phase 2, which is continuing today, we are focused on improvements totechnology-based modernization efforts, including standardizing our operational framework to promote efficiencies and process enhancements; and in Phase 3, on the foundation of benefits realized from Phases 1 and 2, we anticipate accelerating growth with our industry-based, go-to-market service model.
2020Vision Developments in 2018
During 2018,financial systems, we expect to continue focusing on certain aspects ofincur additional charges related to these initiatives in 2020. During 2019, our business practices to further build the foundation upon which we deliver leading industry-based facility services. We anticipate that we will continue to roll out enterprise-wide standard operating procedures (the “ABMWay”) and improve our account planning, labor management, manager development, and safety initiatives. To achieve this, we are focusing on long term, profitable growth relating to both existing clients and targeted opportunities, and we have launched a “Tag Pricer” tool that will help us capture work orders more efficiently. In addition, we continue consolidating our procurementrestructuring activities and investing in technology platforms to help drive and sustain 2020Vision performance.
Developments and Trends
United States Tax Reform
The Tax Cuts and Jobs Act (the “Tax Act”), which was enacted on December 22, 2017, represents the most significant overhaul of the U.S. tax code in more than 30 years. Among other provisions, the Tax Act provides for a reduction of the federal corporate income tax rate from 35% to 21% and a “transition tax” to be levied on the deemed repatriation of indefinitely reinvested earnings of international subsidiaries. Since we have an October 31 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of 23.3% for fiscal 2018 and 21% for subsequent fiscal years. Other provisions under the Tax Act will not be effective for us until fiscal 2019, including limitations on deductibility of interest and executive compensation as well as anti-deferral provisions on Global Intangible Low-Taxed Income (“GILTI”). As a result, in 2019 we expect our effective tax rate to increase from the 2018 rate. The estimated impact of the Tax Act, as summarized below for the three months ended January 31, 2018, is further described in Note 11, “Income Taxes,” in the Financial Statements.
 Three Months Ended
(in millions)January 31, 2018
Remeasurement of U.S. deferred tax assets and liabilities$28.7
Transition tax on non-U.S. subsidiaries’ earnings(7.0)
Total impact of the Tax Act on the benefit for income taxes$21.7

Due to the complexities of implementing the provisions of the Tax Act, the staff of the U.S. Securities and Exchange Commission issued Staff Accounting Bulletin 118 (“SAB 118”), which provides guidance on accounting for tax effects of the Tax Act and permits a measurement period not to exceed one year from the enactment date for companies to complete the required analyses and accounting. We continue to analyze certain aspects of the Tax Act and refine our calculation of the impact on our deferred tax balances, which could potentially affect the measurement of these balances. The provisional amount recorded is based on our estimate of the expected reversals of certain tax assets and liabilities, which may be revised in future quarters during the one-year measurement period as additional information becomes available. The final impactprimarily related to the one-time transition tax may differ from our current estimate due to the complexitycontinued integration of calculating and supporting U.S. tax attributes involved in foreign tax credit calculations, such as accumulated foreign earnings and profits, foreign tax paid, and other tax components. Changes to our estimates over the one-year measurement period could be material, due to, among other things, changes in interpretations of the Tax Act, future legislative action to address questions that arise because of the Tax Act, changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates we have utilized to calculate the provisional amounts.    
Beginning in fiscal year 2019, provisions under GILTI could result in incremental taxability of our foreign subsidiaries’ income in excess of an allowed return on certain tangible property. The Financial Accounting Standards Board has determined that filers have a policy choice to account for this tax on either a period basis or a deferred tax basis. We are still evaluating the impacts of GILTI on our business model and have not yet made any accounting adjustments or policy decisions regarding this new source of incremental U.S. taxable income.
GCA Services Group
On September 1, 2017, we acquired GCA Services Group (“GCA”), a provider of integrated facility services to educational institutions and commercial facilities, for approximately $1.3 billion, consisting of $839.9 million in cashother initiatives, including standardizing our financial systems and approximately 9.4 million shares of ABM common stockstreamlining our operations by migrating and upgrading several key management platforms, such as our human resources information systems, ERP system, and labor management system. We also continued consolidating our real estate leases. Severance and other expenses associated with a fair value of $421.3 million at closing. Refer to Note 3, “Acquisitions,” in the Financial Statements for more information on this transaction.our Healthcare reorganization during 2019 were immaterial.
Our consolidated statements of comprehensive income (loss) and statements of cash flows include GCA’s results of operations in the three months ended January 31, 2018, but exclude GCA’s results of operations in the three months ended January 31, 2017, as that was prior to the acquisition date. During the three months ended January 31, 2018, we recognized total incremental revenues from GCA of $251.6 million, as summarized below.

Three Months Ended
(in millions)January 31, 2018
Education$140.5
Technology & Manufacturing58.6
Business & Industry40.7
Healthcare7.5
Aviation4.3
Total$251.6
Following this acquisition, during 2018 we initiated a restructuring program to achieve cost synergies from our combined operations. We include these costs within corporate expenses. We do not expect to incur significant severance expenses related to GCA restructuring in the future.

Three Months Ended
(in millions)January 31, 2018
Employee Severance$8.8
External Support Fees2.0
Other Project Fees0.8
Total$11.7


Three Months Ended
(in millions)January 31, 2020Cumulative
Employee severance$0.2  $18.2  
Other project fees3.0  15.4  
External support fees—  3.5  
Lease exit costs—  0.7  
Total$3.1  $37.7  
Segment Reporting

Effective November 1, 2017, we reorganized our reportable segments to reflect the integration of GCA into our industry group model. Our current reportable segments consist of Business & Industry (“B&I”), Aviation, Technology & Manufacturing (“T&M”), Education, and Technical Solutions, and Healthcare, as further described below.
During the third quarter of 2019, we made changes to our operating structure to better align the services and expertise of our Healthcare business with our other industry groups, allowing us to leverage our existing branch network to support the long-term growth of this business. As a result, our former Healthcare portfolio is now included primarily in our Business & Industry segment. Our prior period segment data has been reclassified to conform with our current period presentation. This change had no impact on our previously reported consolidated financial statements.
REPORTABLE SEGMENTS AND DESCRIPTIONS
fy18bni.jpgabm-20200131_g4.jpg
B&I, our largest reportable segment, encompasses janitorial, facilities engineering,services, and parking services for commercial real estate properties, and sports and entertainment venues.venues, and traditional hospitals and non-acute healthcare facilities. B&I also provides vehicle maintenance and other services to rental car providers (“Vehicle Services Contracts”).providers.
fy18aviationa01.jpgabm-20200131_g5.jpg
Aviation supports airlines and airports with services ranging from parking and janitorial to passenger assistance, catering logistics, air cabin maintenance, and transportation.
fy18tnm.jpgabm-20200131_g6.jpg
T&M combines our legacy Industrial & Manufacturing business, which was previously included in our B&I segment, with our legacy High Tech industry group, which was previously reported as part of our Emerging Industries Group. T&M provides janitorial, facilities engineering,services, and parking services.services to industrial and high-tech manufacturing facilities.
fy18educationa01.jpgabm-20200131_g7.jpg
Education delivers janitorial, custodial, landscaping and grounds, facilities engineering, and parking services for public school districts, private schools, colleges, and universities. This business was previously reported as part of our Emerging Industries Group.
fy18technicalsolutions.jpgabm-20200131_g8.jpg
Technical Solutions specializes in mechanical and electrical services. These services can also be leveraged for cross-selling across all of our industry groups, both domestically and internationally.
fy18healthcare.jpg
Healthcare offers janitorial, facilities management, clinical engineering, food and nutrition, laundry and linen, parking and guest services, and patient transportation services at traditional hospitals and non-acute facilities. This business was previously reported as part of our Emerging Industries Group.

