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 ~~July~~January 31, ~~2018~~2019



¨	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 INDUSTRIES INCORPORATED

(Exact name of registrant as specified in its charter)



Delaware		94-1369354
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

__________________________

One Liberty Plaza, 7^th 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)

__________________________

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, 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 filer	þ	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 ~~September~~March 4, ~~2018: 65,851,793~~2019: 66,238,956

ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES

TABLE OF CONTENTS



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	2328
Item 3. Quantitative and Qualitative Disclosures About Market Risk	4842
Item 4. Controls and Procedures	4842
PART II. OTHER INFORMATION	4842
Item 1. Legal Proceedings	4842
Item 1A. Risk Factors	4842
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4942
Item 3. Defaults Upon Senior Securities	4942
Item 4. Mine Safety Disclosures	4942
Item 5. Other Information	4942
Item 6. Exhibits	5043
SIGNATURES	5144

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 full extent of growth opportunities ~~and cost~~or potential synergies ~~that are~~ anticipated from the acquisition of GCA Services Group (“GCA”).

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 beyond 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.

Changes to our businesses, operating structure, financial reporting structure, or personnel relating to the implementation of our 2020 Vision strategic transformation initiative, ~~including our move to our Enterprise Services Center,~~together with process and technology initiatives following the acquisition of GCA, may not have the desired effects on our financial condition and results of operations.

Our success depends on our ability to gain profitable business despite competitive pressures and on our ability 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 on our results of operations and financial condition.

Unfavorable developments in our class and representative actions and other lawsuits alleging various claims could cause us to incur substantial liabilities.

We insure our insurable risks through a combination of insurance 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 of ultimate insurance losses could result in a material ~~charge~~charges 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 could have a material adverse effect on our financial condition and results of operations.

Changes in general economic conditions, including changes in energy prices, government regulations, orand changing consumer preferences, could reduce the demand for facility services and, as a result, reduce our earnings and adversely affect our financial condition.

Our ~~income tax provision and income tax liabilities could~~business may be ~~adversely~~materially 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 changes to ~~the U.S. corporate income~~fiscal and tax ~~system.~~policies. Negative or unexpected tax consequences could adversely affect our results of operations.

We ~~could be subject~~may experience breaches of, or disruptions to, ~~cyber-security risks,~~our information technology ~~interruptions, and business continuity risks.~~systems or those of our third-party providers or clients, or other compromises of our data that could adversely affect our business.

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-organizing drives.

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 ~~company~~Company 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.

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, ~~2017~~2018 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.

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)	July 31, 2018			October 31, 2017			January 31, 2019			October 31, 2018
ASSETS
Current assets
Cash and cash equivalents	$	46.0		$	62.8		$	30.6		$	39.1
Trade accounts receivable, net of allowances of $14.1 and $25.5 at July 31, 2018 and October 31, 2017, respectively	1,046.0			1,038.1
Trade accounts receivable, net of allowances of $23.4 and $19.2 at January 31, 2019 and October 31, 2018, respectively							1,039.2			1,014.1
Costs incurred in excess of amounts billed							40.2			—
Prepaid expenses	110.4			101.8			77.4			80.8
Other current assets	38.2			32.8			43.7			37.0
Total current assets	1,240.6			1,235.5			1,231.1			1,171.0
Other investments	17.4			17.6			15.5			16.3
Property, plant and equipment, net of accumulated depreciation of $163.8 and $136.4 at July 31, 2018 and October 31, 2017, respectively	142.8			143.1
Other intangible assets, net of accumulated amortization of $238.4 and $189.1 at July 31, 2018 and October 31, 2017, respectively	369.6			430.1
Property, plant and equipment, net of accumulated depreciation of $165.1 and $153.9 at January 31, 2019 and October 31, 2018, respectively							140.0			140.1
Other intangible assets, net of accumulated amortization of $265.8 and $250.4 at January 31, 2019 and October 31, 2018, respectively							340.7			355.7
Goodwill	1,864.3			1,864.2			1,836.4			1,834.8
Other noncurrent assets	105.8			122.1			122.7			109.6
Total assets	$	3,740.4		$	3,812.6		$	3,686.4		$	3,627.5
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt, net	$	27.0		$	16.9		$	42.1		$	37.0
Trade accounts payable	224.8			230.8			209.1			221.9
Accrued compensation	170.6			159.9			142.1			172.1
Accrued taxes—other than income	63.8			52.5			64.8			56.0
Insurance claims	115.7			112.5			157.2			149.5
Income taxes payable	5.2			13.4			7.1			3.2
Other accrued liabilities	162.7			171.8			175.7			152.7
Total current liabilities	769.8			757.8			798.0			792.5
Long-term debt, net	998.4			1,161.3			945.8			902.0
Deferred income tax liability, net	43.5			57.3			29.2			37.8
Noncurrent insurance claims	393.6			382.9			364.5			360.8
Other noncurrent liabilities	60.2			61.3			70.4			62.9
Noncurrent income taxes payable	18.4			16.3			17.5			16.9
Total liabilities	2,283.9			2,436.9			2,225.3			2,172.9
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; 65,833,297 and 65,502,568 shares issued and outstanding at July 31, 2018 and October 31, 2017, respectively	0.7			0.7
Common stock, $0.01 par value; 100,000,000 shares authorized; 66,210,379 and 66,004,361 shares issued and outstanding at January 31, 2019 and October 31, 2018, respectively							0.7			0.7
Additional paid-in capital	688.3			675.2			694.1			691.8
Accumulated other comprehensive loss, net of taxes	(5.7		)	(20.3		)	(12.2		)	(9.0		)
Retained earnings	773.2			720.1			778.6			771.2
Total stockholders’ equity	1,456.4			1,375.7			1,461.1			1,454.6
Total liabilities and stockholders’ equity	$	3,740.4		$	3,812.6		$	3,686.4		$	3,627.5

See accompanying notes to unaudited consolidated financial statements.

ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

(UNAUDITED)


	Three Months Ended July 31,						Nine Months Ended July 31,						Three Months Ended January 31,
(in millions, except per share amounts)	2018			2017			2018			2017			2019			2018
Revenues	$	1,624.3		$	1,318.4		$	4,793.5		$	3,955.6		$	1,607.9		$	1,588.3
Operating expenses	1,446.7			1,184.5			4,281.8			3,544.1			1,446.0			1,429.3
Selling, general and administrative expenses	110.0			101.3			326.8			299.2			112.7			109.0
Restructuring and related expenses	2.9			5.2			22.5			16.0			3.8			14.3
Amortization of intangible assets	16.6			6.1			49.5			17.4			15.2			16.2
Impairment recovery and gain on sale	—			(1.1		)	—			(18.5		)
Operating profit	48.1			22.6			112.9			97.4			30.3			19.5
Income from unconsolidated affiliates, net	1.0			1.2			2.5			3.6			0.9			0.5
Interest expense	(12.9		)	(2.8		)	(41.0		)	(9.1		)	(13.5		)	(14.3		)
Income from continuing operations before income taxes	36.1			21.0			74.4			91.9			17.8			5.8
Income tax (provision) benefit	(2.4		)	11.9			12.7			(11.3		)	(4.7		)	22.2
Income from continuing operations	33.7			32.9			87.1			80.6			13.0			28.0
(Loss) income from discontinued operations, net of taxes	(0.1		)	—			1.0			(73.2		)
Loss from discontinued operations, net of taxes													(0.1		)	(0.1		)
Net income	33.6			32.9			88.1			7.4			13.0			27.8
Other comprehensive income (loss)
Other comprehensive income
Interest rate swaps	(1.2		)	(0.3		)	22.0			2.3			(8.7		)	18.6
Foreign currency translation	(6.5		)	3.6			(1.5		)	9.8			3.1			9.4
Income tax benefit (provision)	0.3			0.1			(5.9		)	(0.9		)	2.4			(5.0		)
Comprehensive income	$	26.2		$	36.3		$	102.6		$	18.6		$	9.7		$	50.9
Net income per common share — Basic
Income from continuing operations	$	0.51		$	0.59		$	1.32		$	1.44		$	0.20		$	0.42
Income (loss) from discontinued operations	—			—			0.02			(1.31		)
Loss from discontinued operations													—			—
Net income	$	0.51		$	0.59		$	1.33		$	0.13		$	0.20		$	0.42
Net income per common share — Diluted
Income from continuing operations	$	0.51		$	0.58		$	1.31		$	1.42		$	0.20		$	0.42
Income (loss) from discontinued operations	—			—			0.02			(1.29		)
Loss from discontinued operations													—			—
Net income	$	0.51		$	0.58		$	1.33		$	0.13		$	0.19		$	0.42
Weighted-average common and common equivalent shares outstanding
Basic	66.1			56.1			66.0			56.0			66.4			65.9
Diluted	66.3			56.6			66.3			56.6			66.7			66.3
Dividends declared per common share	$	0.175		$	0.170		$	0.525		$	0.510		$	0.180		$	0.175

See accompanying notes to unaudited consolidated financial statements.

ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Nine Months Ended July 31,						Three Months Ended January 31,
(in millions)	2018			2017			2019			2018
Cash flows from operating activities
Net income	$	88.1		$	7.4		$	13.0		$	27.8
(Income) loss from discontinued operations, net of taxes	(1.0		)	73.2
Loss from discontinued operations, net of taxes							0.1			0.1
Income from continuing operations	87.1			80.6			13.0			28.0
Adjustments to reconcile income from continuing operations to net cash provided by operating activities of continuing operations
Adjustments to reconcile income from continuing operations to net cash (used in) provided by operating activities of continuing operations
Depreciation and amortization	86.1			43.4			26.7			29.0
Proceeds from termination of interest rate swaps	25.9			—
Impairment recovery and gain on sale	—			(18.5		)
Deferred income taxes	(19.5		)	8.9			(8.7		)	(30.3		)
Share-based compensation expense	13.1			10.3			4.5			3.8
Provision for bad debt	4.5			2.7			3.0			2.6
Discount accretion on insurance claims	0.6			0.1			0.2			0.2
Loss (gain) on sale of assets	0.5			(2.4		)
Gain on sale of assets							—			(0.1		)
Income from unconsolidated affiliates, net	(2.5		)	(3.6		)	(0.9		)	(0.5		)
Distributions from unconsolidated affiliates	0.1			5.7			1.7			—
Changes in operating assets and liabilities, net of effects of acquisitions
Trade accounts receivable	(12.6		)	(69.5		)
Trade accounts receivable and costs incurred in excess of amounts billed							(68.2		)	15.7
Prepaid expenses and other current assets	(7.1		)	(14.9		)	(8.2		)	1.4
Other noncurrent assets	14.5			(8.3		)	—			(1.7		)
Trade accounts payable and other accrued liabilities	9.0			15.6			(32.5		)	(33.2		)
Insurance claims	12.7			32.5			11.1			5.8
Income taxes payable	(5.0		)	(7.7		)	13.1			10.9
Other noncurrent liabilities	(1.0		)	7.6			5.9			2.2
Total adjustments	119.3			2.0			(52.3		)	5.8
Net cash provided by operating activities of continuing operations	206.4			82.6
Net cash provided by (used in) operating activities of discontinued operations	1.0			(57.2		)
Net cash provided by operating activities	207.4			25.3
Net cash (used in) provided by operating activities of continuing operations							(39.3		)	33.8
Net cash used in operating activities of discontinued operations							(0.1		)	(0.1		)
Net cash (used in) provided by operating activities							(39.3		)	33.7
Cash flows from investing activities
Additions to property, plant and equipment	(37.3		)	(42.2		)	(11.6		)	(10.6		)
Proceeds from sale of assets	0.7			1.4			0.2			0.3
(Adjustments to) and proceeds from sale of business	(1.9		)	35.5
Adjustments to sale of business							—			(1.9		)
Purchase of businesses, net of cash acquired	—			(18.6		)	—			(2.4		)
Proceeds from redemption of auction rate security	2.9			—
Investments in unconsolidated affiliates	(0.6		)	—			—			(0.6		)
Net cash used in investing activities	(36.3		)	(23.9		)	(11.4		)	(15.3		)
Cash flows from financing activities
(Taxes withheld) and proceeds from issuance of share-based compensation awards, net	(0.3		)	2.0
Repurchases of common stock	—			(7.9		)
Taxes withheld from issuance of share-based compensation awards, net							(2.3		)	(2.0		)
Dividends paid	(34.5		)	(28.4		)	(11.9		)	(11.5		)
Deferred financing costs paid	(0.1		)	—			—			(0.1		)
Borrowings from credit facility	887.0			671.0			357.6			304.3
Repayment of borrowings from credit facility	(1,042.1		)	(674.6		)	(309.6		)	(303.0		)
Changes in book cash overdrafts	1.1			26.5			7.2			(1.2		)
Financing of energy savings performance contracts	3.5			6.8			1.7			—
Payment of contingent consideration	—			(3.8		)
Repayment of capital lease obligations	(2.3		)	(0.3		)	(0.8		)	(0.8		)
Net cash used in financing activities	(187.7		)	(8.7		)
Net cash provided by (used in) financing activities							42.0			(14.3		)
Effect of exchange rate changes on cash and cash equivalents	(0.2		)	1.5			0.3			1.7
Net decrease in cash and cash equivalents	(16.8		)	(5.8		)
Net (decrease) increase in cash and cash equivalents							(8.5		)	5.8
Cash and cash equivalents at beginning of year	62.8			53.5			39.1			62.8
Cash and cash equivalents at end of period	$	46.0		$	47.7		$	30.6		$	68.6

See accompanying notes to unaudited consolidated financial statements.

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 five industry groups and one Technical Solutions segment:

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.~~2018 (“Annual Report”). Unless otherwise indicated, all references to years are to our fiscal year, which ends on October 31.

~~Acquisition of GCA Services Group~~

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 and ~~nine months ended~~ July 31, 2018, but exclude GCA’s results of operations in the three and nine months ended July 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 $1.1 million during the third quarter of 2017 that was subsequently adjusted to $1.2 million due to a working capital settlement. 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,~~2018, we ~~made changes to our operating structure as a result~~have modified the presentation of ~~the GCA acquisition. To reflect these changes, certain~~inter-segment revenues, which are recorded at cost with no associated intercompany profit or loss and are eliminated in consolidation. Our prior ~~year amounts, including operating~~period segment data ~~have~~in Note 11, “Segment Information,” has been reclassified to conform with our fiscal ~~2018~~2019 presentation. These changes 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.~~

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.

Management Reimbursement Revenue by Segment

We operate certain parking facilities under managed location arrangements. Under these arrangements, we manage the parking facility for a management fee and pass through the revenue and expenses associated with the facility to the owner. See Note 3, “Revenue,” for further details regarding managed location arrangement considerations under the new revenue standards. These revenues and expenses are reported in equal amounts as costs reimbursed from our managed locations:


	Three Months Ended July 31,				Nine Months Ended July 31,				Three Months Ended January 31,
(in millions)	2018		2017		2018		2017		2019		2018
Business & Industry	$	65.0	$	59.3	$	191.4	$	175.2	$	66.3	$	63.0
Aviation	23.8		21.9		76.9		54.7		24.2		25.5
Healthcare	4.7		4.6		14.6		14.0		4.7		4.9
Total	$	93.5	$	85.8	$	282.9	$	243.8	$	95.2	$	93.4

~~Impact~~Recently Adopted Accounting Standards

Our significant accounting policies are described in Note 2, “Basis of ~~New~~ Presentation and Significant Accounting Policies,” in our Annual Report. There have been no material changes to our significant accounting policies during the three months ended January 31, 2019, other than those described below.

Revenue ~~Recognition Standard~~from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, ~~establishing Accounting Standards Codification (“ASC”) Topic 606,~~ Revenue from Contracts with Customers (Topic 606)~~. The FASB~~ and subsequently issued several ASUs further updating Topic 606.

Additionally, in May 2017, the FASB issued ASU 2017-10, Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services, to clarify how operating entities should determine the customer of operation services for transactions within the scope of this guidance, which U.S. GAAP did not address prior to this ASU. The amendment eliminates diversity in practice by clarifying ~~ASUs, collectively referred to~~that the grantor is the customer of the operation services in all cases for those arrangements. We determined that revenue we generate from service concession arrangements, primarily from certain parking arrangements, will be accounted for under this guidance. We adopted the amendments in this update in conjunction with the adoption of Topic 606, as ~~“ASC 606,” that~~discussed below.

Collectively these ASUs introduce a new principles-based framework for revenue recognition and disclosure. The core ~~requirement~~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~~it expects to be entitled to for those goods or services. ~~ASC~~The standard also expands the required disclosures to include the disaggregation of revenue from contracts with customers into categories that depict how the nature, timing, and uncertainty of revenue and cash flows are affected by economic factors.

We adopted Topic 606 ~~allows either a full retrospective adoption to all periods presented or~~and Topic 853 on November 1, 2018 using a modified retrospective ~~adoption~~ approach with a cumulative-effect adjustment to retained earnings as of the beginning of 2019; prior period financial statements are not adjusted. We applied the ~~year~~standards to contracts that had not been completed at November 1, 2018 and did not apply them to contracts that were modified before the beginning of ~~adoption.~~the earliest reporting period presented. See Note 3, “Revenue,” for further details.

