Edgar Filing: ABM INDUSTRIES INC /DE/

Accounting Standard

Description

Effective Date/Method of Adoption

Effect on the Financial Statements

In August 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.

November 1, 2019

We are currently evaluating the impact of this ASU on our consolidated financial statements.

In May 2017, the FASB issued ASU 2017-10, Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services.

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________

FORM 10-K

(Mark One)



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

For the fiscal year ended October 31, 2017



¨	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)

__________________

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



Title of each class		Name of each exchange on which registered
Common Stock, $0.01 par value		New York Stock Exchange

__________________________

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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	o	Non-accelerated filer	o	Smaller reporting company	o	Emerging growth company	o

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 Act). Yes o No þ

Aggregate market value of the registrant’s common stock held by non-affiliates of the registrant, based upon the closing price of a share of the registrant’s common stock on April 30, 2017 as reported on the New York Stock Exchange on that date: $2,389,186,450

Number of shares of the registrant’s common stock outstanding as of December 8, 2017: 65,514,281

_______________________________________________

DOCUMENTS INCORPORATED BY REFERENCE

Parts of the registrant’s Definitive Proxy Statement relating to the registrant’s 2018 Annual Meeting of Shareholders, to be held on March 7, 2018, are incorporated by reference into Part III of this Annual Report on Form 10-K.

ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES

TABLE OF CONTENTS



FORWARD-LOOKING STATEMENTS	1
PART I	2
Item 1. Business.	2
Item 1A. Risk Factors.	7
Item 1B. Unresolved Staff Comments.	12
Item 2. Properties.	13
Item 3. Legal Proceedings.	13
Item 4. Mine Safety Disclosures.	15
PART II	16
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	16
Item 6. Selected Financial Data.	18
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	20
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.	48
Item 8. Financial Statements and Supplementary Data.	49
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.	92
Item 9A. Controls and Procedures.	92
Item 9B. Other Information.	92
PART III	93
Item 10. Directors, Executive Officers and Corporate Governance.	93
Item 11. Executive Compensation.	93
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	93
Item 13. Certain Relationships and Related Transactions, and Director Independence.	93
Item 14. Principal Accounting Fees and Services.	93
PART IV	94
Item 15. Exhibits, Financial Statement Schedules.	94
SIGNATURES	95

FORWARD-LOOKING STATEMENTS

This Form 10-K for ABM Industries Incorporated and its subsidiaries (collectively referred to as “ABM,” “we,” “us,” “our,” or the “Company”) contains both historical and forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. 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. Factors that might cause such differences include, but are not limited to, those discussed in Part 1 of this Form 10-K under Item 1A., “Risk Factors,” which are incorporated herein by reference, and 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

ITEM 1. BUSINESS.

General

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 solutions with a mission to make a difference, every person, every day. Our history dates back to 1909, when American Building Maintenance Company began as a window washing company in San Francisco with one employee. In 1985, we were incorporated in Delaware under the name American Building Maintenance Industries, Inc., as the successor to the business originally founded in 1909. In 1994, we changed our name to ABM Industries Incorporated. Over the past ten years, we have grown into a multi-segment facility solutions company, particularly through new service offerings and strategic acquisitions:

The acquisition of OneSource in 2007 bolstered ABM as a leader in the janitorial market, while the Linc Group acquisition in 2010 established ABM as a “facility solutions” company with new service offerings, including lighting, mechanical, and electrical “technical solutions.” With demand increasing for industry-specific service providers, in 2012 we purchased Air Serv and established our first industry group, “aviation,” which was previously included in “other.” In recent years, we have strategically acquired companies in the U.K., particularly with the GBM and Westway acquisitions, which expanded overseas both our janitorial and technical solutions businesses. In 2017, we completed the acquisition of GCA Services, a provider of integrated facility services to educational institutions and commercial facilities for $1.3 billion, the largest acquisition in ABM history. As a result of this acquisition, we are now a leading facility solutions provider in the education market. In recent years, we also evaluated all of our service offerings and sold our Security and Government Services businesses as they did not align with ABM’s long-term industry-group focus.