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Prior Year Reclassifications

Effective with the reorganization of our reportable segments, we have revised our prior period segment information to conform with our fiscal 2018 presentation. These changes had no impact on our previously reported consolidated balance sheets, statements of comprehensive income (loss), or statements of cash flows.


Government Services Business

Insurance
We soldreview our Government Services businessself-insurance liabilities on May 31, 2017. The reported resultsa regular basis and adjust our accruals accordingly. Actual claims activity or development may vary from our assumptions and estimates, which may result in material losses or gains. As we obtain additional information that affects the assumptions and estimates used in our reserve liability calculations, we adjust our self-insurance rates and reserves for this business are through the date of salefuture periods and, future results could include run-off costs. As this business has been sold and is no longer part ofif appropriate, adjust our ongoing operations, we have excluded a discussion of its resultsreserves for the periodsclaims incurred in this report.
Insuranceprior accounting periods.
During the three months ended January 31, 2018,first quarter of 2020, we performed ana comprehensive actuarial review of the majority of our casualty insurance programs that consideredevaluated all changes in claim developmentsmade to claims reserves and claimclaims payment activity for the period commencingof May 1, 2017 and ending2019 through October 31, 2017 for all policy years2019 (the “Actuarial Review”). The Actuarial Review was comprehensive in which opennature and was based on loss development patterns, trend assumptions, and underlying expected loss costs during the period analyzed.
This Actuarial Review again demonstrates that the changes we have made to our risk management program are positively impacting the frequency and severity of claims; however, there is some flattening of claims existed.frequency reductions as compared to prior periods. The actuarial review indicated the claims reductionmanagement strategies and safety initiativesprograms that we have implemented have had a positive impactresulted in better than anticipated improvements in early identification of certain claims that may potentially develop adversely. Furthermore, we continue to focus on ensuring the establishment of reserves consistent with known fact patterns. The Actuarial Review indicated favorable developments relative to our claims costs in the most recent years. Most notably, there has been a decrease in claim frequency for workers’ compensation lost-time claims and general liability bodily injury claims over the past two years. However, there have been unfavorable developments inestimates of ultimate losses beyond our estimates for general liability and workers’ compensation claims related to certain prior claims years.
Based on the results of the actuarial review and subsequent developments,Actuarial Review, at January 31, 2020 we increaseddecreased our total reserves for knownprior periods by $6.6 million. This adjustment compares to a $5.0 million increase to prior year claims as well as our estimate of the loss amounts associated with incurred but not reported claims for prior years by $2.0 million during the three months ended January 31, 2018. This adjustment was $3.0 million lower than the total adjustment related to prior year claims of $5.0 million during the three months ended January 31, 2017.2019. We will continue to assess ongoing developments, which may result in further adjustments to reserves.
Key Financial Highlights
Revenues•Revenues increased by $261.6$5.0 million, or 19.7%0.3%, including $253.9 million of incremental revenues primarily from the GCA acquisition, during the three months ended January 31, 2018,2020, as compared to the three months ended January 31, 2017.2019, due to organic growth, primarily in our U.S. Technical Solutions business, partially offset by the loss of certain accounts in our Aviation business, our U.S. B&I business, and our U.K. Technical Solutions business.
•Operating profit decreased increased by $4.3$15.5 million, or 18.2%51.2%, during the three months ended January 31, 2018,2020, as compared to the three months ended January 31, 2017.2019. The decreaseincrease in operating profit iswas primarily attributable to higher amortization expense, incremental selling, general and administrative expenses, and restructuring and related costs associated with a lower self-insurance reserve adjustment related to prior year claims and improved margins within our Aviation and U.S. B&I businesses.
•Our effective tax rate on income from continuing operations was 23.6% for the GCA acquisition. This decreasethree months ended January 31, 2020, as compared to 26.4%during the three months ended January 31, 2019.
•Net cash used in operating activities was partially offset by higher operating profit in our Education and T&M segments associated with the GCA acquisition.
Interest expense increased by $11.1$34.3 million during the three months ended January 31, 2018, as compared2020. Typically, our total operating cash flows in the first quarter are lower than in subsequent quarters of the year, primarily due to the three months ended January 31, 2017, primarily related to increased indebtedness incurred to fundtiming of certain working capital requirements during the GCA acquisition and higher relative interest rates under our credit facility.
Our income taxes fromfirst quarter. We expect operating activities of continuing operations to provide positive cash flows for the three months ended January 31, 2018 were favorably impacted by a net discrete tax benefit of $21.7 million related to the Tax Act.2020.
Net cash provided by operating activities was $33.7 million during the three months ended January 31, 2018.
•Dividends of $11.5$12.3 million were paid to shareholders, and dividends totaling $0.175$0.185 per common share were declared during the three months ended January 31, 2018.2020.
•At January 31, 2018,2020, total outstanding borrowings under our credit facility were $1.2 billion,$864.8 million, and we had up to $330.5$499.9 million of borrowing capacity under our credit facility; however, covenant restrictions limited our actual borrowing capacity to $245.5$353.2 million.