Other Recently Adopted Accounting Standards

During the first quarter of 2019, we adopted the following ASUs with no material impact on our consolidated financial statements:



ASU	Topic	Method of Adoption
2016-01	Financial Instruments	Modified retrospective
2016-15	Statement of Cash Flows — Classification of Certain Cash Receipts and Cash Payments	Retrospective
2016-16	Income Taxes — Intra-Entity Transfers of Assets Other Than Inventory	Modified retrospective
2016-18	Statement of Cash Flows — Restricted Cash	Retrospective
2017-07	Compensation — Retirement Benefits	Retrospective
2017-09	Compensation — Stock Compensation	Prospective
2018-02	Income Statement — Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income	Early adopted; we elected not to reclassify any stranded tax effects of the Tax Cuts and Jobs Act (the “Tax Act”) due to the insignificance of the amount remaining in accumulated other comprehensive income (“AOCI”).
2018-04	Investments — Debt Securities	Adopted in conjunction with ASU 2016-01

Recent Accounting Pronouncements

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which replaces existing lease accounting guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. The new guidance will require us to continue to classify leases as either operating or financing, with classification affecting the pattern of expense recognition in the statement of comprehensive income. The FASB issued several updates to ASU 2016-02, including ASU 2018-10, Codification Improvements, and ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides an additional transition method to adopt Topic 842.

~~To assess~~We have established an implementation team to comprehensively evaluate the impact of adopting this ~~standard, we have established a cross-functional implementation team consisting of representatives from all of~~guidance, which includes: reviewing our ~~operating segments. The implementation team is completing~~lease portfolio; implementing new system tools to help us meet reporting requirements; and assessing the ~~analysis of our contract portfolio~~impact to ~~identify potential differences that would result from applying the requirements of this new standard. In addition, we continue to identify and implement the appropriate changes to our~~ business processes, ~~and controls to support revenue recognition~~internal control over financial reporting, and the ~~expanded disclosures required under this new standard. We expect~~related disclosure requirements. While our evaluation is ongoing, we believe the adoption of this standard towill have ana significant impact on the timing of revenue recognition related to certain lines of business and the financial statement line item reporting of certain items. Additionally, the accounting for certain direct and incremental contract costs is significantly different from our current capitalization policy; however, the full impact of this difference is currently unknown. We are continuing to evaluate the impact of this standard and an estimate of the impact to our consolidated ~~financial statements cannot be made at this time. We expect~~balance sheets due to ~~adopt ASC 606~~the recognition of right-of-use assets and corresponding lease liabilities. Refer to Note 14, “Commitments and Contingencies,” in our 2018 Annual Report for information about our lease obligations. This standard will become effective for us on November 1, ~~2018~~2019. We plan to adopt using ~~the~~a modified retrospective transition approach ~~under which~~for leases that exist in the period of adoption, and therefore we will ~~present~~not restate the ~~cumulative effect of adoption as an adjustment to the opening balance of retained earnings at the adoption date.~~prior comparative periods.

No other recently issued standards are expected to have a significant impact on our fiscal ~~2019~~2020 consolidated financial statements.

3. ~~ACQUISITIONS~~

REVENUE

~~Acquisition~~Impact of ~~GCA during 2017~~Adopting Topic 606 and Topic 853 on the Consolidated Financial Statements

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. As described in Note 12, “Segment Information,” we integrated GCA’s operations into our industry group model effective November 1, ~~2017. As~~2018, we recorded a pre-tax increase of $9.1 million to our opening retained earnings as a result of adopting Topic 606. These changes primarily related to: (1) the ~~acquisition, we are~~capitalization of certain commission costs that were previously expensed as incurred; (2) the deferral of revenue, and the associated margin, on uninstalled materials associated with certain project type contracts that will now be recognized when installation is substantially complete; and (3) the deferral of initial franchise license fees that were previously recognized when the franchise license term began but will now be recognized over the term of the initial franchise arrangement. Changes to our consolidated balance sheets include the separate presentation of costs incurred in excess of amounts billed, which were previously included in trade accounts receivable, net. Additionally, in accordance with Topic 853, rent expense related to service concession arrangements, which was previously classified as an operating expense, is now classified as a ~~leading facilities services provider in the education market.~~reduction of revenues.

~~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⁽¹⁾
837.5
Total consideration transferred $ 1,258.8



(in millions)	Balance at October 31, 2018		Adjustments Due to Adoption of Topic 606			Balance at November 1, 2018
ASSETS
Current assets
Trade accounts receivable, net	$	1,014.1	$	(40.1	)	$	974.0
Costs incurred in excess of amounts billed	—		40.1			40.1
Other current assets	37.0		3.6			40.6
Other noncurrent assets	109.6		11.5			121.1

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Other accrued liabilities	$	152.7	$	6.0		$	158.9
Deferred income tax liability, net	37.8		2.6			40.3
Retained earnings	771.2		6.5			777.6

⁽¹⁾ ~~Revised during the second quarter~~The impact of ~~2018 to reflect a post-closing purchase price adjustment related to a net working capital settlement.~~adopting Topic 606 on our unaudited consolidated balance sheet as of January 31, 2019 was as follows:

~~Preliminary Purchase Price Allocation~~

Our preliminary purchase price allocation is based on information that is currently available, and we are continuing to evaluate the underlying inputs and assumptions used in our valuations. Accordingly, the purchase price allocation is subject to, among other items: further analysis of tax accounts, including deferred tax liabilities, and final valuation of identifiable intangible assets. During the nine months ended July 31, 2018, we refined our valuation of customer relationships and certain other estimates.



	As of January 31, 2019
(in millions)	Under Historical Guidance		Effect of Adoption		As Reported
ASSETS
Current assets
Other current assets	$	38.9	$	4.8	$	43.7
Other noncurrent assets	111.4		11.3		122.7

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Other accrued liabilities	$	170.9	$	4.8	$	175.7
Deferred income tax liability, net	27.3		1.9		29.2
Retained earnings	769.2		9.4		778.6

The ~~following table presents~~impacts of adopting Topic 606 and Topic 853 on 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 third quarter of 2018.

As reported at
As reported at
(in millions) October 31, 2017 Adjustments July 31, 2018
Cash and cash equivalents $ 2.5
$ (2.3 ) $ 0.2
Trade accounts receivable⁽¹⁾
118.1
(0.4 ) 117.7
Prepaid expenses and other current assets 10.3
(0.3 ) 10.1
Property, plant and equipment 41.4
0.1
41.5
Customer relationships⁽²⁾
340.0
(10.0 ) 330.0
Trade names⁽²⁾
9.0
—
9.0
Goodwill⁽³⁾
933.9
0.3
934.2
Other assets 4.2
(0.2 ) 4.0
Trade accounts payable (9.1 ) (0.4 ) (9.6 )
Insurance reserves (35.5 ) (0.6 ) (36.1 )
Income taxes payable (16.5 ) 8.2
(8.3 )
Accrued liabilities (36.5 ) 3.3
(33.1 )
Deferred income tax liability, net (92.6 ) —
(92.6 )
Other liabilities (8.1 ) —
(8.1 )
Net assets acquired $ 1,261.3
$ (2.4 ) $ 1,258.8

⁽¹⁾ ~~The gross amount of trade accounts receivable was $122.0 million, of which $4.3 million is currently 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~~

For the three and nine months ended July 31, 2018, we recorded revenue related to GCA of $260.0 million and $768.0 million, respectively, and operating profit of $9.8 million and $22.3 million, respectively. The following table presents our unaudited pro forma results as though the GCA acquisition occurred on November 1, 2015. The pro forma results include adjustments for the estimated amortization of intangible assets, interest expense, and the income tax impact of the pro forma adjustments at the statutory rate 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.

Three Months Ended Nine Months Ended
(in millions) July 31, 2017 July 31, 2017
Pro forma revenue $ 1,573.2
$ 4,712.5
Pro forma income from continuing operations 36.1
82.6

These pro forma results were adjusted to exclude $2.2 million of acquisition-related costs incurred during the three and nine months ended July 31, 2017, which are included in selling, general and administrative expenses in the accompanying unaudited consolidated statements of comprehensive income ~~(loss).~~for the three months ended January 31, 2019 were as follows:

~~Other 2017 Acquisitions~~

~~Effective December 1, 2016,~~



	Three Months Ended January 31, 2019
(in millions, except per share amounts)	Under Historical Guidance			Effect of Adoption			As Reported
Revenues	$	1,617.9		$	(10.0	)	$	1,607.9
Operating expenses	1,457.3			(11.3		)	1,446.0
Selling, general and administrative expenses	113.6			(0.9		)	112.7
Income tax (provision) benefit	(4.2		)	(0.6		)	(4.7		)
Net income	11.3			1.7			13.0

Net income per common share — Basic	$	0.17		$	0.03		$	0.20
Net income per common share — Diluted	$	0.17		$	0.03		$	0.19

There were no significant impacts on our consolidated statements of cash flows other than offsetting shifts in net cash provided by operating activities between net income and various changes in working capital line items.

Disaggregation of Revenue

We generate revenues under several types of contracts, as further explained below. Generally, 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 ~~acquired~~disaggregate revenue from contracts with customers into major service lines. We have determined that disaggregating revenue into these categories best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Our reportable segments are Business & Industry (“B&I”), Aviation, Technology and Manufacturing (“T&M”), Education, Technical Solutions, and Healthcare, as described in Note 11, “Segment Information.”



	Three Months Ended January 31, 2019
(in millions)	B&I		Aviation		T&M		Education		Technical Solutions		Healthcare		Total
Major Service Line
Janitorial⁽¹⁾	$	549.7	$	31.1	$	187.8	$	183.3	$	—	$	38.0	$	989.9
Parking⁽²⁾	114.4		85.8		7.4		0.8		—		13.7		222.1
Facility Services⁽³⁾	110.2		18.0		40.8		20.7		—		15.0		204.7
Airline Services⁽⁴⁾	0.2		117.5		—		—		—		—		117.7
Building & Energy Solutions⁽⁵⁾	—		—		—		—		107.9		—		107.9
	$	774.5	$	252.4	$	236.1	$	204.7	$	107.9	$	66.7	$	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.

⁽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. Certain of our management reimbursement, leased, and allowance location arrangements are considered service concession agreements and are accounted for under the guidance of Topic 853. For the three months ended January 31, 2019, rent expense related to service concession arrangements, previously recorded within operating expenses, has been recorded as a reduction of the 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.

⁽⁴⁾ Airline Services arrangements support airlines and airports with services ranging from passenger assistance, catering logistics, and airplane cabin maintenance.

⁽⁵⁾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. We also franchise certain operations under franchise agreements relating to our Linc Network and TEGG brands.

Contracts with Customers

We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. Once a contract is identified, we evaluate whether it is a combined or single contract and whether it should be accounted for as more than one performance obligation. 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. If a contract includes a cancellation clause, the remaining contract term is limited to the required termination notice period.

At contract inception, we assess the services promised to our customers and identify a performance obligation for each promise to transfer to the customer a service, or a bundle of services, that is distinct. To identify the performance obligation, we consider all of our services promised in the ~~outstanding stock~~contract, regardless of ~~Mechanical Solutions, Inc. (“MSI”),~~whether they are explicitly stated or are implied by customary business practices.

The majority of our contracts contain multiple promises that represent an integrated bundle of services comprised of activities that may vary over time; however, these activities fulfill a ~~provider of specialized HVAC, chiller, and plumbing services, for~~single integrated performance obligation since we perform a ~~purchase price of $12.6 million. The purchase price includes up to $1.0 million of undiscounted contingent consideration~~continuous service that is substantially the same and has the same pattern of transfer to the customer. Our performance obligations are primarily satisfied over time as we provide the related services. We allocate the contract transaction price to this single performance obligation and recognize revenue as the services are performed, as further described in “Contract Types” below.

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 in the period they are earned. Some of our contracts, often related to Airline Services, may also include performance incentives based on variable performance measures that are ascertained exclusively by future performance and therefore cannot be estimated at contract inception and are recognized as revenue once known and mutually agreed upon. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current, and forecasted) that is reasonably available to us.

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.

We typically bill customers on a monthly basis and have the right to consideration from customers in an amount that corresponds directly with the performance obligation satisfied to date. The time between completion of the performance obligation and collection of cash is generally 30 to 60 days. Sales-based taxes are excluded from revenue.

Contracts generally can be modified to account for changes in specifications and requirements. We consider contract modifications to exist when the modification either changes the consideration, creates new performance obligations, or changes the existing scope of the contract and related performance obligations. Historically, contract modifications have been for services that are not distinct from the existing contract, since we are providing a bundle of services that are highly inter-related and are therefore treated as if they were part of that existing contract. Such modifications are generally accounted for prospectively as part of the existing contract.

Contract Types

We have arrangements under various contract types within our major service lines.

Monthly Fixed-Price

Monthly fixed-price arrangements are contracts in which the client agrees to pay a fixed fee every month over a specified contract term. We measure progress toward satisfaction of the performance obligation as the services are provided, and revenue is recognized at the agreed-upon contractual amount over time because the customer simultaneously receives and consumes the benefits of the services as they are performed. Certain Janitorial, Facilities Services, and Airline Services contracts are structured pursuant to this type of arrangement.

Square-Foot

Monthly square-foot arrangements are contracts in which the client agrees to pay a fixed fee every month based on the ~~expected achievement~~actual square footage serviced over a specified contract term. We measure progress toward satisfaction of the performance obligation as the services are provided, and revenue is recognized at the agreed-upon contractual amount over time because the customer simultaneously receives and consumes the benefits of the services as they are performed. Certain Janitorial contracts are structured pursuant to this type of arrangement.

Cost-Plus

Cost-plus arrangements are contracts in which the clients reimburse us for the agreed-upon amount of wages and benefits, payroll taxes, insurance charges, and other expenses associated with the contracted work, plus a profit margin. We measure progress toward satisfaction of the performance obligation as the services are provided, and revenue is recognized at the agreed-upon contractual amount over time because the customer simultaneously receives and consumes the benefits of the services as they are performed. Certain Janitorial, Facilities Services, and Airline Services contracts are structured pursuant to this type of arrangement.

Tag Services

Tag work generally consists of supplemental services requested by clients outside of the standard service specification and includes cleanup after tenant moves, construction cleanup, flood cleanup, and snow removal. Because the nature of these short-term contracts involves performing one-off type services, revenue is recognized at the agreed-upon contractual amount over time as the services are provided, because the customer simultaneously receives and consumes the benefits of the services as they are performed. Certain Janitorial and Facilities Services are often structured under to this type of arrangement.

Transaction-Price

Transaction-price contracts are arrangements in which customers are billed a fixed price for each transaction performed on a monthly basis (e.g., wheelchair passengers served, airplane cabins cleaned). We measure progress toward satisfaction of the performance obligation as the services are provided, and revenue is recognized at the agreed-upon contractual amount over time because the customer simultaneously receives and consumes the benefits of the services as they are performed. Certain Airline Services contracts are structured under this type of arrangement.

Hourly

Hourly arrangements are contracts in which the client is billed a fixed hourly rate for each labor hour provided. We measure progress toward satisfaction of the performance obligation as the services are provided, and revenue is recognized at the agreed-upon contractual amount over time because the customer simultaneously receives and consumes the benefits of the services as they are performed. Certain Airline Services contracts are structured under this type of arrangement.

Management Reimbursement

Under management reimbursement arrangements, within our Parking service line, we manage a parking facility for a management fee and pass through the revenue and expenses associated with the facility to the owner. We measure progress toward satisfaction of the performance obligation over time as the services are provided. Under these contracts we recognize both revenues and expenses, in equal amounts, that are directly reimbursed from the property owner for operating expenses, as such expenses are incurred. Such revenues do not include gross customer collections at the managed locations because they belong to the property owners. We have determined we are the principal in these transactions, because the nature of our performance obligation is for us to provide the services on behalf of the customer and we have control of the promised services before they are transferred to the customer.

Leased Location

Under leased location parking arrangements, within our Parking service line, we pay a fixed amount of rent, plus a percentage of revenues derived from monthly and transient parkers, to the property owner. We retain all revenues and we are responsible for most operating expenses incurred. We measure progress toward satisfaction of the performance obligation as the services are provided, and revenue is recognized over time because the customer simultaneously receives and consumes the benefits of the services as they are performed.

As described above and in Note 2, “Basis of Presentation and Significant Accounting Policies,” and in accordance with Topic 853, rental expense and certain ~~pre-established~~other expenses under contracts that meet the definition of service concession arrangements are recorded as a reduction of revenue.

Allowance

Under allowance parking arrangements, within our Parking service line, we are paid a fixed amount or hourly rate to provide parking services and we are responsible for certain operating expenses that are specified in the contract. We measure progress toward satisfaction of the performance obligation as the services are provided, and revenue ~~goals. See Note 6, “Fair Value~~is recognized at the agreed-upon contractual rate over time because the customer simultaneously receives and consumes the benefits of ~~Financial Instruments,” regarding~~the services as they are performed.

Energy Savings Contracts and Fixed-Price Repair and Refurbishment

Under energy savings and fixed-price repair and refurbishment arrangements, within our ~~valuation~~Building & Energy Solutions service line, we agree to develop, design, engineer, and construct a project. Additionally, as part of ~~contingent consideration liabilities. As~~bundled energy solutions arrangements, we guarantee the project will satisfy agreed-upon performance standards.

We use the cost-to-cost method, which compares the actual costs incurred to date with the current estimate of ~~December 1, 2016,~~total costs to complete in order to measure the ~~operations~~satisfaction of ~~MSI~~the performance obligation and recognize revenue as work progresses, as we believe this best depicts the transfer of control to the customer, that occurs as we incur costs on our contracts. This measurement and comparison process requires updates to the estimate of total costs to complete the contract, and these updates may include subjective assessments and judgments. Equipment purchased for these projects is project-specific and considered a value-added element to our work. Equipment costs are incurred when title is transferred to us, typically upon delivery to the work site. Revenue for uninstalled equipment is recognized at cost and the associated margin is deferred until installation is substantially complete.