As a result of these strategic acquisitions, we have strengthened our ability to offer janitorial, facilities engineering, parking, and specialized mechanical and electrical technical solutions, on a standalone basis or in combination, and positioned ourselves as a leading integrated facilities management company. Unless otherwise indicated, all references to years are to our fiscal year, which ends on October 31.

2020 Vision

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 2020 Vision involves three phases: During Phase 1, which we 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 efficiencies and process enhancements; and in Phase 3, on the foundation of benefits realized from Phases 1 and 2, we anticipate accelerating growth with our industry-based, go-to-market service model. For additional information on our 2020 Vision, see Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Contract Types

We generate revenues under several types of contracts, as explained below. Generally, the type of contract is determined by the nature of the services. Although many of our service agreements are cancelable on short notice, we have historically had a high client retention rate and expect to continue maintaining long-term relationships with our clients.



Contract Type	Description
Monthly Fixed-Price	These arrangements are contracts in which the client agrees to pay a fixed fee every month over a specified contract term. A variation of a fixed-price arrangement is a square-foot arrangement, under which monthly billings are based on the actual square footage serviced. Janitorial contracts are commonly structured as fixed-price arrangements.
Cost-Plus	These 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. Facilities engineering, janitorial, and catering services are commonly structured as cost-plus arrangements.
Tag Services	Tag work generally consists of supplemental services requested by clients outside of the standard service specification. This contract type is commonly used in janitorial services and includes cleanup after tenant moves, construction cleanup, flood cleanup, and snow removal.
Transaction-Price	These are agreements in which the clients are billed for each transaction performed on a monthly basis (e.g., wheelchair passengers served or aircrafts cleaned).
Hourly	These arrangements are contracts in which the client is billed a set hourly rate for each labor hour provided. Certain Aviation contracts are structured as hourly arrangements.
Management Reimbursement	Under these parking arrangements, we manage a parking facility for a management fee and pass through the revenue and expenses associated with the facility to the owner.
Leased Location	Under these parking arrangements, we generally pay to the property owner a fixed amount of rent, plus a percentage of revenues derived from monthly and transient parkers. We retain all revenues and we are responsible for most operating expenses incurred.
Allowance	Under these parking arrangements, we are paid a fixed or hourly fee to provide parking services, and we are responsible for certain operating expenses, as specified in the contract.
Energy Savings Contracts and Fixed-Price Repair and Refurbishment	Under these arrangements, we agree to develop, design, engineer, and construct a project and guarantee that the project will satisfy agreed-upon performance standards.
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.

Segment and Geographic Financial Information

For management and financial reporting purposes, our businesses are currently separated into five reportable segments: Business & Industry (“B&I”), Aviation, Emerging Industries Group, Technical Solutions, and the newly acquired GCA Services. Among other changes, once we integrate GCA into our industry group model in 2018, we anticipate our Education industry group will become a reportable segment. We also expect to present a new Technology & Manufacturing reportable segment, that will combine our High Tech industry group and the legacy GCA and ABM Industrial & Manufacturing (“I&M”) businesses. ABM’s legacy I&M business was included in the B&I segment. Our principal operations are in the United States, and in 2017 our U.S. operations generated approximately 94% of our revenues. For segment and geographical financial information, see Note 18, “Segment and Geographic Information,” in the Notes to Consolidated Financial Statements.