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Results of Operations

Three Months Ended January 31, 20182020 Compared with the Three Months Ended January 31, 20172019
Consolidated
 Three Months Ended January 31,    
($ in millions)2018 2017 Increase / (Decrease)
Revenues$1,588.3
 $1,326.7
 $261.6
 19.7%
Operating expenses1,429.3
 1,195.1
 234.2
 19.6%
Gross margin10.0% 9.9% 9 bps  
Selling, general and administrative expenses109.0
 97.3
 11.7
 12.1%
Restructuring and related expenses14.3
 5.0
 9.3
 NM*
Amortization of intangible assets16.2
 5.5
 10.7
 NM*
Operating profit19.5
 23.8
 (4.3) (18.2)%
Income from unconsolidated affiliates, net0.5
 1.4
 (0.9) (61.0)%
Interest expense(14.3) (3.2) (11.1) NM*
Income from continuing operations before income taxes5.8
 22.0
 (16.2) (73.8)%
Income tax benefit (provision)22.2
 (5.9) 28.1
 NM*
Income from continuing operations28.0
 16.1
 11.9
 74.1%
Loss from discontinued operations, net of taxes(0.1) (72.9) 72.8
 (99.8)%
Net income (loss)27.8
 (56.8) 84.6
 NM*
Other comprehensive income (loss)       
Unrealized gains on interest rate swaps, net of taxes of $5.0 and $1.1, respectively13.6
 1.6
 12.0
 NM*
Foreign currency translation9.4
 3.3
 6.1
 NM*
Comprehensive income (loss)$50.9
 $(51.9) $102.8
 NM*
*Not meaningful
Three Months Ended January 31,
($ in millions)20202019Increase / (Decrease)
Revenues$1,612.9  $1,607.9  $5.0  0.3%  
Operating expenses1,433.7  1,446.0  (12.3) (0.8)% 
Gross margin11.1 %10.1 %104 bps
Selling, general and administrative expenses117.6  112.7  4.9  4.4%  
Restructuring and related expenses3.1  3.8  (0.7) (16.6)% 
Amortization of intangible assets12.6  15.2  (2.6) (17.0)% 
Operating profit45.8  30.3  15.5  51.2%  
Income from unconsolidated affiliates0.9  0.9  —  (1.9)% 
Interest expense(10.2) (13.5) (3.3) (24.2)% 
Income from continuing operations before income taxes36.5  17.8  18.7  NM*  
Income tax provision(8.6) (4.7) 3.9  82.4%  
Income from continuing operations27.9  13.0  14.9  NM*  
Income (loss) from discontinued operations, net of taxes0.1  (0.1) 0.2  NM*  
Net income28.0  13.0  15.0  NM*  
Other comprehensive income (loss)
Interest rate swaps(1.1) (8.7) 7.6  87.0%  
Foreign currency translation0.4  3.1  (2.7) (87.2)% 
Income tax benefit0.3  2.4  (2.1) (86.7)% 
Comprehensive income$27.6  $9.7  $17.9  NM*  
*Not meaningful
Revenues
Revenues increased by $261.6$5.0 million, or 19.7%0.3%, during the three months ended January 31, 2018,2020, as compared to the three months ended January 31, 2017. The2019. This increase in revenues was primarily attributabledue to $253.9 million of incremental revenues from acquisitions, including GCA, and organic growth, primarily in B&I and Aviation. Thisour U.S. Technical Solutions business. The increase was partially offset by lower project revenuesthe loss of certain accounts in our Aviation business, our U.S. B&I business, and our U.K. Technical Solutions business and the sale of our Government Services business on May 31, 2017.business.
Operating Expenses
Operating expenses increaseddecreased by $234.2$12.3 million, or 19.6%0.8%, during the three months ended January 31, 2018,2020, as compared to the three months ended January 31, 2017.2019. Gross margin increased slightly by 9104 bps duringto 11.1% in the three months ended January 31, 2018.2020 from 10.1% in the three months ended January 31, 2019. The increase in gross margin was primarily associated with a lower self-insurance reserve adjustment related to prior year claims and favorableimproved margins on certainwithin our Aviation and U.S. Technical Solutions projects. This increase was partially offset by lower profit margins on certain B&I accounts and the loss of certain high margin contracts in our U.K. Technical Solutions business.businesses.

29

Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $11.7$4.9 million, or 12.1%4.4%, during the three months ended January 31, 2018,2020, as compared to the three months ended January 31, 2017.2019. The increase in selling, general and administrative expenses was primarily related to $10.1 million of incremental expenses related to the GCA acquisition and attributable to:
•a $3.7$5.7 million increase in costscompensation and related expenses, including higher commissions expense in the current year primarily associated with 2020Vision technology investments. due to the amortization of commissions that were capitalized in the prior year; and
•a $1.5 million increase in legal costs.
This increase was partially offset by by:
•a $1.0$1.6 million decrease in sales tax reserve.certain technology projects and related support; and

•a $0.6 million decrease in bad debt expense primarily associated with specific reserves established for client receivables.
Restructuring and Related Expenses
Restructuring and related expenses increaseddecreased by $9.3$0.7 million, or 16.6%, during the three months ended January 31, 2018,2020, as compared to the three months ended January 31, 2017, as a result of restructuring2019. The decrease was primarily due to severance expenses incurred in the prior year following the GCA acquisition, partially offset by expenses related to the GCA acquisition.our ongoing technology initiatives.
Amortization of Intangible Assets
Amortization of intangible assets increaseddecreased by $10.7$2.6 million, or 17.0%, during the three months ended January 31, 2018,2020, as compared to the three months ended January 31, 2017, as a result2019, primarily related to certain intangible assets being amortized using the sum-of-the-years'-digits method, which results in declining amortization expense over the useful lives of the amortization of acquired intangible assets associated with the GCA acquisition.assets.
Interest Expense
Interest expense increaseddecreased by $11.1$3.3 million, or 24.2%, during the three months ended January 31, 2018,2020, as compared to the three months ended January 31, 2017,2019, primarily relateddue to increased indebtedness incurred to fund the GCA acquisition and higher relative interest rateslower outstanding borrowings under our credit facility.facility and lower relative interest rates.
Income Taxes from Continuing Operations
DuringOur effective tax rates on income from continuing operations for the three months ended January 31, 2018, we had an income2020 and January 31, 2019 were 23.6% and 26.4%, respectively, resulting in provisions for taxes of $8.6 million and $4.7 million, respectively. There were no significant discrete items that impacted our effective tax benefitrate during either period.
Interest Rate Swaps
The unrealized loss on income from continuing operations of $22.2interest rate swaps decreased by $7.6 million, primarily due to a net discrete tax benefit of $21.7 million related to the Tax Act.
Loss from Discontinued Operations, Net of Taxes
Loss from discontinued operations, net of taxes, decreased by $72.8 millionor 87.0%, during the three months ended January 31, 2018,2020, as compared to the three months ended January 31, 2017,2019, primarily due to underlying changes in which a legal reserve was established in connection with certain legal settlement agreements.
Unrealized Gains on Interest Rate Swaps
Unrealized gains onthe fair value of our interest rate swaps increasedswaps.
Foreign Currency Translation
Foreign currency translation gain decreased by $12.0$2.7 million, or 87.2%, during the three months ended January 31, 2018,2020, as compared to the three months ended January 31, 2017. The increase2019. This change was primarily due to an increasefluctuations in the notional amount of interestexchange rate swaps and to changing interest rates. In November 2017, we entered into three additional interest rate swaps with a combined notional amount of $500.0 million and fixed interest rates of 1.65% and 1.69%.
Foreign Currency Translation
Foreign currency translation gain increased by $6.1 million during the three months ended January 31, 2018, as compared to the three months ended January 31, 2017. This increase was related to the weakening ofbetween the U.S. Dollar (“USD”) againstand the Great Britain Pound during the three months ended January 31, 2018.(“GBP”). Future gains and losses on foreign currency translation will be dependent upon changes in the relative value of foreign currencies to the USD and the extent of our foreign assets and liabilities.


30


Segment Information
Financial Information for Each Reportable Segment
Three Months Ended January 31,    Three Months Ended January 31,
($ in millions)2018 2017 Increase / (Decrease)($ in millions)20202019Increase / (Decrease)
Revenues      Revenues
Business & Industry$722.1
 $655.6
 $66.5
 10.1%Business & Industry$820.9  $828.8  $(7.9) (1.0)% 
Aviation256.2
 231.9
 24.3
 10.5%Aviation238.7  252.4  (13.7) (5.4)% 
Technology & Manufacturing232.0
 171.5
 60.5
 35.3%Technology & Manufacturing233.9  236.1  (2.2) (0.9)% 
Education206.3
 67.0
 139.3
 NM*Education208.0  208.9  (0.9) (0.5)% 
Technical Solutions104.0
 107.7
 (3.7) (3.4)%Technical Solutions142.0  116.1  25.9  22.4%  
Healthcare67.7
 61.7
 6.0
 9.8%
Government Services—
 31.4
 (31.4) NM*
Elimination of inter-segment revenuesElimination of inter-segment revenues(30.6) (34.4) 3.8  11.0%  
$1,588.3
 $1,326.7
 $261.6
 19.7%$1,612.9  $1,607.9  $5.0  0.3%  
Operating profit (loss)      Operating profit (loss)
Business & Industry$28.5
 $27.1
 $1.4
 5.1%Business & Industry$38.2  $36.8  $1.4  3.9%  
Operating profit margin3.9% 4.1% (19) bps
 