We recognize revenue over time for all of our services as we perform them, because (i) control continuously transfers to the customer as work progresses or (ii) we have the right to bill the customer as costs are incurred. The customer typically controls the work in process as evidenced either by contractual termination clauses or by our rights to payment for work performed to date plus a reasonable profit to deliver products or services that do not have an alternative use to us.

Certain project contracts include a schedule of billings or invoices to the customer based on our job-to-date percentage of completion of specific tasks inherent in the fulfillment of our performance obligation(s) or in accordance with a fixed billing schedule. Fixed billing schedules may not precisely match the actual costs incurred. Therefore, revenue recognized may differ from amounts that can be billed or invoiced to the customer at any point during the contract, resulting in balances that are considered revenue recognized in excess of cumulative billings or cumulative billings in excess of revenue recognized. Advanced payments from our customers generally do not represent a significant financing component as the payments are used to meet working capital demands that can be higher in the early stages of a contract, as well as to protect us from our customer failing to meet its obligations under the contract.

Certain projects include service maintenance agreements under which existing systems are repaired and maintained for a specific period of time. We generally recognize revenue under these arrangements over time. Our service maintenance agreements are generally one-year renewable agreements.

Franchise

We franchise certain engineering services through individual and area franchises under the Linc Service and TEGG brands, which are part of ABM Technical Solutions and are included in our ~~Technical~~Building & Energy Solutions ~~segment.~~service line. Initial franchise fees result from the sale of a franchise license and include the use of the name, trademarks, and proprietary methods. The franchise license is considered symbolic intellectual property, and revenue related to the sale of this right is recognized at the agreed-upon contractual amount over the term of the initial franchise agreement.

Royalty fee revenue consists of sales-based royalties received as part of the consideration for the franchise right, which is calculated as a percentage of the franchisees’ revenue. We recognize royalty fee revenue at the agreed-upon contractual rates over time as the customer revenue is generated by the franchisees. A receivable is recognized for an estimate of the unreported royalty fees, which are reported and remitted to us in arrears.

Remaining Performance Obligations

At January 31, 2019, we had $193.0 million related to performance obligations that were unsatisfied or partially unsatisfied for which we expect to recognize revenue. We expect to recognize revenue on approximately 54% of the remaining performance obligations over the next 12 months, with the remaining recognized thereafter.

These amounts exclude variable consideration primarily related to: (1) 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; (2) parking contracts where we and the customer share the gross revenues or operating profit for the location; and (3) 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.

Costs to Obtain a Contract With a Customer

We capitalize the incremental costs of obtaining a contract with a customer, primarily commissions, as contract assets and recognize the expense on a straight-line basis over a weighted average expected customer relationship period. Upon adoption of Topic 606 on November 1, 2018, we capitalized $15.1 million of commissions related to contracts that were not completed at that date. Capitalized commissions are classified as current or noncurrent based on the timing of when we expect to recognize the expense.

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. If a contract includes a cancellation clause that allows for the termination of the contract by either party without a substantive penalty, the contract term is limited to the termination notice period.

Contract assets 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 projects exceeds the amount billed to the customer. These amounts are transferred to billed trade receivables when the rights become unconditional. 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.

~~Effective December 1, 2016, we also acquired all~~The following tables present the balances in our contract assets and contract liabilities:



(in millions)	January 31, 2019		November 1, 2018
Contract assets
Billed trade receivables⁽¹⁾	$	971.5	$	918.9
Unbilled trade receivables⁽¹⁾	91.1		74.3
Costs incurred in excess of amounts billed⁽²⁾	40.2		40.1
Capitalized commissions⁽³⁾	16.1		15.1

⁽¹⁾Included in trade accounts receivable, net, on the consolidated balance sheets. The fluctuation correlates directly to the execution of ~~the outstanding stock of OFJ Connections Ltd (“OFJ”), a provider of airport transportation services~~new customer contracts and invoicing and collections from customers in the ~~United Kingdom, for a purchase price~~normal course of ~~$6.3 million. As~~business.

⁽²⁾Increase is primarily due to the timing of ~~December 1, 2016,~~payments on our contracts measured using the ~~operations~~cost-to-cost method of ~~OFJ are included~~revenue recognition.

⁽³⁾Included in ~~our Aviation segment.~~

~~Pro Forma and Other Supplemental Financial Information~~

~~Except for GCA, we do not present pro forma~~other current assets and other ~~financial information for our~~noncurrent assets on the consolidated balance sheets. During the three months ended January 31, 2019, we capitalized $2.1 million of new costs and amortized $1.2 million of previously capitalized costs. There was no impairment loss recorded on the costs capitalized.



(in millions)	Three Months Ended January 31, 2019
Contract liabilities⁽¹⁾
Balance at beginning of period	$	41.7
Additional contract liabilities	92.6
Recognition of deferred revenue	(91.7		)
Balance at end of period	$	42.6

⁽¹⁾ Included in other ~~acquisitions, as they are not considered material business combinations individually or~~accrued liabilities on ~~a combined basis.~~the consolidated balance sheets.

4. RESTRUCTURING AND RELATED COSTS

GCA Services Group Restructuring

~~Following the acquisition of GCA, during~~During the first quarter of 2018, we initiated a restructuring program to achieve cost synergies ~~from our combined operations.~~following the acquisition of GCA Services Group (“GCA”). We incurred the majority of our anticipated severance expense associated with this restructuring program in the first half of 2018. We expect to incur additional charges related to other project fees as we continue to further integrate and ~~rebranding activities in~~consolidate our operational and financial processes to support the ~~fourth quarter~~growth and capabilities of ~~2018.~~our shared services and operations. Additionally, we continue standardizing our financial systems and streamlining our operations by migrating and upgrading several key management platforms, including our human resources information systems, enterprise resource planning system, and labor management system. We also continue consolidating our real estate leases.

2020 Vision Restructuring

During the fourth quarter of 2015, our Board of Directors approved a comprehensive strategy intended to have a positive transformative effect on ABM (the “2020 Vision”). As part of the 2020 Vision, 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 and other project fees during the nine months ended July 31, 2018 relating to this strategy. We~~ do not expect to incur significant 2020 Vision restructuring and related expenses in the ~~future, other than in connection with the continued consolidation of our real estate leases.~~future.

Rollforward of Restructuring and Related Liabilities


(in millions)	Balance, October 31, 2017		Costs Recognized⁽¹⁾		Payments			Non-Cash Items			Balance, July 31, 2018		Balance, October 31, 2018			Costs Recognized⁽¹⁾		Payments			Balance, January 31, 2019
Employee severance	$	2.7	$	10.8	$	(8.9	)	$	—		$	4.6	$	3.8		$	1.3	$	(1.7	)	$	3.4
Lease exit costs and asset impairment	2.8		2.5		(1.2		)	(1.1		)	3.1		3.1		��	—		(0.3		)	2.8
Other project fees	0.4		5.1		(4.4		)	—			1.1		1.8			2.5		(1.5		)	2.7
External support fees	2.5		4.0		(6.5		)	—			—
Total	$	8.4	$	22.5	$	(21.0	)	$	(1.1	)	$	8.8	$	8.6		$	3.8	$	(3.5	)	$	8.9

⁽¹⁾We include these costs within corporate expenses.

Cumulative Restructuring and Related Charges


(in millions)	External Support Fees		Employee Severance		Other Project Fees		Lease Exit Costs		Asset Impairment		Total		External Support Fees		Employee Severance		Other Project Fees		Lease Exit Costs		Asset Impairment		Total
GCA	$	2.0	$	12.8	$	4.9	$	—	$	—	$	19.6	$	2.0	$	14.8	$	10.3	$	—	$	—	$	27.1
2020 Vision	30.0		13.5		10.7		7.7		5.2		67.1		30.0		13.0		10.7		7.7		5.2		66.5
Total	$	32.0	$	26.3	$	15.5	$	7.7	$	5.2	$	86.7	$	32.0	$	27.8	$	21.0	$	7.7	$	5.2	$	93.6

5. NET INCOME PER COMMON SHARE

Basic and Diluted Net Income Per Common Share Calculations


	Three Months Ended July 31,					Nine Months Ended July 31,					Three Months Ended January 31,
(in millions, except per share amounts)	2018			2017		2018		2017			2019			2018
Income from continuing operations	$	33.7		$	32.9	$	87.1	$	80.6		$	13.0		$	28.0
(Loss) income from discontinued operations, net of taxes	(0.1		)	—		1.0		(73.2		)
Loss from discontinued operations, net of taxes											(0.1		)	(0.1		)
Net income	$	33.6		$	32.9	$	88.1	$	7.4		$	13.0		$	27.8

Weighted-average common and common equivalent shares outstanding — Basic	66.1			56.1		66.0		56.0			66.4			65.9
Effect of dilutive securities
Restricted stock units	0.1			0.3		0.1		0.3			0.1			0.2
Stock options	0.1			0.2		0.1		0.2			0.1			0.1
Performance shares	—			—		—		0.1			0.1			0.1
Weighted-average common and common equivalent shares outstanding — Diluted	66.3			56.6		66.3		56.6			66.7			66.3

Net income per common share — Basic
Income from continuing operations	$	0.51		$	0.59	$	1.32	$	1.44		$	0.20		$	0.42
Income (loss) from discontinued operations	—			—		0.02		(1.31		)
Loss from discontinued operations											—			—
Net income	$	0.51		$	0.59	$	1.33	$	0.13		$	0.20		$	0.42

Net income per common share — Diluted
Income from continuing operations	$	0.51		$	0.58	$	1.31	$	1.42		$	0.20		$	0.42
Income (loss) from discontinued operations	—			—		0.02		(1.29		)
Loss from discontinued operations											—			—
Net income	$	0.51		$	0.58	$	1.33	$	0.13		$	0.19		$	0.42

Anti-Dilutive Outstanding Stock Awards Issued Under Share-Based Compensation Plans


	Three Months Ended July 31,		Nine Months Ended July 31,		Three Months Ended January 31,
(in millions)	2018	2017	2018	2017	2019	2018
Anti-dilutive	0.5	—	0.4	—	0.4	0.2

6. 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 Hierarchy	July 31, 2018		October 31, 2017		Fair Value Hierarchy	January 31, 2019			October 31, 2018
Cash and cash equivalents⁽¹⁾	1	$	46.0	$	62.8	1	$	30.6		$	39.1
Insurance deposits⁽²⁾	1	0.6		11.2		1	0.8			0.6
Assets held in funded deferred compensation plan⁽³⁾	1	2.8		4.6		1	2.5			2.7
Credit facility⁽⁴⁾	2	1,036.1		1,191.2		2	997.0			949.0
Interest rate swaps⁽⁵⁾	2	—		2.9
Interest rate swap (liabilities) assets⁽⁵⁾						2	(6.0		)	1.3
Investments in auction rate securities⁽⁶⁾	3	5.0		8.0		3	5.0			5.0
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 8,7, “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 9,8, “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 LIBOR forward rates at the end of the period. At January 31, 2019 and October 31, ~~2017, these~~2018, our interest rate swaps ~~were~~are included in “Other noncurrent ~~assets”~~liabilities” and “Other noncurrent assets,” respectively, on the accompanying unaudited consolidated balance sheets. ~~During April 2018, we elected to terminate our interest rate swaps.~~ See Note 9,8, “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 January 31, 2019 and October 31, 2018, we held an investment in one auction rate security that had an original principal amount, amortized cost, and fair value of $5.0 million that is included in “Other investments” on the accompanying unaudited consolidated balance sheets. ~~See Note 7, “Auction Rate Securities,” for further information.~~

⁽⁷⁾Certain of our acquisitions involve the payment of contingent consideration. The fair value of these liabilities is based on the expected achievement of certain pre-established revenue goals. Our contingent consideration liability is included in “Other accrued liabilities” and “Other noncurrent liabilities” on the accompanying unaudited consolidated balance sheets.

~~During the nine months ended July 31, 2018, 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~~

In certain circumstances we measure certain assets that are subject to fair value adjustments at fair value on a non-recurring basis. These assets can include: goodwill; intangible assets; property, plant and equipment; 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 impairment test immediately before and after the segment realignment. In analyzing 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 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 and fair value of $8.0 million. During the third quarter of 2018, we sold one of our auction rate securities with an original par value of $5.0 million and an amortized cost basis of $3.0 million for proceeds of $2.9 million. The resulting loss is included in “Selling, general and administrative expenses” on the accompanying unaudited consolidated statements of comprehensive income (loss). The total amount of other-than-temporary impairment credit loss previously recognized on this security investment and included in our retained earnings was $2.0 million.

~~At July 31, 2018, the remaining auction rate security had an aggregate original principal amount, amortized cost, and fair value of $5.0 million.~~ This auction rate security is a debt instrument with a stated maturity in 2050. The interest rate for this security is designed to be reset through Dutch auctions approximately every thirty days; however, auctions for this security have not occurred since August 2007.

At ~~July~~January 31, ~~2018~~2019 and October 31, ~~2017,~~2018, there were no unrealized gains or losses on our auction rate ~~securities~~security included in ~~accumulated other comprehensive income (loss), net~~AOCI.

During the three months ended January 31, 2019, we had no transfers of ~~taxes (“AOCI”).~~assets or liabilities between any of the above hierarchy levels.

~~Significant Assumptions Used to Determine the~~Non-Financial Assets Measured at Fair ~~Values of Our Auction Rate Securities~~



~~Assumption~~	~~July 31, 2018~~	~~October 31, 2017~~
~~Discount rates~~	~~L + 0.41%~~	~~L + 0.42% and L + 0.79%~~
~~Yields~~	~~L + 2.00%~~	~~2.15%, L + 2.00%~~
~~Average expected lives~~	~~4 years~~	~~4 - 10 years~~

~~L – One Month LIBOR~~

Value on a Non-Recurring Basis

8.In addition to assets and liabilities that are measured at fair value on a recurring basis, we are also required to measure certain items at fair value on a non-recurring basis, which are subject to fair value adjustments in certain circumstances. These assets can include: goodwill; intangible assets; property, plant and equipment; and long-lived assets that have been reduced to fair value when they are held for sale.

7. 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 million of exposure on a per-participant, per-year basis with respect to claims.

The adequacy of 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 studies are used to estimate our insurance rates and insurance reserves for future periods and to adjust reserves, if appropriate, for prior years. During 2018, we performed both an annual actuarial review and an actuarial update. As a result of these studies, we increased our reserves for claims related to prior periods by approximately $10.0 million during 2018, as described below.

Actuarial ~~Studies~~Review Performed During ~~2018~~the First Quarter of 2019

During the three months ended January 31, ~~2018,~~2019, we performed an actuarial review of the majority of our casualty insurance programs that considered changes in claim developments and claim payment activity for the period commencing May 1, ~~2017~~2018 and ending October 31, 2017 for all policy years. During the three months ended July 31, 2018, we performed an annual actuarial update of the majority of our casualty insurance programs, evaluating all changes made to claims reserves and claim payment activity for the period commencing November 1, 2017 and

~~ending April 30,~~ 2018 for all policy ~~years. The studies excluded~~years in which open claims ~~relating to certain previously acquired businesses, which we expect to evaluate during the fourth quarter of 2018.~~existed.

~~Both the~~The actuarial review ~~and actuarial update indicate~~indicated the changes we have made to our risk management program have reduced the frequency of ~~claims and have had a positive~~claims; however, we are experiencing adverse developments that impact on claim ~~costs. Changes~~costs relating to prior periods. Claim management initiatives include ~~the implementation of~~ programs to identify those claims ~~that have the potential to develop adversely~~ earlier in the claims cycle that may potentially develop adversely and ~~to facilitate~~ensure the establishment of reserves consistent with known fact patterns. However, with respect to claims related to ~~certain~~ prior fiscal years, the actuarial ~~studies completed to date show~~review showed unfavorable developments in our ~~estimate~~estimates of ultimate losses related to general liability, property damage, workers’ compensation, and automobile liability claims, as described below.

The actuarial ~~studies~~review related to our general liability program indicated the total number of claims continues to show a pattern of decreasing ~~losses,~~frequency, particularly with bodily injury claims. However, we experienced adverse developments with respect to claims related to ~~certain~~ prior fiscal years that are largely attributable to adjustments for certain alleged bodily injury ~~claims and to losses for property damage.~~claims.

Due to increases in projected costs and severity of claims in ~~certain~~ prior fiscal years, ~~in 2018~~ we increased our estimate of ultimate losses for workers’ compensation claims. Statutory, regulatory, and legal developments have also contributed to the increase in our estimated losses. Our workers’ compensation estimate of ultimate losses was primarily impacted by increases in projected costs for a significant number of prior year claims in California.

Our automobile liability program covers our fleet of passenger vehicles, service vans, and shuttle buses, which are associated with our various transportation service contracts. Claim frequency and severity associated with our fleet operations developed unfavorably versus actuarial expectations, consistent with insurance trends exhibited in the broader insurance book of claims.

Based on the results of the actuarial ~~studies performed during 2018, which included analyzing recent loss development patterns, comparing the loss development against benchmarks,~~review and ~~applying actuarial projection methods to estimate ultimate losses,~~subsequent developments, we increased our total reserves for known claims as well as our estimate of the loss amounts associated with incurred but not reported claims ~~for prior periods~~ by ~~$4.0~~$5.0 million during the ~~first half of 2018 and by an additional $6.0 million during the third quarter of 2018, for a total adjustment related to prior year claims of approximately $10.0 million during the nine~~three months ended ~~July~~January 31, ~~2018.~~2019. This adjustment was ~~$12.3~~$3.0 million ~~lower~~higher than the total adjustment related to prior year claims of ~~$22.3~~$2.0 million induring the ~~nine~~three months ended ~~July~~January 31, ~~2017.~~2018. We will continue to assess ongoing developments, which may result in further adjustments to reserves.