ONGOING REPORTABLE SEGMENTS AND DESCRIPTIONS
	B&I, our largest reportable segment, encompasses janitorial, facilities engineering, and parking services for commercial real estate properties, sports and entertainment venues, and industrial and manufacturing sites. We typically provide these services pursuant to monthly fixed-price and cost-plus arrangements that are obtained through a competitive bid process.
	Aviation supports airlines and airports with services ranging from parking and janitorial to passenger assistance, catering, air cabin maintenance, and transportation. We typically provide services to clients in this segment under master services agreements. These agreements are typically re-bid upon renewal and are generally structured as fixed-price arrangements, parking reimbursement contracts, transaction-price arrangements, and hourly arrangements. Two clients accounted for approximately 35% of revenues for this segment in 2017.
	Our Emerging Industries Group is comprised of our Education, Healthcare, and High Tech industry groups. Services include janitorial, facilities engineering, and parking services for clients in these industries. The Emerging Industries Group typically provides these services pursuant to monthly fixed-price and cost-plus arrangements that are obtained through a competitive bid process.
	Technical Solutions provides specialized mechanical and electrical services. These services can also be leveraged for cross-selling within B&I, Aviation, and the Emerging Industries Group, both domestically and internationally. Contracts for this segment are structured as cost-plus arrangements, fixed-price arrangements, energy savings contracts, and franchise arrangements.
	GCA Services is a provider of integrated facility services to educational institutions and commercial facilities. It typically provides these services pursuant to monthly fixed-price and cost-plus arrangements that are obtained through a competitive bid process.

Service Marks, Trademarks, and Trade Names

We hold various service marks, trademarks, and trade names, such as “ABM,” “ABM Building Value,” “ABM Greencare,” “MPower,” “Linc Service,” and “TEGG,” which we deem important to our marketing activities, our business, and, with respect to certain of these, the franchising activities conducted by our Technical Solutions segment.

Dependence on Significant Client

No client accounted for more than 10% of our consolidated revenues during 2017, 2016, or 2015.

Competition

Sales and Marketing

Our sales and marketing activities include digital engagement and direct interactions with prospective and existing clients, pricing, proposal management, and customer relationship management by dedicated business development teams, operations personnel, and management. These activities are executed by branch and regional sales, marketing, and operations teams assigned to our industry groups and are supported by centralized sales support teams, inside sales teams, corporate marketing personnel, and our Center of Excellence teams. These sales and marketing teams perform lead acquisition, lead nurturing, and lead management as well as training in sales tools and proposal systems, all governed by standard operating procedures.

Regulatory Environment and Environmental Compliance

Our operations are subject to various federal, state, and/or local laws regulating the discharge of materials into the environment or otherwise relating to the protection of the environment, such as discharge into soil, water, and air, and the generation, handling, storage, transportation, and disposal of waste and hazardous substances. From time to time we are involved in environmental matters at certain of our locations or in connection with our operations. Historically, the cost of complying with environmental laws or resolving environmental issues relating to locations or operations in the United States or abroad has not had a material adverse effect on our financial position, results of operations, or cash flows.

Employees

As of October 31, 2017, we employed approximately 140,000 employees, of which approximately 44,000, or 32%, were subject to various local collective bargaining agreements.

Available Information

We are required to file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other information with the Securities and Exchange Commission (“SEC”). The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are also available free of charge on our Internet site at www.abm.com as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. We provide references to our website for your convenience, but our website does not constitute, and should not be viewed as, a part of this Annual Report, and our website is not incorporated into this or any of our other filings with the SEC.