Operating profit margin4.7 %4.4 %22 bps
Aviation5.8
 4.6
 1.2
 25.5%Aviation5.6  3.9  1.7  43.0%  
Operating profit margin2.3% 2.0% 27 bps
 Operating profit margin2.3 %1.6 %79 bps
Technology & Manufacturing16.9
 12.6
 4.3
 33.6%Technology & Manufacturing16.7  18.2  (1.5) (8.5)% 
Operating profit margin7.3% 7.4% (9) bps
 Operating profit margin7.1 %7.7 %(59) bps
Education9.2
 3.6
 5.6
 NM*Education11.2  10.3  0.9  9.2%  
Operating profit margin4.4% 5.4% (99) bps
 Operating profit margin5.4 %4.9 %47 bps
Technical Solutions5.5
 7.9
 (2.4) (30.5)%Technical Solutions8.3  6.8  1.5  23.2%  
Operating profit margin5.3% 7.3% (205) bps
 Operating profit margin5.9 %5.8 %4 bps
Healthcare2.7
 2.5
 0.2
 10.1%
Operating profit margin4.0% 4.0% 1 bps
 
Government Services(0.7) 1.9
 (2.6) NM*
Operating profit marginNM*
 6.0% NM*
 
Corporate(47.4) (34.6) (12.8) 36.9%Corporate(33.3) (44.7) 11.4  25.5%  
Adjustment for income from unconsolidated affiliates, net, included in Aviation and Government Services(0.6) (1.3) 0.7
 53.3%
Adjustment for tax deductions for energy efficient government buildings, included in Technical Solutions(0.3) (0.5) 0.2
 (39.4)%
Adjustment for income from unconsolidated affiliates, included in AviationAdjustment for income from unconsolidated affiliates, included in Aviation(0.9) (0.9) —  (2.2)% 
$19.5
 $23.8
 $(4.3) (18.2)%
$45.8  $30.3  $15.5  51.2%  
*Not meaningful
Business & Industry      Business & Industry
Three Months Ended January 31,    Three Months Ended January 31,
($ in millions)2018 2017 Increase / (Decrease)($ in millions)20202019(Decrease) / Increase
Revenues$722.1
 $655.6
 $66.5
 10.1%Revenues$820.9  $828.8  $(7.9) (1.0)% 
Operating profit28.5
 27.1
 1.4
 5.1%Operating profit38.2  36.8  1.4  3.9%  
Operating profit margin3.9% 4.1% (19) bps
 Operating profit margin4.7 %4.4 %22 bps
B&I revenues increaseddecreased by $66.5$7.9 million, or 10.1%1.0%, during the three months ended January 31, 2018,2020, as compared to the three months ended January 31, 2017.2019. The increasedecrease was primarily attributable to incremental revenuesthe loss of certain accounts in our U.S. business, including the exit from certain lower margin or underperforming accounts. The decrease was partially offset by the GCA acquisitiontargeted expansion of $40.7 millioncertain key clients within our U.S. business and to net new janitorial business including new contract wins in theour U.K., expansion of existing accounts, and additional tag revenue. operations. Management reimbursement revenues for this segment totaled $63.0$73.7 million and $57.8$71.0 million for the three months ended January 31, 20182020 and 2017,2019, respectively.
Operating profit increased by $1.4 million, or 5.1%3.9%, during the three months ended January 31, 2018,2020, as compared to the three months ended January 31, 2017.2019. Operating profit margin decreasedincreased by 1922 bps to 3.9% in the

three months ended January 31, 2018 from 4.1%4.7% in the three months ended January 31, 2017.2020 from 4.4% in the three months ended January 31, 2019. The decreaseincrease in operating profit margin was primarily associated with lowerhigher margins on certain janitorial accounts in our U.S. business, including the exit from certain lower margin or underperforming accounts, as well as higher margins on certain accounts in our U.K. business and Vehicle Services Contractslower reserves established for client receivables. While labor challenges are present in certain areas of our B&I business, it is our most mature business and with higher amortization expense related tohas the GCA acquisition. The decrease was partially offset by the managementhighest proportion of selling, general and administrative expenses.unionized labor.
31

Aviation      Aviation
Three Months Ended January 31,    Three Months Ended January 31,
($ in millions)2018 2017 Increase($ in millions)20202019(Decrease) / Increase
Revenues$256.2
 $231.9
 $24.3
 10.5%Revenues$238.7  $252.4  $(13.7) (5.4)% 
Operating profit5.8
 4.6
 1.2
 25.5%Operating profit5.6  3.9  1.7  43.0%  
Operating profit margin2.3% 2.0% 27 bps
 
Operating profit margin2.3 %1.6 %79 bps
Aviation revenues increaseddecreased by $24.3$13.7 million, or 10.5%5.4%, during the three months ended January 31, 2018,2020, as compared to the three months ended January 31, 2017.2019. The increasedecrease was primarily attributable to organic growth in parking,the loss of certain cabin cleaning and catering logistics and to incremental revenues of $5.9 million primarily from the GCA acquisition.passenger services accounts, partially offset by new contract wins. Management reimbursement revenues for this segment totaled $25.5$25.9 million and $16.5$24.2 million for the three months ended January 31, 20182020 and 2017,2019, respectively.
Operating profit increased by $1.2$1.7 million, or 43.0%, during the three months ended January 31, 2020, as compared to the three months ended January 31, 2019. Operating profit margin increased by 79 bps to 2.3% in the three months ended January 31, 2020 from 1.6% in the three months ended January 31, 2019. The increase was primarily attributable to higher margins on certain new contracts and the loss of a lower margin cabin cleaning account that occurred in the prior year.
Technology & Manufacturing
 Three Months Ended January 31,
($ in millions)20202019Decrease
Revenues$233.9  $236.1  $(2.2) (0.9)% 
Operating profit16.7  18.2  (1.5) (8.5)% 
Operating profit margin7.1 %7.7 %(59) bps
T&M revenues decreased by $2.2 million, or 0.9%, during the three months ended January 31, 2020, as compared to the three months ended January 31, 2019. The decrease was primarily related to the loss of certain accounts, partially offset by new business and the expansion of certain accounts.
Operating profit decreased by $1.5 million, or 8.5%, during the three months ended January 31, 2020, as compared to the three months ended January 31, 2019. Operating profit margin decreased by 59 bps to 7.1% in the three months ended January 31, 2020 from 7.7% in the three months ended January 31, 2019. The decrease in operating profit margin was primarily attributable to the loss of certain higher margin accounts that occurred in the prior year, higher labor costs due to a tight labor market, and higher reserves established for client receivables, all partially offset by lower amortization of intangible assets.
Education
 Three Months Ended January 31,
($ in millions)20202019(Decrease) / Increase
Revenues$208.0  $208.9  $(0.9) (0.5)% 
Operating profit11.2  10.3  0.9  9.2%  
Operating profit margin5.4 %4.9 %47 bps
Education revenues decreased slightly by $0.9 million during the three months ended January 31, 2020, as compared to the three months ended January 31, 2019. The slight decrease was primarily attributable to lower tag services in the current year.
Operating profit increased by $0.9 million, or 9.2%, during the three months ended January 31, 2020, as compared to the three months ended January 31, 2019. Operating profit margin increased by 47 bps to 5.4% in the three months ended January 31, 2020 from 4.9% in the three months ended January 31, 2019. The increase in operating profit margin was primarily attributable to lower amortization of intangible assets, partially offset by an increase in direct labor and related personnel costs driven by a challenging labor environment.
32