Insurance Related Balances and Activity


(in millions)	July 31, 2018		October 31, 2017		January 31, 2019		October 31, 2018
Insurance claim reserves excluding medical and dental	$	500.4	$	485.6
Insurance claim reserves, excluding medical and dental					$	512.0	$	501.4
Medical and dental claim reserves	8.9		9.8		9.7		8.9
Insurance recoverables	73.8		73.1		73.7		73.7

At ~~July~~January 31, ~~2018~~2019 and October 31, ~~2017,~~2018, 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)	July 31, 2018		October 31, 2017		January 31, 2019		October 31, 2018
Standby letters of credit	$	146.7	$	137.6	$	143.5	$	144.1
Surety bonds	89.0		77.5		89.2		89.2
Restricted insurance deposits	0.6		11.2		0.8		0.6
Total	$	236.3	$	226.3	$	233.5	$	233.9

9.8. 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. In accordance with the terms of the Credit Facility, the line of credit was reduced to $800.0 million 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 ~~July~~January 31, ~~2018,~~2019, the weighted average interest rate on our outstanding borrowings was ~~4.07%~~4.32%. 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. 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 maximum leverage ratio of ~~4.75~~4.50 to 1.0, ~~through April 2018,~~ which steps down 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 ~~July~~January 31, ~~2018,~~2019, we were in compliance with these covenants.~~On September 5, 2018, we amended our Credit Facility to increase the maximum leverage ratio for fiscal quarters commencing July 31, 2018 through April 30, 2021 by 25 basis points for such quarters.~~

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 certain events of default 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)	July 31, 2018			October 31, 2017			January 31, 2019			October 31, 2018
Current portion of long-term debt
Gross term loan	$	30.0		$	20.0		$	45.0		$	40.0
Less: unamortized deferred financing costs	(3.0		)	(3.1		)
Unamortized deferred financing costs							(2.9		)	(3.0		)
Current portion of term loan	$	27.0		$	16.9		$	42.1		$	37.0

Long-term debt
Gross term loan	$	750.0		$	780.0		$	725.0		$	740.0
Less: unamortized deferred financing costs	(7.7		)	(9.9		)
Unamortized deferred financing costs							(6.2		)	(6.9		)
Total noncurrent portion of term loan	742.3			770.1			718.8			733.1
Line of credit⁽¹⁾⁽²⁾	256.1			391.2			227.0			169.0
Long-term debt	$	998.4		$	1,161.3		$	945.8		$	902.0

⁽¹⁾Standby letters of credit amounted to ~~$155.5~~$152.4 million at ~~July~~January 31, ~~2018.~~2019.

⁽²⁾At ~~July~~January 31, ~~2018,~~2019, we had borrowing capacity of ~~$477.3~~$410.2 million; however, covenant restrictions limited our ~~actual~~ borrowing capacity to ~~$196.0~~$352.5 million.

Term Loan Maturities

During the first quarter of 2019, we made ~~$20.0~~$10.0 million of principal ~~payments.~~payments under the term loan. As of ~~July~~January 31, ~~2018,~~2019, the following principal payments are required under the term loan.


(in millions)	2019		2020		2021		2022		2019		2020		2021		2022
Debt maturities	$	40.0	$	60.0	$	120.0	$	560.0	$	30.0	$	60.0	$	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. 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 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 ~~were~~have been designated and accounted for as cash flow hedges from inception. See Note 6, “Fair Value of Financial Instruments,” regarding the valuation of our interest rate swaps.

During April 2018, we elected to terminate all of our interest rate swaps and received cash proceeds of $25.9 million from the swap counterparties upon termination. We classified the cash proceeds as an operating activity on our consolidated statements of cash flows. We subsequently entered into new forward-starting interest rate swaps, as summarized below.



Notional Amounts	Fixed Interest Rates	Effective Dates	Maturity Dates
$ 90.0 million	2.83%	November 1, 2018	April 30, 2021
$ 90.0 million	2.84%	November 1, 2018	October 31, 2021
$ 130.0 million	2.86%	November 1, 2018	April 30, 2022
$ 130.0 million	2.84%	November 1, 2018	September 1, 2022

At ~~July~~January 31, 2019 and October 31, 2018, ~~the realized gain~~amounts recorded in AOCI ~~was~~for interest rate swaps were $11.5 million, net of taxes of $4.7 million, and $17.8 million, net of taxes of $7.1 million, respectively. These amounts included the gain associated with the interest rate swaps we terminated in 2018, which ~~will be~~is being amortized to interest expense as interest payments are made over the term of our Credit Facility. During the three ~~and nine~~ months ended ~~July~~January 31, ~~2018,~~2019, we amortized ~~$0.9~~$1.0 million of this gain, net of taxes of ~~$0.3~~$0.4 million, to interest expense. ~~Additionally, at July~~At January 31, ~~2018,~~2019, the total amount expected to be reclassified from AOCI to earnings during the next twelve months was ~~$3.9 million, net of taxes of $1.6 million. At October 31, 2017, amounts recorded in AOCI were $1.7~~$2.8 million, net of taxes of $1.2 million.

~~10.~~9. 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 ~~July~~January 31, ~~2018,~~2019, these letters of credit and surety bonds totaled ~~$155.5~~$152.4 million and ~~$454.7~~$463.6 million, respectively. ~~Included in the total amount of surety bonds is $2.7 million of bonds with an effective date starting after July 31, 2018.~~

Guarantees

In some instances, we offer clients guaranteed energy savings under certain energy savings contracts. At ~~July~~January 31, ~~2018,~~2019, total guarantees were ~~$176.0~~$179.5 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.~~2021. Annual revenues relating to the underlying contracts are approximately $35 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 ~~July~~January 31, ~~2018,~~2019, the total amount accrued for all probable litigation losses where a reasonable estimate of the loss could be made was ~~$11.7~~$12.1 million. This $12.1 million ~~including $3.8 million accrued during the three months ended July 31, 2018 and an accrual~~includes accruals of ~~$3.8~~$3.3 million in connection with the Hussein case and $5.4 million in connection with the Castro case, which amounts were previously accrued and are discussed further 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 zero and $4$6 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.

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, 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, 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.~~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.

On September 20, 2018, the trial court entered an order defining four certified subclasses of janitors who were employed by the legacy ABM janitorial companies in California at any time between April 7, 2002 and April 30, 2013, on claims based on previous automatic deduction practices for meal breaks, unpaid meal premiums, unpaid split shift premiums, and unreimbursed business expenses, such as mileage reimbursement for use of personal vehicles to travel between worksites. On February 1, 2019, the Superior Court held that the discovery related to PAGA claims allegedly arising after April 30, 2013 would be stayed until after the class and PAGA claims accruing prior to April 30, 2013 had been tried. This matter has not been set for trial. Prior to trial, we will have the opportunity to move for summary judgment, seek decertification of the classes, or mediate, if we deem such actions appropriate.

Hussein and Hirsi v. Air Serv Corporation filed on January 20, 2016, pending in the United States District Court for the Western District 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)~~“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 applicable 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,~~Airport, the King County Superior Court (the “Superior Court”) issued a decision that invalidated the Ordinance as it applied to workers at SeaTac ~~airport.~~Airport. Subsequently, the Washington Supreme Court reversed the Superior Court’s decision. On February 7, 2017, the Isse case was filed against Air Serv on behalf of 60 individual plaintiffs (who would otherwise be members of the Hussein class), who alleged failure to comply with both the minimum wage provision and the sick and safe time provision 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 expanded to approximately 220 individual plaintiffs.

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 in January 2018.

On July 30, 2018, the United States District Court for the Western District of Washington at Seattle preliminarily approved the settlement in the Hussein case. ~~The~~At the final approval hearing ~~is set for~~on December 5,4, 2018, ~~and, if approved,~~the court (i) accepted opt-out notices from 78 Hussein class members (the “opt-out members”) indicating their intent to participate in separate lawsuits (leaving 386 class members in the Hussein class), (ii) directed the parties to recalculate the settlement ~~proceeds will be~~amount by deducting the settlement funds attributable to the 78 opt-out members, and (iii) requested other minor changes, but indicated that the court intended to grant final approval of the settlement with these changes. On December 20, 2018, the court issued its order granting final approval of the Hussein class action settlement in the amount of $2.1 million. The Hussein settlement funds were distributed ~~thereafter.~~to the class on March 6, 2019. In January 2019, we reached a tentative agreement to resolve the claims of the opt-out members for $1.2 million.

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)~~“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, which was denied on April 30, 2018. On March 20, 2018, ABM moved to compel arbitration of the claims of certain class members pursuant to the terms of three collective bargaining agreements. In response to that motion, on May 14, 2018, the district court modified the class definition to exclude all claims arising after the operative date(s) of the applicable collective bargaining agreements (which is June 1, 2016 for one agreement and May 1, 2016 for the other two agreements). However, the district court denied the motion to compel arbitration as to claims that arose prior to the operative date(s) of the applicable collective bargaining agreements. ABM has appealed to the Ninth Circuit the district court’s order denying the motion to compel arbitration with respect to the periods preceding the operative dates of the collective bargaining agreements. ~~The parties have~~

After a ~~court ordered~~court-ordered mediation ~~scheduled for~~held on October 15, ~~2018.~~2018, the parties agreed to a class action settlement of $5.4 million, subject to court approval. The plaintiffs’ motion for preliminary approval of the settlement was filed on January 4, 2019, and the court held a hearing on the motion on February 12, 2019. On February 14, 2019, the court granted preliminary approval of the settlement. In connection with the settlement, we modified our existing written policies for California to expressly confirm that ABM service workers are not required to use personal cell phones for work purposes and began centralizing the process and implementing technology for such employees to request reimbursement for personal cell phone use due to work. A hearing on final approval of the settlement is scheduled to be held on August 20, 2019.

~~11.~~10. INCOME TAXES

~~The Tax Cuts and Jobs Act (the “Tax Act”), which was enacted on~~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~~was enacted into law, which, among other provisions, reduced the federal corporate income tax rate from 35% to 21% and required companies to pay a ~~“transition tax” to be levied~~one-time transition tax 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~~was 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~~became effective for us ~~until~~in fiscal 2019, including limitations on deductibility of interest and executive compensation as well as a new minimum tax on Global Intangible Low-Taxed Income (“GILTI”)., which we have elected to account for as a period cost.

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~~to provide guidance on accounting for the tax effects of the Tax Act and ~~permits~~permitted companies to record provisional amounts during 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~~date. During 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.~~

~~During the three months ended January 31,~~ 2018, we remeasured certain deferred tax assets and liabilities based on the new tax rates at which they ~~are~~were expected to reverse in the future and recorded a ~~net discrete~~provisional one-time tax benefit of ~~$28.5 million.~~$28.7 million related to this remeasurement. In addition, we recorded ana provisional expense of $7.0 million for the one-time transition tax on the deemed repatriation of indefinitely reinvested earnings of our international subsidiaries. We completed our analysis of the impacts of these provisions under the Tax Act as of October 31, 2018, and recorded adjustments during the fourth quarter of 2018 that (i) increased the benefit to $29.6 million for the remeasurement of certain deferred tax assets and liabilities and (ii) decreased the expense to $4.5 million for the one-time transition tax on the deemed repatriation of indefinitely reinvested earnings of our international subsidiaries. We plan to reinvest our foreign earnings to fund future non-U.S. growth and expansion, and we do not anticipate remitting such earnings to the United States. While U.S. federal tax expense has been recognized as a result of the Tax Act, 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 from 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. We adjusted our provisional amounts by $0.2 million during the three months ended July 31, 2018.

Beginning in fiscal year 2019, provisions under GILTI could result in incremental U.S. federal tax on 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. Our income taxes for the three months ended ~~July~~January 31, ~~2018 were favorably impacted~~2019 increased by ~~the reduction of the federal corporate income tax rate resulting from the Tax Act. Discrete tax benefits of $4.2 million, including interest of~~ $0.7 million ~~related~~due to ~~expiring statute of limitations for an uncertain tax position~~certain reserves and ~~$1.6~~decreased by $0.5 million of excess tax benefits related to the vesting of share-based compensation ~~awards were also recorded during~~awards.

During the ~~quarter. Our income taxes for the nine~~three months ended ~~July~~January 31, 2018, ~~were favorably impacted by:~~we had an income tax benefit on income from continuing operations of $22.2 million, primarily due to a net discrete tax benefit of ~~$21.5~~$21.7 million related to ~~the enactment of~~provisional amounts recorded under the Tax ~~Act; $4.1 million, including interest of $0.6 million, related to expiring statute of limitations for an uncertain tax position; $3.1~~Act and $1.5 million of excess tax benefits related to the vesting of share-based compensation awards; and $2.6 million related to tax deductions on energy efficient government buildings. These benefits were partially offset by a $1.5 million reduction in certain tax credits, including the prior year Work Opportunity Tax Credits (“WOTC”) for new hires.

Our income taxes for the three and nine months ended July 31, 2017 were favorably impacted by a benefit of $15.8 million, including interest of $1.2 million, related to expiring statute of limitations for an uncertain tax position. In addition, the nine months ended July 31, 2017 also benefited from $2.7 million of excess tax benefits related to the vesting of share-based compensation awards, $1.8 million of tax deductions for energy efficient government buildings, and the 2017 WOTC for new hires.awards.

~~12.~~11. SEGMENT INFORMATION

~~Effective November 1, 2017, we reorganized our reportable segments to reflect the integration of GCA into our industry group model.~~ Our reportable segments consist of ~~Business & Industry (“~~B~~&I”),~~&I, Aviation, ~~Technology & Manufacturing (“~~T~~&M”),~~&M, Education, Technical Solutions, and Healthcare, as further described below. Refer to Note 2, “Basis of Presentation and Significant Accounting Policies,” for information related to the modification in our ~~former Government Services business.~~presentation of inter-segment revenues.



REPORTABLE SEGMENTS AND DESCRIPTIONS
B&I	B&I, our largest reportable segment, encompasses janitorial, facilities engineering, and parking services for commercial real estate properties and sports and entertainment venues. B&I also provides vehicle maintenance and other services to rental car ~~providers (“Vehicle Services Contracts”).~~providers.
Aviation	Aviation supports airlines and airports with services ranging from parking and janitorial to passenger assistance, catering logistics, air cabin maintenance, and transportation.
T&M	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 legacy Emerging Industries Group. T&M provides janitorial, facilities engineering, and parking ~~services.~~services to industrial and high-tech manufacturing facilities.
Education	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 legacy Emerging Industries Group.~~
Technical Solutions	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.
Healthcare	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 legacy Emerging Industries Group.~~

Financial Information by Reportable Segment


	Three Months Ended July 31,						Nine Months Ended July 31,						Three Months Ended January 31,
(in millions)	2018			2017			2018			2017			2019			2018
Revenues
Business & Industry	$	735.2		$	652.6		$	2,180.5		$	1,945.6		$	774.5		$	756.3
Aviation	256.8			258.9			758.3			722.9			252.4			260.1
Technology & Manufacturing	230.8			161.5			690.3			494.4			236.1			232.2
Education	210.9			67.3			623.5			199.5			204.7			206.9
Technical Solutions	121.6			106.7			334.1			325.2			107.9			104.0
Healthcare	69.1			59.3			206.7			181.6			66.7			67.7
Government Services	—			12.3			—			86.5
Elimination of inter-segment revenues													(34.4		)	(38.9		)
	$	1,624.3		$	1,318.4		$	4,793.5		$	3,955.6		$	1,607.9		$	1,588.3
Operating profit (loss)
Business & Industry	$	38.9		$	37.3		$	111.0		$	100.4		$	36.5		$	28.5
Aviation	9.7			5.4			20.6			16.8			3.9			5.8
Technology & Manufacturing	16.9			11.0			49.8			35.8			18.2			16.9
Education	12.0			3.9			31.8			11.1			10.3			9.2
Technical Solutions	11.9			9.4			24.9			27.5			5.9			5.5
Healthcare	2.5			2.8			7.9			7.7			1.2			2.7
Government Services	—			1.7			(0.8		)	21.8			—			(0.7		)
Corporate	(42.7		)	(47.5		)	(127.3		)	(118.5		)	(44.7		)	(47.4		)
Adjustment for income from unconsolidated affiliates, net, included in Aviation and Government Services	(0.9		)	(1.0		)	(2.5		)	(3.4		)
Adjustment for income from unconsolidated affiliates, net, included in Aviation													(0.9		)	(0.6		)
Adjustment for tax deductions for energy efficient government buildings, included in Technical Solutions	(0.3		)	(0.4		)	(2.6		)	(1.8		)	—			(0.3		)
	48.1			22.6			112.9			97.4			30.3			19.5
Income from unconsolidated affiliates, net	1.0			1.2			2.5			3.6			0.9			0.5
Interest expense	(12.9		)	(2.8		)	(41.0		)	(9.1		)	(13.5		)	(14.3		)
Income from continuing operations before income taxes	$	36.1		$	21.0		$	74.4		$	91.9		$	17.8		$	5.8

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 adjustments resulting from actuarial developments of self-insurance reserves, and direct acquisition costs.

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, ~~2017~~2018 (“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, which ends on October 31.

Effective November 1, 2018, we adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) and ASU 2017-10, Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services using a modified retrospective approach with a cumulative-effect adjustment to retained earnings as of the beginning of 2019; prior period financial statements are not adjusted. Refer to Note 2, “Basis of Presentation,” and Note 3, “Revenue,” in the Financial Statements for additional information regarding the impact of adoption.

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.