Executive Officers of Registrant

Executive Officers on December 22, 2017



Name	Age	Principal Occupations and Business Experience
Scott Salmirs	55	President and Chief Executive Officer of ABM since March 2015; Executive Vice President of ABM from September 2014 to March 2015, with global responsibility for ABM’s Aviation division and all international activities; Executive Vice President of ABM’s Onsite Services division focused on the Northeast from 2003 to September 2014; Member of the Board of Directors of ABM since January 2015.
D. Anthony Scaglione	45	Executive Vice President and Chief Financial Officer of ABM since April 2015; Senior Vice President, Treasurer, and Head of Mergers and Acquisitions of ABM from January 2012 to April 2015; Vice President and Treasurer of ABM from June 2009 to January 2012; Chairman of the Board of the Association for Financial Professionals (AFP), the professional society that represents finance executives across the globe, from November 2014 to October 2016.
Scott Giacobbe	55	Chief Operating Officer of ABM since November 2017; President of ABM’s U.S. Technical Solutions from November 2010 to November 2017.
Andrea R. Newborn	54	Executive Vice President, General Counsel, and Corporate Secretary of ABM since July 2017; Executive Vice President and General Counsel for TravelClick, Inc. from July 2014 to June 2017; Senior Vice President, General Counsel, and Secretary of The Reader’s Digest Association, Inc. from March 2007 to February 2014.
Dean A. Chin	49	Senior Vice President, Chief Accounting Officer, and Corporate Controller of ABM since June 2010; Vice President and Assistant Controller of ABM from June 2008 to June 2010.
David R. Goodes	45	Senior Vice President and Chief Human Resources Officer of ABM since January 2016; Executive Vice President, Human Resources of Hess Retail Corporation during 2014; Vice President, Human Resources, Marketing & Refining of Hess Corporation from March 2011 to December 2013; Director, Human Resources of Hess Corporation from October 2005 to March 2011.
Rene Jacobsen	56	President of ABM’s Business & Industry Group since February 2016; Executive Vice President of ABM’s West Region from April 2012 to February 2016; Executive Vice President and Chief Operating Officer of Temco Service Industries from November 2007 to April 2012.

ITEM 1A. RISK FACTORS.

We may not realize the growth opportunities and cost synergies that are anticipated from the acquisition of GCA.

The benefits that are expected to result from the acquisition of GCA will depend, in part, on our ability to realize the anticipated growth opportunities and cost synergies from the acquisition. Our success in realizing these growth opportunities and cost synergies, and the timing of this realization, depends on a number of factors. There is a significant degree of difficulty and management distraction inherent in the process of integrating an acquisition as sizable as GCA. The process of integrating operations could cause an interruption of, or loss of momentum in, our activities or the activities of the GCA business. Members of our senior management may be required to devote considerable time to this integration process, which will decrease the time they will have to manage our Company, service existing clients, and attract new clients. In addition, we have not fully implemented our 2020 Vision, which is expected to generate significant benefits to the Company. Time and distraction relating to the acquisition of GCA could detract from the ability to achieve the benefits anticipated with respect to our 2020 Vision. If senior management is not able to effectively manage the integration process or if any significant business activities including 2020 Vision initiatives are interrupted as a result of the integration process, our business could suffer. There can be no assurance that we will successfully or cost-effectively integrate GCA. The failure to do so could have a material adverse effect on our business, financial condition, or results of operations.

Even if we are able to integrate GCA successfully, this integration may not result in the realization of the full benefits of the growth opportunities and cost synergies we currently expect from this integration, and we cannot guarantee these benefits will be achieved within anticipated time frames or at all. For example, we may not be able to eliminate duplicative costs. Moreover, we may incur substantial expenses in connection with the integration of GCA. While it is anticipated that certain expenses will be incurred to achieve cost synergies, such expenses are difficult to estimate accurately and may exceed current estimates. Accordingly, the benefits from the acquisition may be offset by costs incurred to integrate the business or delays in the integration process. In addition, the overall integration may result in unanticipated problems, expenses, liabilities, competitive responses, loss of client and other relationships, or loss of key employees, any of which may adversely affect our results of operations and may cause our stock price to decline.

We 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.

In connection with the acquisition of GCA, on September 1, 2017, we refinanced and replaced our existing credit facility with a new syndicated secured credit facility (the “Credit Facility”) consisting of a $900 million revolving line of credit and an $800 million amortizing term loan with a five-year term. On September 1, 2017, we borrowed approximately $1.3 billion under the Credit Facility. Our ability to make payments on our debt, fund our other liquidity needs, and make planned capital expenditures will depend on our ability to generate cash in the future. Our ability to generate cash, to a certain extent, is subject to general economic, financial, competitive, and other factors that are beyond our control. We cannot guarantee that our business will generate sufficient cash flow from our operations or that future borrowings will be available to us in an amount sufficient to enable us to make payments of our debt, fund other liquidity needs, make planned capital expenditures, or continue our dividend.