Technical Solutions
 Three Months Ended January 31,
($ in millions)20202019Increase
Revenues$142.0  $116.1  $25.9  22.4%  
Operating profit8.3  6.8  1.5  23.2%  
Operating profit margin5.9 %5.8 %4 bps
Technical Solutions revenues increased by $25.9 million, or 22.4%, during the three months ended January 31, 2020, as compared to the three months ended January 31, 2019. This increase was primarily attributable to growth in our U.S. business related to bundled energy solutions projects and power projects, partially offset by the loss of certain accounts in our U.K. business.
Operating profit increased by $1.5 million, or 23.2%, during the three months ended January 31, 2020, as compared to the three months ended January 31, 2019. Operating profit margin increased slightly by 4 bps to 5.9% in the three months ended January 31, 2020 from 5.8% in the three months ended January 31, 2019. The slight increase in operating profit margin was primarily attributable to the contribution of higher project revenues and lower reserves established for client receivables. This increase was offset by a higher volume of lower margin projects in our U.S. business in the current year, higher commissions expense in the current year primarily due to the amortization of commissions that were capitalized in the prior year, and the loss of certain higher margin contracts in our U.K. business.
Corporate
 Three Months Ended January 31,
($ in millions)20202019Decrease
Corporate expenses$33.3  $44.7  $(11.4) (25.5)% 
Corporate expenses decreased by $11.4 million, or 25.5%, during the three months ended January 31, 2018,2020, as compared to the three months ended January 31, 2017. Operating profit margin increased by 27 bps to 2.3%2019. The decrease in the three months ended January 31, 2018 from 2.0% in the three months ended January 31, 2017. The increase in operating profit margincorporate expenses was primarily attributable to the termination of to:
•an unprofitable contract at the end of 2017 and the management of selling, general and administrative expenses.
Technology & Manufacturing       
 Three Months Ended January 31,    
($ in millions)2018 2017 Increase / (Decrease)
Revenues$232.0
 $171.5
 $60.5
 35.3%
Operating profit16.9
 12.6
 4.3
 33.6%
Operating profit margin7.3% 7.4% (9) bps
  
T&M revenues increased by $60.5$11.6 million or 35.3%, during the three months ended January 31, 2018, as compared to the three months ended January 31, 2017. The increase wasdecrease in self-insurance reserve adjustments related to incremental revenues from the GCA acquisition of $58.6 million.prior year claims;
Operating profit increased by $4.3•a $1.6 million or 33.6%, during the three months ended January 31, 2018, as compareddecrease in certain technology projects and related support; and
•a $0.7 million decrease in restructuring and related expenses due to the three months ended January 31, 2017. Operating profit margin decreased by 9 bps to 7.3%severance expenses incurred in the three months ended January 31, 2018 from 7.4% in the three months ended January 31, 2017. The decrease in operating profit margin was primarily attributable to higher amortization expense related toprior year following the GCA acquisition, partially offset by certain acquired higher margin contracts.
Education       
 Three Months Ended January 31,    
($ in millions)2018 2017 Increase / (Decrease)
Revenues$206.3
 $67.0
 $139.3
 NM*
Operating profit9.2
 3.6
 5.6
 NM*
Operating profit margin4.4% 5.4% (99) bps
 
*Not meaningful
Education revenues increased by $139.3 million during the three months ended January 31, 2018, as compared to the three months ended January 31, 2017. The increase was attributable to incremental revenues from the GCA acquisition of $140.5 million.
Operating profit increased by $5.6 million during the three months ended January 31, 2018, as compared to the three months ended January 31, 2017. Operating profit margin decreased by 99 bps to 4.4% in the three months

ended January 31, 2018 from 5.4% in the three months ended January 31, 2017. The decrease in operating profit margin was primarily associated with higher amortization expenseexpenses related to the GCA acquisition, partially offset by certain acquired higher margin contracts.our ongoing technology initiatives.
Technical Solutions       
 Three Months Ended January 31,    
($ in millions)2018 2017 Decrease
Revenues$104.0
 $107.7
 $(3.7) (3.4)%
Operating profit5.5
 7.9
 (2.4) (30.5)%
Operating profit margin5.3% 7.3% (205) bps
  
Technical Solutions revenues decreased by $3.7 million, or 3.4%, during the three months ended January 31, 2018, as compared to the three months ended January 31, 2017. This decrease was primarily attributable to the timing of new project bookings and the completion of certain bundled energy solutions projects.
Operating profit decreased by $2.4 million, or 30.5%, during the three months ended January 31, 2018, as compared to the three months ended January 31, 2017. Operating profit margin decreased by 205 bps to 5.3% in the three months ended January 31, 2018 from 7.3% in the three months ended January 31, 2017. The decrease in operating profit margin was primarily attributable to higher compensation and related expenses due to investment in sales personnel and the loss of certain high margin contracts in our U.K. business. This decrease was partially offset by favorable margins on certain projects in our U.S. business.by:
Healthcare       
 Three Months Ended January 31,    
($ in millions)2018 2017 Increase
Revenues$67.7
 $61.7
 $6.0
 9.8%
Operating profit2.7
 2.5
 0.2
 10.1%
Operating profit margin4.0% 4.0% 1 bps
  
Healthcare revenues increased by $6.0 million, or 9.8%, during the three months ended January 31, 2018, as compared to the three months ended January 31, 2017. This increase was primarily attributable to incremental revenues from the GCA acquisition of $7.5 million, the expansion of existing janitorial accounts, and new business. This increase was partially offset by the loss of •a large facilities management contract.
Operating profit increased by $0.2 million or 10.1% during the three months ended January 31, 2018, as compared to the three months ended January 31, 2017. Operating profit margin remained flat at 4.0% in the three months ended January 31, 2018 and 2017.
Corporate       
 Three Months Ended January 31,    
($ in millions)2018 2017 Increase
Corporate expenses$47.4
 $34.6
 $12.8
 36.9%
Corporate expenses increased by $12.8 million, or 36.9%, during the three months ended January 31, 2018, as compared to the three months ended January 31, 2017. The increase in corporate expenses was primarily related to a $9.3$1.5 million increase in restructuringlegal costs; and related costs as
•a result of the GCA acquisition and a $3.7$1.2 million increase in costs primarily associated with 2020Vision technology investments. This increase was partially offset by a $3.0 million lower self-insurance adjustmentcompensation and related to prior year claims as a result of an actuarial review completed in the three months ended January 31, 2018.expenses.

33

Liquidity and Capital Resources

Our primary sources of liquidity are operating cash flows and borrowing capacity under our credit facility. We assess our liquidity in terms of our ability to generate cash to fund our short- and long-term cash requirements. As such, we project our anticipated cash requirements as well as cash flows generated from operating activities to meet those needs.