2020 VisionDevelopments in 2019

In September 2015, we announced a comprehensive transformation initiative (“2020 Vision”) intended to drive long-term profitable growth through an industry-based go-to-market approach. ~~Our~~We continue focusing on several key initiatives across our organization to sustain our 2020 Vision involves three phases: During Phase 1, completed on November 1, 2016, we realigned our organization; in Phase 2, which is continuing today, we are focused on improvements to our operational framework to promote efficienciesstrategy 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.~~

~~2020VisionDevelopments in 2018~~

~~We are continuing to focus on certain aspects of our business practices to further build the foundation upon which we~~profitably deliver leading industry-based facility ~~services.~~solutions. We are targeting significant investments in our information technology infrastructure to help simplify our operating environment, drive productivity, and create consistency and efficiency across our organization. We continue upgrading several key platforms, including our human resources information systems, enterprise resource planning system, and labor management system. We are also utilizing technology to ~~roll out our enterprise-wide standard operating procedures and to~~help improve ~~the~~ processes ~~around our~~company-wide, including account planning, labor management, ~~manager development,~~payroll, and ~~safety initiatives.~~procurement. We ~~are focusing on long term, profitable growth relating~~continue 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~~centralize many of our ~~procurement activities and investing~~back-office functions through our Enterprise Services Center in ~~technology platforms~~Sugar Land, Texas to help drive consistency in practice and ~~sustain~~ ~~2020Vision~~ ~~performance.~~support operating efficiency. In addition, by consolidating purchasing activities we have been able to leverage our scale, increase our purchasing power, and identify preferred suppliers, which has enabled cost saving opportunities in supplies and materials procurement.

Developments and Trends

Economic Labor Outlook

The U.S. economy continues to demonstrate positive underlying fundamentals, with expanding gross domestic product growth and improving employment conditions, which have 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.

~~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 a new minimum tax on

~~Global Intangible Low-Taxed Income (“GILTI”). As a result, in 2019 we expect our effective tax rate to increase from~~Restructuring and Related Costs

During the ~~2018 rate. The estimated impact of the Tax Act, as summarized below for the nine months ended July 31, 2018, is further described in Note 11, “Income Taxes,” in the Financial Statements.~~

Nine Months Ended
(in millions) July 31, 2018
Remeasurement of U.S. deferred tax assets and liabilities $ 28.5
Transition tax on non-U.S. subsidiaries’ earnings (7.0 )
Total impact of the Tax Act on the benefit for income taxes $ 21.5

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 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 from 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. We adjusted our provisional amounts by $0.2 million during the three months ended July 31, 2018.

~~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 $837.5 million in cash (revised during the secondfirst quarter of 2018, to reflect a post-closing purchase price adjustment related to a net working capital settlement) and approximately 9.4 million shares of ABM common stock 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 consolidated statements of comprehensive income (loss) and statements of cash flows include GCA’s results of operations in the three and~~ ~~nine months ended~~ ~~July 31, 2018, but exclude GCA’s results of operations in the three and nine months ended July 31, 2017, as that was prior to the acquisition date. During the three and~~ ~~nine months ended~~ ~~July 31, 2018, we recognized total incremental revenues from GCA of $260.0 million and $768.0 million, respectively, as summarized below.~~

Three Months Ended Nine Months Ended
(in millions) July 31, 2018 July 31, 2018
Education $ 143.5
$ 425.4
Technology & Manufacturing 59.6
178.8
Business & Industry 45.3
128.5
Healthcare 7.1
22.3
Aviation 4.4
13.0
Total $ 260.0
$ 768.0

~~Following this acquisition,~~ we initiated a restructuring program to achieve cost synergies ~~from~~following the acquisition of GCA Services Group (“GCA”). We incurred the majority of our ~~combined operations.~~anticipated severance expense associated with this restructuring program in the first half of 2018. We ~~include these costs within corporate expenses. We do not~~ expect to incur ~~significant severance expenses~~additional charges related to ~~GCA restructuring in~~other project fees as we continue to further integrate and consolidate our operational and financial processes to support the ~~future.~~growth and capabilities of our shared services and operations. Additionally, we continue standardizing our financial systems and streamlining our operations by migrating and upgrading several key management platforms, including our human resources information systems, enterprise resource planning system, and labor management system. We also continue consolidating our real estate leases.


	Three Months Ended		Nine Months Ended				Three Months Ended
(in millions)	July 31, 2018		July 31, 2018		Cumulative		January 31, 2019		Cumulative
Employee Severance	$	1.6	$	11.1	$	12.8	$	1.3	$	14.8
Other Project Fees	1.4		4.9		4.9		2.5		10.3
External Support Fees	—		2.0		2.0		—		2.0
Total	$	3.0	$	18.0	$	19.6	$	3.8	$	27.1

Segment Reporting

~~Effective November 1, 2017, we reorganized our reportable segments to reflect the integration of GCA into our industry group model.~~ Our reportable segments consist of Business & Industry (“B&I”), Aviation, Technology & Manufacturing (“T&M”), Education, Technical Solutions, and Healthcare, as further described below. Effective November 1, 2018, we have modified the presentation of inter-segment revenues, which are recorded at cost with no associated intercompany profit or loss and are eliminated in consolidation. Our prior period segment data has been reclassified to conform with our fiscal 2019 presentation. These changes had no impact on our previously reported consolidated balance sheets, statements of comprehensive income, or statements of cash flows.



REPORTABLE SEGMENTS AND DESCRIPTIONS
	B&I, our largest reportable segment, encompasses janitorial, facilities engineering, and parking services for commercial real estate properties and sports and entertainment venues. B&I also provides vehicle maintenance and other services to rental car ~~providers (“Vehicle Services Contracts”).~~providers.
	Aviation supports airlines and airports with services ranging from parking and janitorial to passenger assistance, catering logistics, air cabin maintenance, and transportation.
	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 legacy Emerging Industries Group. T&M provides janitorial, facilities engineering, and parking ~~services.~~services to industrial and high-tech manufacturing facilities.
	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 legacy Emerging Industries Group.~~
	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.
	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 legacy Emerging Industries Group.~~

~~Prior Year Reclassifications~~Insurance

~~Effective with~~During the ~~reorganization~~three months ended January 31, 2019, we performed an actuarial review of the majority of our ~~reportable segments, we have revised our prior~~casualty insurance programs that considered changes in claim developments and claim payment activity for the period ~~segment information to conform with our fiscal~~commencing May 1, 2018 ~~presentation. These changes had no impact on our previously reported consolidated balance sheets, statements of comprehensive income (loss), or statements of cash flows.~~

~~Insurance~~

and ending October 31, 2018 for all policy years in which open claims existed. The ~~adequacy of 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 studies are used to estimate our insurance rates and insurance reserves for future periods and to adjust reserves, if appropriate, for prior years. This year, the actuarial studies performed indicatereview indicated the changes we have made to our risk management program have reduced the frequency of ~~claims and have had a positive~~claims; however, we are experiencing adverse developments that impact on claim ~~costs. Changes~~costs relating to prior periods. Claim management initiatives include ~~the implementation of~~ programs to identify those claims ~~that have the potential to develop adversely~~ earlier in the claims cycle that may potentially develop adversely and ~~to facilitate~~ensure the establishment of reserves consistent with known fact patterns. However, with respect to claims related to ~~certain~~ prior fiscal years, the actuarial ~~studies completed to date show~~review showed unfavorable developments in our ~~estimate~~estimates of ultimate losses related to general liability, property damage, workers’ compensation, and automobile liability claims. Additionally, we increased our estimate of ultimate losses for workers’ compensation claims, primarily related to claims in California, due to increases in projected costs and severity of claims in certain prior fiscal years, as well as statutory, regulatory, and legal developments.

~~Government Services Business~~

We sold our Government Services business on May 31, 2017. The reported results for this business are through the date of sale and future results could include run-off costs. As this business has been sold and is no longer part of our ongoing operations, we have excluded a discussion of its results for the periods in this report.

Key Financial Highlights

Revenues increased by ~~$305.9~~$19.6 million, or ~~23.2%~~1.2%, ~~including $260.0 million of incremental revenues from the GCA acquisition, during the three months ended July 31, 2018,~~ as compared to the three months ended ~~July~~January 31, ~~2017.~~2018.

Operating profit increased by ~~$25.5~~$10.8 million, or 55.4%, during the three months ended ~~July~~January 31, ~~2018,~~2019, as compared to the three months ended ~~July~~January 31, ~~2017.~~2018. The increase in operating profit is primarily attributable to ~~$9.8 million of incremental operating profit from the GCA acquisition,~~ higher gross margin, particularly within B&I, and lower corporate expenses due to lower restructuring and related ~~expenses, partially offset by higher amortization expense and incremental selling, general and administrative expenses associated with the GCA acquisition.~~

Interest expense increased by $10.1 million during the three months ended July 31, 2018, as compared to the three months ended July 31, 2017, primarily related to increased indebtedness incurred to fund the GCA acquisition and higher relative interest rates under our credit facility, partially offset by amortization of $1.2 million related to the interest rate swap gain.expenses.

Our income taxes from continuing operations for the ~~nine~~three months ended ~~July~~January 31, 2019 increased by $0.7 million due to certain reserves and decreased by $0.5 million of excess tax benefits related to the vesting of share-based compensation awards. Comparatively, the three months ended January 31, 2018, ~~were favorably impacted by~~benefited from a net discrete tax benefit of ~~$21.5~~$21.7 million related to provisional amounts recorded under the Tax ~~Act.~~Cuts and Jobs Act (the “Tax Act”) and $1.5 million of excess tax benefits related to the vesting of share-based compensation awards.

Net cash ~~provided by~~used in operating activities was ~~$207.4~~$39.3 million during the ~~nine~~three months ended ~~July~~January 31, ~~2018.~~2019. 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 2019.

Dividends of ~~$34.5~~$11.9 million were paid to shareholders, and dividends totaling ~~$0.525~~$0.180 per common share were declared during the ~~nine~~three months ended ~~July~~January 31, ~~2018.~~2019.

At ~~July~~January 31, ~~2018,~~2019, total outstanding borrowings under our credit facility were ~~$1.0 billion,~~$997.0 million, and we had up to ~~$477.3~~$410.2 million of borrowing capacity under our credit facility; however, covenant restrictions limited our actual borrowing capacity to ~~$196.0~~$352.5 million.

Results of Operations

Three Months Ended ~~July~~January 31, ~~2018~~2019 Compared with the Three Months Ended ~~July~~January 31, ~~2017~~2018

Consolidated


	Three Months Ended July 31,										Three Months Ended January 31,
($ in millions)	2018			2017			Increase / (Decrease)				2019			2018			Increase / (Decrease)
Revenues	$	1,624.3		$	1,318.4		$	305.9		23.2%	$	1,607.9		$	1,588.3		$	19.6		1.2%
Operating expenses	1,446.7			1,184.5			262.2			22.1%	1,446.0			1,429.3			16.7			1.2%
Gross margin	10.9		%	10.2		%	77 bps				10.1		%	10.0		%	6 bps
Selling, general and administrative expenses	110.0			101.3			8.7			8.6%	112.7			109.0			3.7			3.4%
Restructuring and related expenses	2.9			5.2			(2.3		)	(43.4)%	3.8			14.3			(10.5		)	(73.6)%
Amortization of intangible assets	16.6			6.1			10.5			NM*	15.2			16.2			(1.0		)	(6.2)%
Impairment recovery and gain on sale	—			(1.1		)	1.1			NM*
Operating profit	48.1			22.6			25.5			NM*	30.3			19.5			10.8			55.4%
Income from unconsolidated affiliates, net	1.0			1.2			(0.2		)	(22.2)%	0.9			0.5			0.4			71.1%
Interest expense	(12.9		)	(2.8		)	(10.1		)	NM*	(13.5		)	(14.3		)	0.8			(5.7)%
Income from continuing operations before income taxes	36.1			21.0			15.1			72.1%	17.8			5.8			12.0			NM*
Income tax (provision) benefit	(2.4		)	11.9			(14.3		)	NM*	(4.7		)	22.2			(26.9		)	NM*
Income from continuing operations	33.7			32.9			0.8			2.5%	13.0			28.0			(15.0		)	(53.4)%
Loss from discontinued operations, net of taxes	(0.1		)	—			(0.1		)	NM*	(0.1		)	(0.1		)	—			(55.8)%
Net income	33.6			32.9			0.7			2.2%	13.0			27.8			(14.8		)	(53.4)%
Other comprehensive income (loss)
Other comprehensive income
Interest rate swaps	(1.2		)	(0.3		)	(0.9		)	NM*	(8.7		)	18.6			(27.3		)	NM*
Foreign currency translation	(6.5		)	3.6			(10.1		)	NM*	3.1			9.4			(6.3		)	(67.4)%
Income tax benefit	0.3			0.1			0.2			NM*
Income tax benefit (provision)											2.4			(5.0		)	7.4			NM*
Comprehensive income	$	26.2		$	36.3		$	(10.1	)	(27.7)%	$	9.7		$	50.9		$	(41.2	)	(80.9)%

*Not meaningful

Revenues

Revenues increased by ~~$305.9~~$19.6 million, or ~~23.2%~~1.2%, during the three months ended ~~July~~January 31, ~~2018,~~2019, as compared to the three months ended ~~July~~January 31, ~~2017.~~2018. The increase in revenues was primarily attributable to ~~$260.0 million of incremental revenues from the GCA acquisition as well as~~ organic growth in B&I, in our U.S. Technical Solutions business, and in T&M. This increase was partially offset by a reclassification of $11.3 million of rent expense related to service concession arrangements, primarily within Aviation. This expense was previously recorded as an operating expense but is now recorded as a reduction of revenues, due to the ~~sale~~adoption of Topic 853. Additionally, we lost certain accounts in Aviation, in our ~~Government Services~~U.K. Technical Solutions business, ~~on May 31, 2017~~ and ~~the loss of certain Aviation accounts.~~in Education.

Operating Expenses

Operating expenses increased by ~~$262.2~~$16.7 million, or ~~22.1%~~1.2%, during the three months ended ~~July~~January 31, ~~2018,~~2019, as compared to the three months ended ~~July~~January 31, ~~2017. The~~2018. This increase was ~~primarily attributable to $229.4~~partially offset by the reclassification of $11.3 million of ~~incremental operating expenses from the GCA acquisition and an increase in wages and~~rent expense related ~~personnel costs due~~ to ~~a tight labor market.~~service concession arrangements to revenue, as noted above. Gross margin increased slightly by 776 bps to ~~10.9%~~10.1% in the three months ended ~~July~~January 31, ~~2018~~2019 from ~~10.2%~~10.0% in the three months ended ~~July~~January 31, ~~2017.~~2018. The increase in gross margin was primarily associated with improved margins on certain B&I and T&M accounts, partially offset by a ~~lower~~higher self-insurance adjustment related to prior year claims as a result of an actuarial evaluation completed in the three months ended July 31, 2018, the termination of an unprofitable Aviation contract in the third quarter of 2017, and favorable margins in our Technical Solutions business, all partially offset by lower profit margins on certain B&I accounts.claims.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by ~~$8.7~~$3.7 million, or ~~8.6%~~3.4%, during the three months ended ~~July~~January 31, ~~2018,~~2019, as compared to the three months ended ~~July~~January 31, ~~2017.~~2018. The increase in selling, general and administrative expenses was primarily related to:

~~$9.4~~the absence of a $4.0 million reimbursement of ~~incremental expenses~~previously expensed legal settlement costs;

a $3.7 million increase in technology investments and related ~~to the GCA acquisition;~~support; and

a ~~$1.8~~$2.1 million increase in ~~expenses related to certain incentive plans due to the timing of awards.~~bad debt expense primarily associated with specific reserves established for client receivables.

This increase was partially offset by:

a $5.4 million decrease in compensation and related expenses; and

the absence of ~~$2.2~~$1.4 million of ~~transaction expenses~~acquisition costs related to the GCA ~~acquisition; and~~

~~a $1.0 million decrease in rental expense due to office consolidations~~acquisition in the prior year.

Restructuring and Related Expenses

Restructuring and related expenses decreased by ~~$2.3~~$10.5 million, or ~~43.4%~~73.6%, during the three months ended ~~July~~January 31, ~~2018,~~2019, as compared to the three months ended ~~July~~January 31, ~~2017, as a result~~2018, due to restructuring expenses, mainly severance, incurred in the prior year following the acquisition of ~~the completion of our~~ ~~2020Vision~~ ~~organizational realignment,~~GCA, partially offset by ~~restructuring related to~~continued integration expenses in the ~~GCA acquisition.~~

~~Amortization of Intangible Assets~~

Amortization of intangible assets increased by $10.5 million during the three months ended July 31, 2018, as compared to the three months ended July 31, 2017, as a result of the amortization of acquired intangible assets associated with the GCA acquisition.

~~Impairment Recovery and Gain on Sale~~

On May 31, 2017, we sold our Government Services business for $35.5 million. Based on the initial offer of $35.0 million received during the second quarter of 2017, we recorded a $17.4 million impairment recovery to adjust the fair value of certain previously impaired assets. In connection with the sale, during the third quarter of 2017 we recorded a pre-tax gain of approximately $1.1 million that was subsequently adjusted to $1.2 million due to a working capital settlement.

~~Interest Expense~~

Income Taxes from Continuing Operations

During the three months ended ~~July~~January 31, ~~2018,~~2019, we had an income tax provision of ~~$2.4~~$4.7 million, compared with an income tax benefit of ~~$11.9~~$22.2 million during the three months ended ~~July~~January 31, ~~2017. The 2018 period was favorably impacted~~2018. Our income taxes for the three months ended January 31, 2019 increased by ~~the reduction of the federal corporate income tax rate resulting from the Tax Act. Discrete tax benefits of $4.2 million, including interest of~~ $0.7 million ~~related~~due to ~~expiring statute of limitations for an uncertain tax position~~certain reserves and ~~$1.6~~decreased by $0.5 million of excess tax benefits related to the vesting of share-based compensation ~~awards~~awards. Comparatively, our income taxes for the three months ended January 31, 2018 were ~~also recorded during the quarter. Comparatively, the 2017 period was~~ favorably impacted by a net discrete tax benefit of ~~$15.8 million, including interest of $1.2~~$21.7 million related to ~~expiring statute~~provisional amounts recorded under the Tax Act and $1.5 million of ~~limitations for an uncertain~~excess tax ~~position.~~

benefits related to the vesting of share-based compensation awards.

Interest Rate Swaps

During April 2018, we elected to terminate all of our interest rate swaps for cash proceeds of $25.9 million. The resulting gain is being amortized from accumulated other comprehensive income (loss) (“AOCI”) to interest expense over the term of our Credit Facility.

~~Foreign Currency Translation~~

~~During~~ the three months ended ~~July~~January 31, ~~2018~~2019, we recognized as a component of our comprehensive income a ~~foreign currency translation~~ loss of ~~$6.5~~$8.7 million related to our interest rate swaps, compared with a gain of ~~$3.6~~$18.6 million during the three months ended ~~July~~January 31, ~~2017.~~2018, due to underlying changes in the fair value of the interest rate swaps. Additionally, during the current period we amortized $1.0 million, net of taxes of $0.4 million, of the gain we realized in 2018 from the termination of our prior interest rate swaps.

Foreign Currency Translation

Foreign currency translation gain decreased by $6.3 million during the three months ended January 31, 2019, as compared to the three months ended January 31, 2018. This ~~change~~decrease was related to the ~~strengthening~~greater relative weakening of the U.S. Dollar (“USD”) against the Great Britain Pound ~~(“GBP”)~~ during the three months ended ~~July~~January 31, 2018. 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.

Segment Information

Financial Information for Each Reportable Segment


	Three Months Ended July 31,										Three Months Ended January 31,
($ in millions)	2018			2017			Increase / (Decrease)				2019			2018			Increase / (Decrease)
Revenues
Business & Industry	$	735.2		$	652.6		$	82.6		12.7%	$	774.5		$	756.3		$	18.2		2.4%
Aviation	256.8			258.9			(2.1		)	(0.8)%	252.4			260.1			(7.7		)	(2.9)%
Technology & Manufacturing	230.8			161.5			69.3			42.9%	236.1			232.2			3.9			1.7%
Education	210.9			67.3			143.6			NM*	204.7			206.9			(2.2		)	(1.1)%
Technical Solutions	121.6			106.7			14.9			14.0%	107.9			104.0			3.9			3.7%
Healthcare	69.1			59.3			9.8			16.5%	66.7			67.7			(1.0		)	(1.6)%
Government Services	—			12.3			(12.3		)	NM*
Elimination of inter-segment revenues											(34.4		)	(38.9		)	4.5			11.6%
	$	1,624.3		$	1,318.4		$	305.9		23.2%	$	1,607.9		$	1,588.3		$	19.6		1.2%
Operating profit (loss)
Business & Industry	$	38.9		$	37.3		$	1.6		4.3%	$	36.5		$	28.5		$	8.0		27.8%
Operating profit margin	5.3		%	5.7		%	(42) bps				4.7		%	3.8		%	94 bps
Aviation	9.7			5.4			4.3			80.3%	3.9			5.8			(1.9		)	(32.2)%
Operating profit margin	3.8		%	2.1		%	170 bps				1.6		%	2.2		%	(67) bps
Technology & Manufacturing	16.9			11.0			5.9			53.6%	18.2			16.9			1.3			8.0%
Operating profit margin	7.3		%	6.8		%	51 bps				7.7		%	7.3		%	45 bps
Education	12.0			3.9			8.1			NM*	10.3			9.2			1.1			11.8%
Operating profit margin	5.7		%	5.8		%	(7) bps				5.0		%	4.4		%	58 bps
Technical Solutions	11.9			9.4			2.5			26.1%	5.9			5.5			0.4			8.5%
Operating profit margin	9.8		%	8.8		%	94 bps				5.5		%	5.3		%	24 bps
Healthcare	2.5			2.8			(0.3		)	(8.9)%	1.2			2.7			(1.5		)	(57.5)%
Operating profit margin	3.7		%	4.7		%	(103) bps				1.7		%	4.0		%	(228) bps
Government Services	—			1.7			(1.7		)	NM*	—			(0.7		)	0.7			NM*
Operating profit margin	NM*			14.1		%	NM*				NM*			NM*			NM*
Corporate	(42.7		)	(47.5		)	4.8			10.1%	(44.7		)	(47.4		)	2.7			5.7%
Adjustment for income from unconsolidated affiliates, net, included in Aviation and Government Services	(0.9		)	(1.0		)	0.1			16.8%
Adjustment for income from unconsolidated affiliates, net, included in Aviation											(0.9		)	(0.6		)	(0.3		)	(51.0)%
Adjustment for tax deductions for energy efficient government buildings, included in Technical Solutions	(0.3		)	(0.4		)	0.1			21.1%	—			(0.3		)	0.3			NM*
	$	48.1		$	22.6		$	25.5		NM*	$	30.3		$	19.5		$	10.8		55.4%

*Not meaningful


Business & Industry
	Three Months Ended July 31,									Three Months Ended January 31,
($ in millions)	2018			2017			Increase / (Decrease)			2019			2018			Increase
Revenues	$	735.2		$	652.6		$	82.6	12.7%	$	774.5		$	756.3		$	18.2	2.4%
Operating profit⁽¹⁾	38.9			37.3			1.6		4.3%	36.5			28.5			8.0		27.8%
Operating profit margin	5.3		%	5.7		%	(42) bps			4.7		%	3.8		%	94 bps

⁽¹⁾~~The three months ended July 31, 2018 includes $1.9 million of amortization expense related to the GCA acquisition.~~

B&I revenues increased by ~~$82.6~~$18.2 million, or ~~12.7%~~2.4%, during the three months ended ~~July~~January 31, ~~2018,~~2019, as compared to the three months ended ~~July~~January 31, ~~2017.~~2018. The increase was primarily attributable to ~~incremental revenues from~~organic growth, including the ~~GCA acquisition~~expansion of ~~$45.3 million, new~~a contract ~~wins~~that started in ~~the~~2018 in our U.K., business, targeted expansion of certain ~~existing accounts,~~key clients within our U.S. business, and ~~organic growth.~~additional tag revenue from the holiday season. Management reimbursement revenues for this segment totaled ~~$65.0~~$66.3 million and ~~$59.3~~$63.0 million for the three months ended ~~July~~January 31, 2019 and 2018, ~~and 2017,~~ respectively.

Operating profit increased by ~~$1.6~~$8.0 million, or ~~4.3%~~27.8%, during the three months ended ~~July~~January 31, ~~2018,~~2019, as compared to the three months ended ~~July~~January 31, ~~2017.~~2018. Operating profit margin ~~decreased~~increased by 4294 bps to ~~5.3%~~4.7% in the three months ended ~~July~~January 31, ~~2018~~2019 from ~~5.7%~~3.8% in the three months ended ~~July~~January 31, ~~2017.~~2018. The ~~decrease~~increase in operating profit margin was primarily associated with higher margins on certain accounts in our U.S. business, a decrease in unemployment taxes in certain states, and lower legal settlement costs. This increase was partially offset by lower margins on certain ~~janitorial~~ accounts ~~an increase~~ in ~~amortization expense related to the GCA acquisition,~~our U.K. business and a provision for the settlement of a union health and welfare benefits audit. ~~This decrease was partially offset by the management of selling, general and administrative expenses.~~ While labor challenges are present in certain areas of our B&I business, it is our most mature business and has the highest proportion of unionized labor.


Aviation
	Three Months Ended July 31,										Three Months Ended January 31,
($ in millions)	2018			2017			Increase / (Decrease)				2019			2018			Decrease
Revenues	$	256.8		$	258.9		$	(2.1	)	(0.8)%	$	252.4		$	260.1		$	(7.7	)	(2.9)%
Operating profit	9.7			5.4			4.3			80.3%	3.9			5.8			(1.9		)	(32.2)%
Operating profit margin	3.8		%	2.1		%	170 bps				1.6		%	2.2		%	(67) bps

Aviation revenues decreased by ~~$2.1~~$7.7 million, or ~~0.8%~~2.9%, during the three months ended ~~July~~January 31, ~~2018,~~2019, as compared to the three months ended ~~July~~January 31, ~~2017.~~2018. The decrease was primarily attributable to a reclassification of $11.1 million of rent expense related to service concession arrangements due to the adoption of Topic 853. This expense is now recorded as a reduction of revenues, but had previously been recorded as an operating expense. The decrease was also due to the loss of certain ~~passenger services,~~ facility services and ~~cabin cleaning accounts. This decrease was~~passenger services accounts, partially offset by ~~incremental revenues of $4.4 million from the GCA acquisition and new parking accounts.~~organic growth in catering logistics. Management reimbursement revenues for this segment totaled ~~$23.8~~$24.2 million and ~~$21.9~~$25.5 million for the three months ended ~~July~~January 31, ~~2018~~2019 and ~~2017,~~2018, respectively.

Operating profit ~~increased~~decreased by ~~$4.3~~$1.9 million, or ~~80.3%~~32.2%, during the three months ended ~~July~~January 31, ~~2018,~~2019, as compared to the three months ended ~~July~~January 31, ~~2017.~~2018. Operating profit margin decreased by 67 bps to 1.6% in the three months ended January 31, 2019 from 2.2% in the three months ended January 31, 2018. The decrease in operating profit margin was primarily attributable to operational issues on certain accounts, but was partially offset by higher margins on certain new contracts.



Technology & Manufacturing
	Three Months Ended January 31,
($ in millions)	2019			2018			Increase
Revenues	$	236.1		$	232.2		$	3.9	1.7%
Operating profit	18.2			16.9			1.3		8.0%
Operating profit margin	7.7		%	7.3		%	45 bps

T&M revenues increased by $3.9 million, or 1.7%, during the three months ended January 31, 2019, as compared to the three months ended January 31, 2018. The increase was primarily related to the expansion of existing accounts and net new business.

Operating profit increased by $1.3 million, or 8.0%, during the three months ended January 31, 2019, as compared to the three months ended January 31, 2018. Operating profit margin increased by ~~170~~45 bps to ~~3.8%~~7.7% in the three months ended ~~July~~January 31, ~~2018~~2019 from ~~2.1%~~7.3% in the three months ended ~~July~~January 31, ~~2017.~~2018. The increase in operating profit margin was primarily attributable to improved margins on certain accounts and the ~~termination~~loss of ~~an unprofitable contract~~a low margin account in the ~~third quarter of 2017,~~prior year, partially offset by ~~lower margins~~specific reserves established for client receivables and ~~operational issues on certain accounts.~~an increase in wages and related personnel costs.


Technology & Manufacturing
Education
	Three Months Ended July 31,									Three Months Ended January 31,
($ in millions)	2018			2017			Increase			2019			2018			Increase / (Decrease)
Revenues	$	230.8		$	161.5		$	69.3	42.9%	$	204.7		$	206.9		$	(2.2	)	(1.1)%
Operating profit⁽¹⁾	16.9			11.0			5.9		53.6%	10.3			9.2			1.1			11.8%
Operating profit margin	7.3		%	6.8		%	51 bps			5.0		%	4.4		%	58 bps

⁽¹⁾~~The three months ended July 31, 2018 includes $2.7 million of amortization expense related to the GCA acquisition.~~

~~T&M~~Education revenues ~~increased~~decreased by ~~$69.3~~$2.2 million, or ~~42.9%~~1.1%, during the three months ended ~~July~~January 31, ~~2018,~~2019, as compared to the three months ended ~~July~~January 31, ~~2017.~~2018. The ~~increase~~decrease was ~~primarily related~~attributable to ~~incremental revenues from~~ the ~~GCA acquisition~~loss of ~~$59.6 million, net~~certain accounts in the prior year, partially offset by new ~~business, and expansion of existing accounts.~~business.

Operating profit increased by ~~$5.9~~$1.1 million, or ~~53.6%~~11.8%, during the three months ended ~~July~~January 31, ~~2018,~~2019, as compared to the three months ended ~~July~~January 31, ~~2017.~~2018. Operating profit margin increased by 5158 bps to ~~7.3%~~5.0% in the three months ended ~~July~~January 31, ~~2018~~2019 from ~~6.8%~~4.4% in the three months ended ~~July~~January 31, ~~2017.~~2018. The increase in operating profit margin was primarily attributable to certain ~~higher~~synergies and the loss of certain lower margin ~~acquired contracts. This increase was~~contracts in the prior year, partially offset by ~~higher amortization expense related to the GCA acquisition and~~ an increase in wages and related personnel ~~costs due to a tight labor market.~~

costs.


Education
Technical Solutions
	Three Months Ended July 31,									Three Months Ended January 31,
($ in millions)	2018			2017			Increase / (Decrease)			2019			2018			Increase
Revenues	$	210.9		$	67.3		$	143.6	NM*	$	107.9		$	104.0		$	3.9	3.7%
Operating profit⁽¹⁾	12.0			3.9			8.1		NM*	5.9			5.5			0.4		8.5%
Operating profit margin	5.7		%	5.8		%	(7) bps			5.5		%	5.3		%	24 bps

*Not meaningful

⁽¹⁾~~The three months ended July 31, 2018 includes $6.5 million of amortization expense related to the GCA acquisition.~~

~~Education~~Technical Solutions revenues increased by ~~$143.6~~$3.9 million, or 3.7%, during the three months ended ~~July~~January 31, ~~2018,~~2019, as compared to the three months ended ~~July~~January 31, ~~2017. The~~2018. This increase was primarily attributable to ~~incremental revenues from~~growth in our U.S. business related to power projects and bundled energy solutions projects due to the ~~GCA acquisition~~timing of ~~$143.5 million.~~bookings, partially offset by the contraction of certain accounts in our U.K. business.

Operating profit increased by ~~$8.1~~$0.4 million, or 8.5%, during the three months ended ~~July~~January 31, ~~2018,~~2019, as compared to the three months ended ~~July~~January 31, ~~2017.~~2018. Operating profit margin ~~decreased~~increased by 724 bps to ~~5.7%~~5.5% in the three months ended ~~July~~January 31, ~~2018~~2019 from ~~5.8%~~5.3% in the three months ended ~~July~~January 31, 2017. The decrease in operating profit margin was primarily attributable to amortization expense related to the GCA acquisition and an increase in wages and related personnel costs due to a tight labor market. This decrease was partially offset by certain higher margin contracts.

Technical Solutions
Three Months Ended July 31,
($ in millions) 2018 2017 Increase
Revenues $ 121.6
$ 106.7
$ 14.9
14.0%
Operating profit 11.9
9.4
2.5
26.1%
Operating profit margin 9.8 % 8.8 % 94 bps

Technical Solutions revenues increased by $14.9 million, or 14.0%, during the three months ended July 31, 2018, as compared to the three months ended July 31, 2017. This increase was primarily attributable to higher bundled energy solutions (“BES”) project revenues due to the timing of new bookings.

Operating profit increased by $2.5 million, or 26.1%, during the three months ended July 31, 2018, as compared to the three months ended July 31, 2017. Operating profit margin increased by 94 bps to 9.8% in the three months ended July 31, 2018 from 8.8% in the three months ended July 31, 2017.2018. The increase in operating profit margin was primarily attributable to a decrease in sales commissions expense in the ~~contribution~~current year due to the adoption of ~~higher margin BES project revenues. This~~Topic 606. These amounts were previously expensed when incurred, but are now capitalized and amortized over the weighted average expected customer relationship period. The increase was also due to lower amortization expense. The increase was partially offset by lower margins on certain ~~lower margin~~power projects and on energy savings performance ~~contract projects~~contracts in our U.S. business, ~~that started during the three months ended July 31, 2018 and~~ the loss of certain higher margin contracts in our U.K. ~~business.~~business, and specific reserves established for certain client receivables.


Healthcare
	Three Months Ended July 31,										Three Months Ended January 31,
($ in millions)	2018			2017			Increase / (Decrease)				2019			2018			Decrease
Revenues	$	69.1		$	59.3		$	9.8		16.5%	$	66.7		$	67.7		$	(1.0	)	(1.6)%
Operating profit	2.5			2.8			(0.3		)	(8.9)%	1.2			2.7			(1.5		)	(57.5)%
Operating profit margin	3.7		%	4.7		%	(103) bps				1.7		%	4.0		%	(228) bps

Healthcare revenues ~~increased~~decreased by ~~$9.8~~$1.0 million, or ~~16.5%~~1.6%, during the three months ended ~~July~~January 31, ~~2018,~~2019, as compared to the three months ended ~~July~~January 31, ~~2017. This increase was primarily attributable to incremental revenues from the GCA acquisition of $7.1 million and net new business.~~2018.

Operating profit decreased by ~~$0.3~~$1.5 million, or ~~8.9%~~57.5%, during the three months ended ~~July~~January 31, ~~2018,~~2019, as compared to the three months ended ~~July~~January 31, ~~2017.~~2018. Operating profit margin decreased by ~~103~~228 bps to ~~3.7%~~1.7% in the three months ended ~~July~~January 31, ~~2018~~2019 from ~~4.7%~~4.0% in the three months ended ~~July~~January 31, ~~2017.~~2018. This decrease was primarily attributable to the loss of certain contracts, lower margin new business, ~~partially offset by the management of selling, general~~ and ~~administrative expenses.~~specific reserves established for client receivables.