In addition to normal working capital requirements, we anticipate that our short- and long-term cash requirements will include funding legal settlements, insurance claims, dividend payments, capital expenditures, share repurchases, and integration costs related to the GCA acquisition.continued systems and technology transformation initiatives. We anticipate long-term cash uses willmay also include strategic acquisitions and share repurchases.acquisitions.


We believe that our operating cash flows and borrowing capacity under our credit facility are sufficient to fund our cash requirements for the next twelve months. In the event that our plans change or our cash requirements are greater than we anticipate, we may need to access the capital markets to finance future cash requirements. However, there can be no assurance that such financing will be available to us should we need it or, if available, that the terms will be satisfactory to us and not dilutive to existing shareholders.


On a long-term basis, we will continue to rely on our credit facility for working capital andany long-term funding not provided by operating cash flows. In addition, we anticipate that future cash generated from operations will be augmented by working capital improvements driven by our 2020Vision, such as the management of costs through consolidated procurement.


IFM Assurance Company (“IFM”) is a wholly-owned captive insurance company that we formed in 2015 and began providing coverage to us as of January 1, 2015. IFM is part of our enterprise-wide, multi-year insurance strategy that is intended to better position our risk and safety programs and provide us with increased flexibility in the end-to-end management of our insurance programs. IFM began providing coverage to us as of January 1, 2015. In 2018, we expect accelerated cash tax savings related to coverage provided by IFM will be between $5 million and $10 million.
Credit Facility
On September 1, 2017, we refinanced and replaced our then-existing $800.0 million credit facility with a new senior, secured five-year syndicated credit facility (the “Credit Facility”), consisting of a $900.0 million revolving line of credit and an $800.0 million amortizing term loan, scheduled to mature on September 1, 2022. TheIn accordance with the terms of the Credit Facility, the line of credit reduceswas reduced to $800.0 million after one year.on September 1, 2018. Initial borrowings under the Credit Facility were used to finance, in part, the cash portion of the purchase price related to the GCA acquisition, to refinance certain existing indebtedness of ABM, and to pay transaction costs.
Our ability to draw down available capacity under the Credit Facility, as amended, is subject to, and limited by, compliance with certain financial covenants, which includeincluding a current maximum leverage ratio of 4.754.00 to 1.0 that steps down by 25 basis points annually each July to 3.50 to 1.0 by July 20202021 and a minimum fixed charge coverage ratio of 1.50 to 1.0. Other covenants under the Credit Facility include limitations on liens, dispositions, fundamental changes, investments, and certain transactions and payments. At January 31, 2018,2020, we were in compliance with these covenants and expect to be in compliance in the foreseeable future.
During the first quarter,three months ended January 31, 2020, we made $20.0 million of principal payments of $15.0 million under the Credit Facility.term loan. At January 31, 2018,2020, the total outstanding amountsborrowings under theour Credit Facility in the form of cash borrowings and standby letters of credit were $1.2 billion$864.8 million and $145.5$153.5 million, respectively. At January 31, 2018,2020, we had up to $330.5$499.9 million of borrowing capacity under the Credit Facility,Facility; however, covenant restrictions limited our actual borrowing capacity to $245.5$353.2 million.
In July 2017, the U.K. Financial Conduct Authority, the regulator of the London Interbank Offered Rate (“LIBOR”), indicated that it will no longer require banks to submit rates to the LIBOR administrator after 2021. This announcement signaled that the calculation of LIBOR and its continued use could not be guaranteed after 2021. A change away from LIBOR after 2021 may impact our Credit Facility and interest rate swaps. Our current credit agreement as well as our International Swaps and Derivatives Association, Inc. agreement provide for any changes away from LIBOR to a successor rate to be based on prevailing or equivalent standards. We continue to monitor developments related to the LIBOR transition and/or identification of an alternative, market-accepted rate. The impact related to any changes cannot be predicted at this time.

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Reinvestment of Foreign Earnings
We plan to reinvest our foreign earnings to fund future non-U.S. growth and expansion. Weexpansion, and we do not anticipate remitting such earnings to the United States, and whileStates. While U.S. federal tax expense has been recognized as a result of the Tax Cuts and Jobs Act of 2017, no deferred tax liabilities with respect to federal and state income taxes or foreign withholding taxes have been recognized.


Share Repurchases
On September 2, 2015, our Board of Directors authorized a program to repurchase up to $200.0 million shares of our common stock. Purchasesstock (the “2015 Share Repurchase Program”). Effective December 18, 2019, authorization for $134.1 million of repurchases remained under our 2015 Share Repurchase Program, and our Board of Directors replaced the 2015 Share Repurchase Program with a new share repurchase program under which we may repurchase up to $150.0 million of our common stock (the “2019 Share Repurchase Program”). These purchases may take place on the open market or otherwise, and all or part of the repurchases may be made pursuant to Rule 10b5-1 plans or in privately negotiated transactions. The timing of repurchases is at our discretion and will depend upon several factors, including market and business conditions, future cash flows, share price, and share availability. Repurchased shares are retired and returned to an authorized but unissued status. The repurchase program2019 Share Repurchase Program may be suspended or discontinued at any time without prior notice. There were no share repurchases during the three months ended January 31, 2018.2020. At January 31, 2018,2020, authorization for $134.1$150.0 million of repurchases remained under our share repurchase program. We do not anticipate additional repurchases in the near future.2019 Share Repurchase Program.
Cash Flows
In addition to revenues and operating profit, our management views operating cash flows as a good indicator of financial performance, because strong operating cash flows provide opportunities for growth both organically and through acquisitions. Net cash provided byused in operating activities was $33.7$34.3 million during the three months ended January 31, 2018.2020. Typically, our total operating cash flows in the first quarter are lower than in subsequent quarters of the year, primarily due to the timing of certain working capital requirements during the first quarter. We expect operating activities of continuing operations to provide positive cash flows for 2018.2020. Operating cash flows primarily depend on: revenue levels; the quality and timing of collections of accounts receivable; the timing of payments to suppliers and other vendors; the timing and amount of income tax payments; and the timing and amount of payments on insurance claims and legal settlements.
Three Months Ended January 31,
(in millions)(in millions)20202019
Net cash used in operating activitiesNet cash used in operating activities$(34.3) $(39.3) 
Three Months Ended January 31,
(in millions)2018 2017
Net cash provided by (used in) operating activities$33.7
 $(11.1)
Net cash used in investing activities(15.3) (29.1)Net cash used in investing activities(2.3) (11.4) 
Net cash (used in) provided by financing activities(14.3) 27.0
Net cash provided by financing activitiesNet cash provided by financing activities48.4  42.0  
Operating Activities
Net cash provided byused in operating activities was $33.7decreased by $5.0 million during the three months ended January 31, 2018,2020, as compared to net cash used in operating activities of $11.1 million during the three months ended January 31, 2017, a change of $44.8 million.2019. This changedecrease was primarily related to the timing of client receivable collections, but was partially offset by the timing of vendor payments.
Investing Activities
Net cash used in investing activities decreased by $13.8$9.1 million during the three months ended January 31, 2018,2020, as compared to the three months ended January 31, 2017. The2019. This decrease was primarily related to proceeds from the redemption of an $16.2 million year-over-year decreaseauction rate security and higher proceeds from the sale of assets in cash paid, net of cash acquired, for acquisitions.the current year.
Financing Activities
Net cash used inprovided by financing activities was $14.3increased by $6.4 million during the three months ended January 31, 2018,2020, as compared with net cash provided by financing activities of $27.0 million duringto the three months ended January 31, 2017, a change of $41.3 million. The change2019. This increase was primarily related to lowerhigher net borrowings from our Credit Facility of $36.4 million.in the current year.