Corporate
	Three Months Ended July 31,								Three Months Ended January 31,
($ in millions)	2018		2017		Decrease				2019		2018		Decrease
Corporate expenses	$	42.7	$	47.5	$	(4.8	)	(10.1)%	$	44.7	$	47.4	$	(2.7	)	(5.7)%

Corporate expenses decreased by ~~$4.8~~$2.7 million, or ~~10.1%~~5.7%, during the three months ended ~~July~~January 31, ~~2018,~~2019, as compared to the three months ended ~~July~~January 31, ~~2017.~~2018. The decrease in corporate expenses was primarily related to:

a ~~$6.3~~$10.5 million decrease in restructuring and related expenses as a result of restructuring expenses, mainly severance, incurred in the prior year following the acquisition of GCA, partially offset by continued integration expenses in the current year;

$1.7 million lower compensation and related expense; and

the absence of $1.4 million of acquisition costs related to the GCA acquisition in the prior year.

This decrease was partially offset by:

the absence of a $4.0 million reimbursement of previously expensed legal settlement costs;

a $3.7 million increase in technology investments and related support; and

a $3.0 million higher adjustment to self-insurance reserves related to prior year claims as a result of an actuarial ~~evaluation~~review completed in the three months ended ~~July~~January 31, ~~2018;~~

~~a $2.7 million reimbursement of previously expensed legal settlement costs;~~

~~a $2.3 million decrease in restructuring and related expenses due to the completion of our~~ ~~2020Vision~~ ~~restructuring, partially offset by GCA restructuring; and~~

~~the absence of $2.2 million of transaction expenses related to the GCA acquisition.~~

~~This decrease was partially offset by:~~

~~a $3.6 million increase in legal settlement costs;~~

~~a $1.8 million increase in expenses related to certain incentive plans due to the timing of awards; and~~

~~$1.1 million of higher compensation and related expenses primarily related to hiring additional personnel to support our~~ ~~2020Vision~~ ~~initiatives, as well as incremental expenses related to the GCA acquisition.~~

~~Results of Operations~~

~~Nine Months Ended July 31,2018 Compared with the Nine Months Ended July 31, 2017~~

~~Consolidated~~

Nine Months Ended July 31,
($ in millions) 2018 2017 Increase / (Decrease)
Revenues $ 4,793.5
$ 3,955.6
$ 837.9
21.2%
Operating expenses 4,281.8
3,544.1
737.7
20.8%
Gross margin 10.7 % 10.4 % 27 bps
Selling, general and administrative expenses 326.8
299.2
27.6
9.2%
Restructuring and related expenses 22.5
16.0
6.5
41.1%
Amortization of intangible assets 49.5
17.4
32.1
NM*
Impairment recovery and gain on sale —
(18.5 ) 18.5
NM*
Operating profit 112.9
97.4
15.5
15.9%
Income from unconsolidated affiliates, net 2.5
3.6
(1.1 ) (29.3)%
Interest expense (41.0 ) (9.1 ) (31.9 ) NM*
Income from continuing operations before income taxes 74.4
91.9
(17.5 ) (19.1)%
Income tax benefit (provision) 12.7
(11.3 ) 24.0
NM*
Income from continuing operations 87.1
80.6
6.5
8.0%
Income (loss) from discontinued operations, net of taxes 1.0
(73.2 ) 74.2
NM*
Net income 88.1
7.4
80.7
NM*
Other comprehensive income (loss)
Interest rate swaps 22.0
2.3
19.7
NM*
Foreign currency translation (1.5 ) 9.8
(11.3 ) NM*
Income tax provision (5.9 ) (0.9 ) (5.0 ) NM*
Comprehensive income $ 102.6
$ 18.6
84.0
NM*

*Not meaningful

~~Revenues~~

Revenues increased by $837.9 million, or 21.2%, during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017. The increase in revenues was primarily attributable to $770.3 million of incremental revenues from acquisitions, mainly GCA, as well as organic growth in B&I. This increase was partially offset by the sale of our Government Services business on May 31, 2017.

~~Operating Expenses~~

Operating expenses increased by $737.7 million, or 20.8%, during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017. The increase was primarily attributable to $682.0 million of incremental operating expenses from the GCA acquisition and an increase in wages and related personnel costs due to a tight labor market. Gross margin increased by 27 bps to 10.7% in the nine months ended July 31, 2018 from 10.4% in the nine months ended July 31, 2017. The increase in gross margin was primarily associated with a lower self-insurance adjustment related to prior year claims as a result of actuarial studies performed in the nine months ended July 31, 2018, the termination of an unprofitable Aviation contract in the third quarter of 2017, and favorable margins in our U.S. Technical Solutions business, all partially offset by lower profit margins on certain B&I accounts.

~~Selling, General and Administrative Expenses~~

Selling, general and administrative expenses increased by $27.6 million, or 9.2%, during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017. The increase in selling, general and administrative expenses was primarily related to:

~~$29.7 million of incremental expenses related to the GCA acquisition;~~

~~a $6.8 million increase in technology investments and related support;~~

the absence of a $3.2 million reimbursement of previously expensed fees associated with a concluded internal investigation into a foreign entity formerly affiliated with a joint venture during the prior year; and

~~a $2.4 million increase in expenses related to certain incentive plans due to the timing of awards.~~

~~This increase was partially offset by:~~

~~a $3.4 million adjustment to decrease our medical and dental insurance reserves as a result of actuarial evaluations performed in the nine months ended July 31, 2018;~~

~~a $2.5 million decrease in rental expense due to office consolidations in the prior year;~~

~~a $2.0 million decrease in travel and entertainment expenses;~~

~~$1.6 million lower legal settlement costs, net of a $6.8 million reimbursement of previously expensed legal settlement costs; and~~

a $0.6 million decrease in acquisition costs due to the absence of $2.2 million of transaction expenses related to the GCA acquisition incurred in the prior year, partially offset by $1.6 million of acquisition related costs incurred in the current year.

~~Restructuring and Related Expenses~~

Restructuring and related expenses increased by $6.5 million, or 41.1%, during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017, as a result of restructuring related to the GCA acquisition, partially offset by the completion of our ~~2020Vision~~ ~~organizational realignment.~~

~~Amortization of Intangible Assets~~

Amortization of intangible assets increased by $32.1 million during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017, as a result of the amortization of acquired intangible assets associated with the GCA acquisition.

~~Impairment Recovery and Gain on Sale~~

~~Interest Expense~~

Interest expense increased by $31.9 million during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017, primarily related to increased indebtedness incurred to fund the GCA acquisition and higher relative interest rates under our credit facility, partially offset by amortization of $1.2 million related to the interest rate swap gain.

~~Income Taxes from Continuing Operations~~

During the nine months ended July 31, 2018 we had an income tax benefit of $12.7 million, compared with an income tax provision of $11.3 million during the nine months ended July 31, 2017. The 2018 period benefited from a net discrete tax benefit of $21.5 million related to the enactment of the Tax Act, $4.1 million, including taxes of $0.6 million, related to expiring statute of limitations for an uncertain tax position, $3.1 million of excess tax benefits related to the vesting of share-based compensation awards, and $2.6 million related to tax deductions on energy efficient government buildings. These benefits were partially offset by a $1.5 million reduction in certain tax credits, including the prior year WOTC for new hires. The 2017 period was favorably impacted by a benefit of $15.8 million, including interest of $1.2 million, related to expiring statute of limitations for an uncertain tax position, $2.7 million of excess tax benefits related to the vesting of share-based compensation awards, $1.8 million of tax deductions for energy efficient government buildings, and the 2017 WOTC for new hires.

~~Discontinued Operations, Net of Taxes~~

During the nine months ended July 31, 2018 we had income from discontinued operations, net of taxes, of $1.0 million, compared with a loss from discontinued operations, net of taxes, of $73.2 million during the nine months ended July 31, 2017, a change of $74.2 million. This change was due to an insurance reimbursement on a legal settlement received during the nine months ended July 31, 2018, compared with a legal reserve established in the prior year.

~~Interest Rate Swaps~~

During April 2018, we elected to terminate all of our interest rate swaps for cash proceeds of $25.9 million. The resulting gain is being amortized from AOCI to interest expense over the term of our Credit Facility.

~~Foreign Currency Translation~~

During the nine months ended July 31, 2018 we recognized as a component of our comprehensive income a foreign currency translation loss of $1.5 million compared with a gain of $9.8 million during the nine months ended July 31, 2017. This change was related to the strengthening of the USD against the GBP during the nine months ended July 31, 2018. 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.

~~Segment Information~~

~~Financial Information for Each Reportable Segment~~

Nine Months Ended July 31,
($ in millions) 2018 2017 Increase / (Decrease)
Revenues
Business & Industry $ 2,180.5
$ 1,945.6
$ 234.9
12.1%
Aviation 758.3
722.9
35.4
4.9%
Technology & Manufacturing 690.3
494.4
195.9
39.6%
Education 623.5
199.5
424.0
NM*
Technical Solutions 334.1
325.2
8.9
2.8%
Healthcare 206.7
181.6
25.1
13.8%
Government Services —
86.5
(86.5 ) NM*
$ 4,793.5
$ 3,955.6
$ 837.9
21.2%
Operating profit (loss)
Business & Industry $ 111.0
$ 100.4
$ 10.6
10.5%
Operating profit margin 5.1 % 5.2 % (7) bps

Aviation 20.6
16.8
3.8
23.0%
Operating profit margin 2.7 % 2.3 % 40 bps

Technology & Manufacturing 49.8
35.8
14.0
39.2%
Operating profit margin 7.2 % 7.2 % (2) bps

Education 31.8
11.1
20.7
NM*
Operating profit margin 5.1 % 5.6 % (48) bps

Technical Solutions 24.9
27.5
(2.6 ) (9.4)%
Operating profit margin 7.5 % 8.5 % (101) bps

Healthcare 7.9
7.7
0.2
2.8%
Operating profit margin 3.8 % 4.2 % (41) bps

Government Services (0.8 ) 21.8
(22.6 ) NM*
Operating profit margin NM*
25.2 % NM*

Corporate (127.3 ) (118.5 ) (8.8 ) (7.5)%
Adjustment for income from unconsolidated affiliates, net, included in Aviation and Government Services (2.5 ) (3.4 ) 0.9
27.4%
Adjustment for tax deductions for energy efficient government buildings, included in Technical Solutions (2.6 ) (1.8 ) (0.8 ) (48.8)%
$ 112.9
$ 97.4
$ 15.5
15.9%

*Not meaningful

Business & Industry
Nine Months Ended July 31,
($ in millions) 2018 2017 Increase / (Decrease)
Revenues $ 2,180.5
$ 1,945.6
$ 234.9
12.1%
Operating profit⁽¹⁾
111.0
100.4
10.6
10.5%
Operating profit margin 5.1 % 5.2 % (7) bps

⁽¹⁾~~The nine months ended July 31, 2018 includes $5.6 million of amortization expense related to the GCA acquisition.~~

B&I revenues increased by $234.9 million, or 12.1%, during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017. The increase was primarily attributable to incremental revenues from the GCA acquisition of $128.5 million and to net new business, including new contract wins in the U.K., expansion of certain existing accounts, and organic growth. Management reimbursement revenues for this segment totaled $191.4 million and $175.2 million for the nine months ended July 31, 2018 and 2017, respectively.

Operating profit increased by $10.6 million, or 10.5%, during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017. Operating profit margin decreased slightly by 7 bps to 5.1% in the nine months ended July 31, 2018 from 5.2% in the nine months ended July 31, 2017. Operating profit margin was impacted by lower margins on certain janitorial accounts and Vehicle Services Contracts, as well as an increase in amortization expense related to the GCA acquisition, partially offset by the management of selling, general and administrative expenses. While labor challenges are present in certain areas of our B&I business, it is our most mature business and has the highest proportion of unionized labor.

Aviation
Nine Months Ended July 31,
($ in millions) 2018 2017 Increase
Revenues $ 758.3
$ 722.9
$ 35.4
4.9%
Operating profit 20.6
16.8
3.8
23.0%
Operating profit margin 2.7 % 2.3 % 40 bps

Aviation revenues increased by $35.4 million, or 4.9%, during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017. The increase was primarily attributable to organic growth in parking and transportation and to incremental revenues of $13.0 million from the GCA acquisition. This increase was partially offset by the loss of certain janitorial, facility services, and passenger services accounts. Management reimbursement revenues for this segment totaled $76.9 million and $54.7 million for the nine months ended July 31, 2018 and 2017, respectively.

Operating profit increased by $3.8 million, or 23.0%, during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017. Operating profit margin increased by 40 bps to 2.7% in the nine months ended July 31, 2018 from 2.3% in the nine months ended July 31, 2017. The increase in operating profit margin was primarily attributable to the termination of an unprofitable contract in the third quarter of 2017 and the management of selling, general and administrative expenses. This increase was partially offset by lower margins and operational issues on certain accounts.

Technology & Manufacturing
Nine Months Ended July 31,
($ in millions) 2018 2017 Increase / (Decrease)
Revenues $ 690.3
$ 494.4
$ 195.9
39.6%
Operating profit⁽¹⁾
49.8
35.8
14.0
39.2%
Operating profit margin 7.2 % 7.2 % (2) bps

⁽¹⁾~~The nine months ended July 31, 2018 includes $7.9 million of amortization expense related to the GCA acquisition.~~

T&M revenues increased by $195.9 million, or 39.6%, during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017. The increase was primarily related to incremental revenues from the GCA acquisition of $178.8 million.

Operating profit increased by $14.0 million, or 39.2%, during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017. Operating profit margin remained relatively flat at 7.2% in the nine months ended July 31, 2018 and 2017. Operating profit margin was impacted by higher amortization expense related to the GCA acquisition and an increase in wages and related personnel costs due to a tight labor market, partially offset by certain higher margin acquired contracts.

Education
Nine Months Ended July 31,
($ in millions) 2018 2017 Increase / (Decrease)
Revenues $ 623.5
$ 199.5
$ 424.0
NM*
Operating profit⁽¹⁾
31.8
11.1
20.7
NM*
Operating profit margin 5.1 % 5.6 % (48) bps

*Not meaningful

⁽¹⁾~~The nine months ended July 31, 2018 includes $19.3 million of amortization expense related to the GCA acquisition.~~

Education revenues increased by $424.0 million during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017. The increase was attributable to incremental revenues from the GCA acquisition of $425.4 million.

Operating profit increased by $20.7 million during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017. Operating profit margin decreased by 48 bps to 5.1% in the nine months ended July 31, 2018 from 5.6% in the nine months ended July 31, 2017. The decrease in operating profit margin was primarily associated with higher amortization expense related to the GCA acquisition and an increase in wages and related personnel costs due to a tight labor market. This decrease was partially offset by certain higher margin acquired contracts and the management of selling, general and administrative expenses.

Technical Solutions
Nine Months Ended July 31,
($ in millions) 2018 2017 Increase / (Decrease)
Revenues $ 334.1
$ 325.2
$ 8.9
2.8%
Operating profit 24.9
27.5
(2.6 ) (9.4)%
Operating profit margin 7.5 % 8.5 % (101) bps

Technical Solutions revenues increased by $8.9 million, or 2.8%, during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017. This increase was primarily attributable to higher BES project revenues due to the timing of new project bookings.

Operating profit decreased by $2.6 million, or 9.4%, during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017. Operating profit margin decreased by 101 bps to 7.5% in the nine months ended July 31, 2018 from 8.5% in the nine months ended July 31, 2017. The decrease in operating profit margin was primarily attributable to the loss of certain higher margin contracts in our U.K. business and to the investment in sales personnel. This decrease was partially offset by favorable margins on certain projects in our U.S. business and higher tax deductions for energy efficient government building projects.

Healthcare
Nine Months Ended July 31,
($ in millions) 2018 2017 Increase / (Decrease)
Revenues $ 206.7
$ 181.6
$ 25.1
13.8%
Operating profit 7.9
7.7
0.2
2.8%
Operating profit margin 3.8 % 4.2 % (41) bps

Healthcare revenues increased by $25.1 million, or 13.8%, during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017. This increase was primarily attributable to incremental revenues from the GCA acquisition of $22.3 million and net new business.

Operating profit increased by $0.2 million, or 2.8%, during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017. Operating profit margin decreased by 41 bps to 3.8% in the nine months ended July 31, 2018 from 4.2% in the nine months ended July 31, 2017. This decrease was primarily attributable to lower margin new business, partially offset by the management of selling, general and administrative expenses.

Corporate
Nine Months Ended July 31,
($ in millions) 2018 2017 Increase
Corporate expenses $ 127.3
$ 118.5
$ 8.8
7.5%

Corporate expenses increased by $8.8 million, or 7.5%, during the nine months ended July 31, 2018, as compared to the nine months ended July 31, 2017. The increase in corporate expenses was primarily related to:

~~a $6.8 million increase in technology investments and related support;~~

~~a $6.5 million increase in restructuring and related costs as a result of the GCA acquisition;~~

~~$3.8 million higher compensation and related expenses primarily related to hiring additional personnel to support our~~ ~~2020Vision~~ ~~initiatives, as well as incremental expenses related to the GCA acquisition;~~

~~a $2.4 million increase in expenses related to certain incentive plans due to the timing of awards; and~~

~~a $1.6 million increase in legal settlement costs, net of a $6.8 million reimbursement of previously expensed legal settlement costs.~~

~~This increase was partially offset by:~~

~~a $12.3 million lower adjustment to self-insurance reserves related to prior year claims as a result of actuarial studies completed in the nine months ended July 31, 2018;~~

~~a $3.4 million adjustment to decrease our medical and dental insurance reserves as a result of actuarial evaluations performed in the nine months ended July 31, 2018; and~~

2019.