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Contingencies
We are a party to a number of lawsuits, claims, and proceedings incident to the operation of our business, including those pertaining to labor and employment, contracts, personal injury, and other matters, some of which allege substantial monetary damages. Some of these actions may be brought as class actions on behalf of a class or purported class of employees.
At January 31, 2018,2020, the total amount accrued for all probable litigation losses where a reasonable estimate of the loss could be made was $10.0$7.0 million.
Litigation outcomes are difficult to predict and the estimation of probable losses requires the analysis of multiple possible outcomes that often depend on judgments about potential actions by third parties. If one or more matters are resolved in a particular period in an amount in excess of, or in a manner different than, what we anticipated, this could have a material adverse effect on our financial position, results of operations, or cash flows.
We do not accrue for contingent losses that, in our judgment, are considered to be reasonably possible but not probable. The estimation of reasonably possible losses also requires the analysis of multiple possible outcomes that often depend on judgments about potential actions by third parties. Our management currently estimates the range of loss for all reasonably possible losses for which a reasonable estimate of the loss can be made is between zero and $8$9 million. Factors underlying this estimated range of loss may change from time to time, and actual results may vary significantly from this estimate.
In some cases, although a loss is probable or reasonably possible, we cannot reasonably estimate the maximum potential losses for probable matters or the range of losses for reasonably possible matters. Therefore, our accrual for probable losses and our estimated range of loss for reasonably possible losses do not represent our maximum possible exposure.
For additional information about our contingencies, see Note 10, “Commitments and Contingencies,” in the Financial Statements.


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Critical Accounting Policies and Estimates
Our accompanying Financial Statements are prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”), which require us to make certain estimates in the application of our accounting policies based on the best assumptions, judgments, and opinions of our management. On November 1, 2019, we adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). Refer to Note 2, “Basis of Presentation and Significant Accounting Policies,” and Note 4, “Leases,” in the Financial Statements for additional information regarding the impact of adopting this standard. There have been no significant changes to our critical accounting policies and estimates. For a description of our critical accounting policies, see Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report.
Recent Accounting Pronouncements 
Accounting StandardStandards UpdateDescriptionTopicSummaryEffective Date/
Method of Adoption		Effect on the Financial Statements
In February 2018,2020-01
Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.Interactions between Topic 321, Topic 323, and Topic 815.This ASU, permits an entityissued in February 2020, clarifies the interaction between Topic 321, Topic 323, and Topic 815. The new guidance, among other things, states that a company should consider observable transactions that require it to reclassifyeither apply or discontinue the income tax effectsequity method of accounting for the Tax Actpurposes of applying the fair value measurement alternative immediately before applying or upon discontinuing the equity method.

While we are currently evaluating the impact of implementing this guidance on items within accumulated other comprehensive income into retained earnings.our financial statements, we do not expect adoption to have a material impact.		This standardupdate is effective for us November 1, 2021 and will be applied eitherprospectively.
2019-12Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.This ASU, issued in December 2019, removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of adoption or retrospectively to each period in which the effectdeferred tax liabilities for outside basis differences. This ASU also amends other aspects of the change in the tax laws or rates were recognized.
guidance to help simplify and promote consistent application of Topic 740.

We are currently evaluating the impact of implementing this guidance on our consolidated financial statements.		This update is effective for us November 1, 2021.

The amendments have differing adoption methods including retrospectively, prospectively, and/or on a modified retrospective basis.
2019-04Codification Improvements to Topic 326: Financial
Instruments—Credit Losses; Topic 815: Derivatives and Hedging; and Topic 825: Financial Instruments.
In August 2017,This ASU, issued in April 2019, provides narrow-scope amendments designed to assist in the FASB issuedapplication of the following updates and the related accounting standards:

(1) ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments;

(2) ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.
Activities; and

(3) ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

We are currently evaluating the impact of implementing the guidance related to (1) and (3) on our financial statements.
This(1) The amendments related to ASU better aligns accounting rules2016-13 will be adopted in conjunction with a company’s risk management activities; better reflects economic results of hedging in financial statements; and simplifies hedge accounting treatment.
that ASU, as further described below.

(2) We early adopted this standard inguidance effective November 1, 2019 on a prospective basis with no significant impact on our consolidated financial statements.

(3) Since we already adopted ASU 2016-01, the first quarter of 2018related amendments are effective for us on November 1, 2020 and will be applied using a modified retrospective approach.		Our adoption of this guidance did not haveapproach with a material impact on our current hedging arrangements or on the disclosures relatedcumulative-effect adjustment to such arrangements.
retained earnings.

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In February 2016,
Accounting Standards UpdateTopicSummaryEffective Date/
Method of Adoption
2018-18Collaborative Arrangements (Topic 808): Clarifying the FASB issued ASU 2016-02, Leases (Topic 842).Interaction between Topic 808 and Topic 606.This ASU, improves transparencyissued in November 2018, provides guidance on whether certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606. It specifically addresses when the participant is a customer in the context of a unit of account, adds unit of account guidance in Topic 808 to align with guidance in Topic 606, and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities onprecludes presenting the balance sheet and to disclose key information about leasing arrangements.November 1, 2019

When transitioning tocollaborative arrangement transaction together with revenue recognized under Topic 606 if the new standard, we are required to recognize and measure leases at the beginning of the earliest period presented usingcollaborative arrangement participant is not a modified retrospective approach.		customer.

We are currently evaluating the impact of implementing this guidance on our consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606).
This ASU introduces a new principles-based framework for revenue recognition and disclosure. The core principle of the standard is when an entity transfers goods or services to customers it will recognize revenue in an amount that reflects the consideration the entity expects to be entitled to for those goods or services.November 1, 2018

2020

This standardupdate will be applied retrospectively.
2018-17Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities.This ASU, issued in October 2018, provides that indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interest.

We are currently evaluating the impact of implementing this guidance on our financial statements.		November 1, 2020

This update will be applied retrospectively.
2018-16Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a full retrospective adoptionBenchmark Interest Rate for Hedge Accounting Purposes.This ASU, issued in October 2018, adds the Overnight Index Swap (“OIS”) rate based on the SOFR (a swap rate based on the underlying overnight SOFR rate) as an eligible benchmark interest rate for purposes of applying hedge accounting. SOFR is a volume-weighted median interest rate that is calculated daily based on overnight transactions from the prior day’s trading activity in specified segments of the U.S. Treasury repo market. SOFR was selected by the Alternative Reference Rates Committee as its preferred alternative reference rate to LIBOR.

We are currently evaluating the impact of implementing this guidance on our financial statements.		Since we early adopted ASU 2017-12, this update will be effective for us on November 1, 2020, on a prospective basis.
2018-15Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.This ASU, issued in August 2018, aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

We are currently evaluating the impact of implementing this guidance on our financial statements.		November 1, 2020

This update can be applied either retrospectively, or prospectively to all periods presented orimplementation costs incurred after the date of adoption.
2018-14Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans.This ASU, issued in August 2018, modifies the disclosure requirements on company-sponsored defined benefit plans.