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, and integration costs related to the GCA acquisition. We anticipate long-term cash uses will also include strategic acquisitions and share repurchases.

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 and~~any 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 2020 Vision, 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. 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,~~2019, we expect accelerated cash tax savings related to coverage provided by IFM ~~will~~to be ~~between~~approximately $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. In accordance with the terms of the Credit Facility, the line of credit was reduced to $800.0 million 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 include a maximum leverage ratio of ~~4.75~~4.50 to 1.0, ~~through April 2018,~~ which steps down to 3.50 to 1.0 by July ~~2020,~~2021, 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 ~~July~~January 31, ~~2018,~~2019, we were in compliance with these covenants and expect to be in compliance in the foreseeable future. ~~On September 5, 2018, we amended our Credit Facility to increase the maximum leverage ratio for fiscal quarters commencing July 31, 2018 through April 30, 2021 by 25 basis points for such quarters.~~

During the first quarter of 2019, we made ~~$20.0~~$10.0 million of principal payments under the Credit Facility. At ~~July~~January 31, ~~2018,~~2019, the total outstanding ~~amounts~~borrowings under ~~the~~our Credit Facility in the form of cash borrowings and standby letters of credit were ~~$1.0 billion~~$997.0 million and ~~$155.5~~$152.4 million, respectively. At ~~July~~January 31, ~~2018,~~2019, we had up to ~~$477.3~~$410.2 million of borrowing capacity under the Credit Facility; however, covenant restrictions limited our actual borrowing capacity to ~~$196.0~~$352.5 million.

Reinvestment of Foreign Earnings

We plan to reinvest our foreign earnings to fund future non-U.S. growth and expansion, and we do not anticipate remitting such earnings to the United States. While U.S. federal tax expense has been recognized as a result of the Tax Act, 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 of our common stock. 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 program may be suspended or discontinued at any time without prior notice. There were no share repurchases during the ~~nine~~three months ended ~~July~~January 31, ~~2018.~~2019. At ~~July~~January 31, ~~2018,~~2019, authorization for $134.1 million of repurchases remained under our share repurchase program. ~~Additional repurchases are not likely in the near future.~~

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 by~~used in operating activities was ~~$207.4~~$39.3 million during the ~~nine~~three months ended ~~July~~January 31, ~~2018.~~2019. 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 2019. 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.

Nine Months Ended July 31,
(in millions) 2018 2017
Net cash provided by operating activities of continuing operations $ 206.4
$ 82.6
Net cash provided by (used in) operating activities of discontinued operations 1.0
(57.2 )
Net cash provided by operating activities $ 207.4
$ 25.3

Net cash used in investing activities (36.3 ) (23.9 )
Net cash used in financing activities (187.7 ) (8.7 )



	Three Months Ended January 31,
(in millions)	2019			2018
Net cash (used in) provided by operating activities	$	(39.3	)	$	33.7
Net cash used in investing activities	(11.4		)	(15.3		)
Net cash provided by (used in) financing activities	42.0			(14.3		)

Operating Activities

Net cash used in operating activities was $39.3 million during the three months ended January 31, 2019, as compared to net cash provided by operating activities ~~increased by $182.1~~of $33.7 million during the ~~nine~~three months ended ~~July~~January 31, ~~2018, as compared to the nine months ended July 31, 2017.~~2018. This ~~increase~~change was primarily related to the timing of client receivable collections, including collections from acquired GCA accounts, as well as proceeds from the termination of our interest rate swaps and a year-over-year increase in the change in other assets due to the reduction of required cash insurance deposits. This increase was partially offset by lower distributions from unconsolidated affiliates and the timing of vendor payments.

~~Operating Activities of Discontinued Operations~~

Net cash provided by operating activities of discontinued operations was $1.0 million during the nine months ended July 31, 2018, as compared to net cash used in operating activities of discontinued operations of $57.2 million during the nine months ended July 31, 2017. The change was primarily related to the payment of a $55.0 million legal settlement during the prior period.collections.

Investing Activities

Net cash used in investing activities ~~increased~~decreased by ~~$12.4~~$3.9 million during the ~~nine~~three months ended ~~July~~January 31, ~~2018,~~2019, as compared to the ~~nine~~three months ended ~~July~~January 31, ~~2017.~~2018. The ~~increase~~decrease was primarily ~~due~~related to a working capital settlement associated with the ~~absence of $35.5 million of cash proceeds from the sale of our Government Services business~~GCA acquisition in the prior ~~period, partially offset by an $18.6 million year-over-year decrease in cash paid, net of cash acquired, for acquisitions.~~year.

Financing Activities

Net cash provided by financing activities was $42.0 million during the three months ended January 31, 2019 as compared to net cash used in financing activities ~~increased by $179.0~~of $14.3 million during the ~~nine~~three months ended ~~July~~January 31, ~~2018, as compared to the nine months ended July 31, 2017.~~2018. This ~~increase~~change was primarily related to higher ~~repayments of our~~net borrowings of ~~$151.5~~$46.7 million.

Contingencies

At ~~July~~January 31, ~~2018,~~2019, the total amount accrued for all probable litigation losses where a reasonable estimate of the loss could be made was ~~$11.7~~$12.1 million.

For additional information about our contingencies, see Note ~~10,~~9, “Commitments and Contingencies,” in the Financial Statements.

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 estimates in the application of our accounting policies based on the best assumptions, judgments, and opinions of our management. On November 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and ASU 2017-10, Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services. Refer to Note 2, “Basis of Presentation and Significant Accounting Policies,” and Note 3, “Revenue,” in the Financial Statements for additional information regarding the impact of adopting these standards. Additionally, refer to Note 2, “Basis of Presentation and Significant Accounting Policies,” for other standards adopted during the first quarter of 2019, none of which had a material impact on our consolidated financial statements. There have been no other 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 Standard	Description	Effective Date/Method of Adoption	Effect on the Financial Statements
In ~~August~~November 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606.	This ASU 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 precludes presenting the collaborative arrangement transaction together with revenue recognized under Topic 606 if the collaborative arrangement participant is not a customer.	November 1, 2020, applied retrospectively.	We are currently evaluating the impact of implementing this guidance on our financial statements.
In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities.	This ASU provides that indirect interest 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.	November 1, 2020	We are currently evaluating the impact of implementing this guidance on our financial statements.
In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as a Benchmark Interest Rate for Hedge Accounting ~~Standards Update (“ASU”)~~Purposes.	This ASU adds the OIS rate based on 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.	Since we early adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which simplified hedge accounting, this update will be effective for us on November 1, 2020 on a prospective basis.	We are currently evaluating the impact of implementing this guidance on our financial statements.



Accounting Standard	Description	Effective Date/Method of Adoption	Effect on the Financial Statements
In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Topic 350).	This ASU 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.	November 1, 2020	We are currently evaluating the impact of implementing this guidance on our financial statements.
In August 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—General (Topic 715).	This ASU modifies the disclosure requirements on company-sponsored defined benefit plans.	November 1, 2020	We are currently evaluating the impact of implementing this guidance on our financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework.	This ASU 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.	November 1, 2020	We are currently evaluating the impact of implementing this guidance on our financial statements.
In ~~March 2018,~~June 2016, the FASB issued ASU ~~2018-05,~~2016-13, ~~Income Taxes~~Financial Instruments—Credit Losses (Topic ~~740).~~	~~This ASU incorporates the provisions~~326): Measurement of ~~SAB 118 into the accounting standards codification. SAB 118 provides guidance~~Credit Losses 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.~~	~~This standard became effective upon issuance.~~	~~We applied SAB 118 to our financial statements upon its original issuance in December 2017, prior to the codification in ASC 740. Refer to Note 11, “Income Taxes,” in the~~ Financial Statements ~~for a discussion of the impacts of the Tax Act on our consolidated financial statements.~~



~~Accounting Standard~~	~~Description~~	~~Effective Date/Method of Adoption~~	~~Effect on the Financial Statements~~
~~In March 2018, the FASB issued ASU 2018-04,~~ ~~Investments—Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SAB No. 117 and SEC Release No. 33-9273.~~.	This ASU ~~deletes ASC 320-10-S99-1, which had codified SAB Topic 5.M, and also removes special requirements~~replaces the existing incurred loss impairment model with a methodology that incorporates all expected credit loss estimates, resulting in ~~SEC Regulation S-X Rule 3A-05 for public utility holding companies. In November 2017, the SEC issued SAB 117 to bring its existing guidance into conformity with Topic 321,~~ ~~Investments—Equity Securities. SAB 117 states that SAB Topic 5.M,~~ ~~Other Than Temporary Impairment~~more timely recognition of ~~Certain Investments in Equity Securities,~~ ~~is no longer applicable upon adoption of ASC 321.~~ losses.	November 1, ~~2018~~2020 This standard 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, except for certain provisions that are required to be applied prospectively.	We are currently evaluating the impact of implementing this guidance on our ~~consolidated~~ financial statements.
~~In February 2018, the FASB issued ASU 2018-02,~~ ~~Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.~~	~~This ASU permits an entity to reclassify the income tax effects of the Tax Act on items within accumulated other comprehensive income into retained earnings.~~	~~This standard will be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the tax laws or rates were recognized.~~	~~We are currently evaluating the impact of implementing this guidance on our consolidated financial statements.~~
~~In August 2017, the FASB issued ASU 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.~~	~~This ASU better aligns accounting rules with a company’s risk management activities; better reflects economic results of hedging in financial statements; and simplifies hedge accounting treatment.~~	~~We early adopted this standard in the first quarter of 2018 using a modified retrospective approach.~~	~~Our adoption of this guidance did not have a material impact on our current hedging arrangements or on the disclosures related to such arrangements.~~
In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842). ~~This guidance was additionally updated by~~The FASB has issued several updates to ASU 2016-02, including ASU 2018-11, Leases (Topic 842): Targeted Improvements, and ASU 2018-10, Codification Improvements to Topic 842, Leases, that were issued in July 2018.	ASU 2016-02 improves transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and to disclose key information about leasing arrangements. ASU 2018-11 ~~added~~and ASU 2018-10 amend various aspects of Topic 842, including an additional transition method.	November 1, 2019 This guidance may be applied through a modified retrospective transition ~~option~~approach for ~~lessees whereby entities can choose to continue to apply~~leases existing at, or entered into after, the ~~legacy~~beginning of the earliest comparative period presented in the financial statements with certain practical expedients available. Alternatively, this guidance ~~and make only annual disclosures for~~may also be applied at the ~~comparative periods, or, for those who elect the transition option, can recognize~~adoption date by recognizing a ~~cumulative effect~~cumulative-effect adjustment to the opening balance of retained earnings in the period of ~~adoption, rather than the earliest period presented.~~	~~November 1, 2019~~adoption.	We are currently evaluating the impact of implementing this guidance on our ~~consolidated~~ financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

During April 2018, we elected to terminate all of our interest rate swaps. We have subsequently entered into new forward-starting interest rate swaps that are effective November 1, 2018. Refer to Note 9, “Credit Facility,” in the unaudited consolidated financial statements and the accompanying notes. There are no other material changes related to market risk from the disclosures in our Annual Report on Form 10-K for the year ended October 31, ~~2017.~~2018.

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 completed the acquisition of GCA, as described elsewhere in this report.~~ We continue to integrate policies, processes, personnel, technology, and operations relating to this transaction and will continue to evaluate the impact of any related changes to our control over financial reporting. Additionally, we continue to migrate many of our financial reporting and other processes to ~~our Enterprise Services Center as part~~the ABM enterprise service center along with integrating GCA. These are enhancements of ongoing activities to support the growth of our financial shared service capabilities and standardize our financial systems. We also continue to update several key platforms, including our human resources information systems, enterprise resource planning system, and labor management system~~2020Vision~~. ~~strategic transformation initiative.~~Both the migration of GCA’s back-office functions to the ABM enterprise service center and the implementation of several key platforms involve changes in the systems that include internal controls. Although 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 procedures.

There were no other changes in our internal control over financial reporting during the ~~third~~first quarter of ~~2018~~2019 identified in connection with the evaluation required by ~~Rule~~Rules 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,~~9, “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,~~2018, in response to Item 1A., “Risk Factors,” of Part I of the Annual ~~Report, except as described below.~~

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.Report.

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 of our common stock. During the ~~nine~~three months ended ~~July~~January 31, ~~2018,~~2019, there were no share repurchases. At ~~July~~January 31, ~~2018,~~2019, authorization for $134.1 million of repurchases remained under our share repurchase program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

On September 5, 2018, the Company entered into an amendment to the Credit Agreement dated September 1, 2017 (the “Amendment”) by and among the Company, the designated borrowers identified on the signature pages thereto, the guarantors identified on the signature pages thereto, and the lenders party thereto, and Bank of America, N.A., as administrative agent. The Amendment increases the maximum total leverage ratio applicable to the Company for fiscal quarters commencing July 31, 2018 through April 30, 2021 by 25 basis points from those specified in the Credit Agreement dated September 1, 2017 for such periods.

The foregoing summary of the Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Amendment, which is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.Not applicable.

ITEM 6. EXHIBITS.

(a) Exhibits



Exhibit No.		Exhibit Description
~~10.1‡~~ 3.1		~~First Amendment,~~Amended and Restated Bylaws of ABM Industries Incorporated, dated December 4, 2018 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on December 10, 2018)
10.1*†		Executive Employment Agreement, dated as of ~~July 3,~~March 1, 2018, ~~to the Credit Agreement dated September 1, 2017,~~ by and ~~among~~between ABM Industries Incorporated a Delaware corporation, the Designated Borrowers identified on the signature pages thereto, the Guarantors identified on the signatures pages thereto, the Lenders identified on the signature pages thereto, and ~~Bank of America, N.A., as Administrative Agent.~~Andrea Newborn
~~10.2‡~~10.2*†		~~Second Amendment, dated September 5, 2018, to the Credit~~Change in Control Agreement, dated ~~September~~as of March 1, ~~2017,~~2018, by and ~~among~~between ABM Industries Incorporated a Delaware corporation, the Designated Borrowers identified on the signature pages thereto, the Guarantors identified on the signatures pages thereto, the Lenders identified on the signature pages thereto and ~~Bank of America, N.A., as Administrative Agent.~~Andrea Newborn
~~31.1‡~~31.1†		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
~~31.2‡~~31.2†		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
~~32†~~32‡		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
~~101.INS~~101.INS†		XBRL Report Instance Document
~~101.SCH~~101.SCH†		XBRL Taxonomy Extension Schema Document
~~101.CAL~~101.CAL†		XBRL Taxonomy Calculation Linkbase Document
~~101.DEF~~101.DEF†		XBRL Taxonomy Extension Definition Linkbase Document
~~101.LAB~~101.LAB†		XBRL Taxonomy Label Linkbase Document
~~101.PRE~~101.PRE†		XBRL Presentation Linkbase Document



*	Indicates management contract or compensatory plan, contract, or arrangement.

‡†	Indicates filed herewith

†‡	Indicates furnished herewith

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



~~September~~March 7, ~~2018~~2019		/s/ D. Anthony Scaglione
		D. Anthony Scaglione Executive Vice President and Chief Financial Officer (Duly Authorized Officer)



~~September~~March 7, ~~2018~~2019		/s/ Dean A. Chin
		Dean A. Chin Senior Vice President, Chief Accounting Officer, and Corporate Controller (Principal Accounting Officer)

5144



(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⁽¹⁾	837.5
Total consideration transferred	$	1,258.8



	As reported at						As reported at
(in millions)	October 31, 2017			Adjustments			July 31, 2018
Cash and cash equivalents	$	2.5		$	(2.3	)	$	0.2
Trade accounts receivable⁽¹⁾	118.1			(0.4		)	117.7
Prepaid expenses and other current assets	10.3			(0.3		)	10.1
Property, plant and equipment	41.4			0.1			41.5
Customer relationships⁽²⁾	340.0			(10.0		)	330.0
Trade names⁽²⁾	9.0			—			9.0
Goodwill⁽³⁾	933.9			0.3			934.2
Other assets	4.2			(0.2		)	4.0
Trade accounts payable	(9.1		)	(0.4		)	(9.6		)
Insurance reserves	(35.5		)	(0.6		)	(36.1		)
Income taxes payable	(16.5		)	8.2			(8.3		)
Accrued liabilities	(36.5		)	3.3			(33.1		)
Deferred income tax liability, net	(92.6		)	—			(92.6		)
Other liabilities	(8.1		)	—			(8.1		)
Net assets acquired	$	1,261.3		$	(2.4	)	$	1,258.8

Refer to Note 2, “Basis of Presentation and Significant Accounting ~~Standard~~

~~Description~~

~~Effective Date/Method of Adoption~~

~~Effect on~~Policies,” in the 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~~

This standard will be applied as a full retrospective adoption to all periods presented or a modified retrospective adoption approach with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption.

To assess the impact of this standard, we have established a cross-functional implementation team consisting of representatives from all of our operating segments. The implementation team is completing the analysis of our contract portfolio to identify potential differences that would result from applying the requirements of this new standard. In addition, we continue to identify and implement the appropriate changes to our business processes and controls to support revenue recognition and disclosure under this new standard. We expect adoption of this standard to have an impact on the timing of revenue recognition related to certain lines of business and the financial statement line item reporting of certain items. Additionally, the accounting for certain direct and incremental contract costs is significantly different from our current capitalization policy; however, the full impact of this difference is currently unknown. We are continuing to evaluate the impact of this ASU and an estimate of the impact to our consolidated financial statements cannot be made at this time. We expect to adopt using the modified retrospective approach, under which we will present the cumulative effect of adoption as an adjustment to the opening balance of retained earnings at the adoption date.additional information.