We are currently evaluating the impact of implementing this guidance on our financial statements.		November 1, 2020

This update will be applied retrospectively.
2018-13Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.This ASU, issued in August 2018, modifies the disclosure requirements on fair value measurements by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty, and adding new disclosure requirements.

We are currently evaluating the impact of implementing this guidance on our financial statements.		November 1, 2020

The amendments related to disclosure requirements within this update will be applied prospectively and the other amendments will be applied retrospectively.

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Accounting Standards UpdateTopicSummaryEffective Date/ Method of Adoption
2016-13
2019-11
2019-05		Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.ASU 2016-13, issued in June 2016, replaces the existing guidance surrounding measurement and recognition of credit losses on financial assets measured at amortized cost, including trade receivables and investments in certain debt securities, by requiring recognition of an allowance for credit losses expected to be incurred over an asset's life based on relevant information about past events, current conditions, and supportable forecasts impacting its ultimate collectibility. This "expected loss" model will result in earlier recognition of credit losses than the current "as incurred" model, under which losses are recognized only upon occurrence of an event that gives rise to the incurrence of a probable loss.

ASU 2019-11 was issued in November 2019 to clarify, improve, and amend certain aspects of ASU 2016-13, such as disclosures related to accrued interest receivables and the estimation of credit losses associated with financial assets secured by collateral.

ASU 2019-05 was issued in May 2019 to provide targeted transition relief allowing entities to make an irrevocable one-time election upon adoption of the new credit losses standard to measure financial assets previously measured at amortized cost (except held-to-maturity securities) using the fair value option.

We are currently evaluating the impact of implementing this guidance on our financial statements.		November 1, 2020

This guidance will be applied using a modified retrospective adoption approach with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption.
We have begun our processadoption, except for implementing this guidance, including a preliminary review of all revenue streamscertain provisions that are required to identify changes from our current method of revenue recognition. We are continuing to evaluate the impact of this ASU on our consolidated financial statements.

be applied prospectively.




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There are no material changes related to market risk from the disclosures in our Annual Report on Form 10-K for the year ended October 31, 2017.2019.
ITEM 4. CONTROLS AND PROCEDURES.
a.Disclosure Controls and Procedures.
As of the end of the period covered by this report, our Principal Executive Officer and Principal Financial Officer evaluated our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and (2) accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.
b. Changes in Internal Control Over Financial Reporting.
During 2017, we completedTo support the acquisitiongrowth of GCA, as described elsewhere in this report. We continue to integrate policies, processes, personnel, technology,our financial shared service capabilities and operations relating to this transaction and will continue to evaluate the impact of any related changes tostandardize our control over financial reporting. Additionally,systems, we continue to migrate manyupdate several key platforms, including our human resources information systems, enterprise resource planning system, and labor management system. The implementation of several key platforms involves changes in the systems that include internal controls. Although some of the transitions have proceeded to date without material adverse effects, the possibility exists that they could adversely affect our internal controls over financial reporting and other processes to our Enterprise Services Center as part of our 2020Vision strategic transformation initiative.procedures.
There were no other changes in our internal control over financial reporting during the first quarter of 20182020 identified in connection with the evaluation required by RuleRules 13a-15(d) and 15d-15(d) of the Exchange Act that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
A discussion of material developments in our litigation matters occurring in the period covered by this report is found in Note 10, “Commitments and Contingencies,” to the Financial Statements in this Form 10-Q.


ITEM 1A. RISK FACTORS.

There have been no material changes to the risk factors identified in our Annual Report on Form 10-K for the year ended October 31, 2017,2019, in response to Item 1A., “Risk Factors,” of Part I of the Annual Report, except as described below.Report.

The Risk Factor under the caption “Our business may be materially affected by changes to fiscal and tax policies. Negative or unexpected tax consequences could adversely affect our results of operations” in our Annual Report on Form 10-K for the year ended October 31, 2017 is amended by replacing in its entirety the text below such caption with the following paragraph:

The Company is subject to income tax laws and regulations in the United States and certain foreign jurisdictions. Significant judgment is required in evaluating and estimating our provision and accruals for these taxes. Our income tax liabilities are dependent upon the location of earnings among different jurisdictions. Our income tax provision and income tax liabilities could be adversely affected by the jurisdictional mix of earnings, changes in valuations of deferred tax assets and liabilities, and changes in tax treaties, laws, and regulations, including changes introduced by the U.S. Tax Cuts and Jobs Act of 2017, which effected significant changes to the U.S. corporate income tax system. Our preliminary estimate of the effects of this law is subject to finalization of management’s analysis related to certain matters. Changes to our preliminary estimate of the effects of this law, which will be recorded in the period completed, could have material adverse effect on the Company’s financial condition or results of operations, as well as our effective tax rate in the period in which the adjustments are made. Furthermore, we are subject to tax audits by government authorities, primarily in the United States and the United Kingdom. If we experience unfavorable

results from one or more such tax audits, there could be an adverse effect on our tax rate and therefore on our net income.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On September 2, 2015, our Board of Directors authorized a program to repurchase up to $200.0 million shares of our common stock. During the three months ended January 31, 2018, there were no share repurchases. At January 31, 2018,stock (the “2015 Share Repurchase Program”). Effective December 18, 2019, authorization for $134.1 million of repurchases remained under our 2015 Share Repurchase Program, and our Board of Directors replaced the 2015 Share Repurchase Program with a new share repurchase program.program under which we may repurchase up to $150.0 million of our common stock (the “2019 Share Repurchase Program”). These purchases may take place on the open market or otherwise, and all or part of the repurchases may be made pursuant to Rule 10b5-1 plans or in privately negotiated transactions. The timing of repurchases is at our discretion and will depend upon several factors, including market and business conditions, future cash flows, share price, and share availability. Repurchased shares are retired and returned to an authorized but unissued status. The 2019 Share Repurchase Program repurchase program may be suspended or discontinued at any time without prior notice. There were no share repurchases during the three months ended January 31, 2020. At January 31, 2020, authorization for $150.0 million of repurchases remained under the 2019 Share Repurchase Program.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.

41

ITEM 6. EXHIBITS.
(a) Exhibits
Exhibit No.Exhibit Description
10.1*‡†
10.2*‡†

10.3*‡31.1†

10.4*‡
Change in Control Agreement, dated as of January 1, 2018, by and between ABM Industries Incorporated and Rene Jacobsen.
31.1‡
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2‡31.2†
32†32‡
101.INS101.INS†Inline XBRL Report Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH101.SCH†Inline XBRL Taxonomy Extension Schema Document
101.CAL101.CAL†Inline XBRL Taxonomy Calculation Linkbase Document
101.DEF101.DEF†Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB101.LAB†Inline XBRL Taxonomy Label Linkbase Document
101.PRE101.PRE†Inline XBRL Presentation Linkbase Document
104†Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Indicates management contract or compensatory plan, contract, or arrangement.
‡†Indicates filed herewith
†‡Indicates furnished herewith




42

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ABM Industries Incorporated




March 7, 20185, 2020/s/ D. Anthony Scaglione
D. Anthony Scaglione

Executive Vice President and
Chief Financial Officer

(Duly Authorized Officer)








March 7, 20185, 2020/s/ Dean A. Chin
Dean A. Chin

Senior Vice President,
Chief Accounting Officer,

and Corporate Controller

(Principal Accounting Officer)










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