The degree to which we are currently leveraged could have important consequences for shareholders. For example, it could require us to dedicate a substantial portion of our cash flows from operations to the payment of debt service, reducing the availability of our cash flow to fund working capital, share repurchases, capital expenditures, acquisitions, and other general corporate purposes; limit our availability to obtain additional financing in the future to enable us to react to changes in our business; and place us at a competitive disadvantage compared to businesses in our industry that have less debt.

Additionally, an increased level of borrowing increases our interest expense, which could negatively impact our profitability. As current interest rates on our credit facility are variable, an increase in prevailing rates would increase our interest costs. Further, our credit facility contains both financial covenants and other covenants that limit our ability to engage in specific transactions. Any failure to comply with covenants in the credit facility could result in an event of default that, if not cured or waived, would have a material adverse effect on us.

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, may not have the desired effects on our financial condition and results of operations.

During the fourth quarter of 2015, we announced our transformation initiative (“2020 Vision”), which is intended to differentiate ABM in the marketplace, accelerate revenue growth for certain industry groups, and improve our margin profile. We may not be able to execute on this strategy as a result of numerous factors, such as client resistance to an integrated approach, inability to deliver requested end-to-end services, and difficulty penetrating certain markets. Even if we are able to execute our 2020 Vision, we may not realize the full benefits that we currently expect within the anticipated time frame or at all. For example, although we may be able to leverage scale to manage costs more efficiently and effectively, the realignment of our business operations may not provide us with the anticipated competitive advantage or revenue growth. Moreover, the execution of our 2020 Vision may result in substantial expenses in excess of what is currently forecast. While we anticipate that certain expenses will be incurred, such expenses are difficult to estimate accurately and may exceed current estimates. Accordingly, the benefits from our 2020 Vision may be offset by unexpected costs or delays incurred in its execution. In connection with our 2020 Vision, we are making significant investments in information technology, but there can be no assurance these investments will have the desired results in improving the delivery of our services. In addition, our 2020 Vision may cause substantial disruption to our operations and may not have the anticipated positive effects on our relationships with our employees, clients, and suppliers.

Changes to our business systems and processes, including the migration of many of our financial reporting and other processes to our Enterprise Services Center, may not create the operational efficiencies or cost benefits that we expect and could result in unanticipated consequences. In addition, the move to a shared services environment may create risks relating to the processing of transactions and recording of financial information. During the transition period, we could experience a lapse in the operation of internal controls due to turnover, lack of legacy knowledge, or inappropriate training, which could result in significant deficiencies or material weaknesses.

Our success depends on our ability to gain profitable business despite competitive pressures and on our ability to preserve long-term client relationships.

We believe that each aspect of our business is highly competitive and that such competition is based primarily on price, quality of service, and ability to anticipate and respond to industry changes. A majority of our revenue is derived from projects requiring competitive bids. The low cost of entry in the facility services business results in a very competitive market. We mainly compete with regional and local owner-operated companies that may have more acute vision into local markets and significantly lower labor and overhead costs, providing them with a competitive advantage in those regards. We also compete indirectly with companies that can perform for themselves one or more of the services we provide. Additionally, many of our contracts provide that our clients pay certain costs at specified rates, such as insurance, healthcare costs, salary and salary-related expenses, petroleum, and other costs. We may experience higher operating costs related to changes in federal, state, or local laws and regulations regarding employee benefits, minimum wages, and other entitlements. If actual costs exceed the rates specified in the contracts, our profitability may be negatively impacted. Further, if we are unable to respond adequately to changing technology, we may lose existing clients and fail to win future business opportunities. These strong competitive pressures could inhibit our success in bidding for profitable business and our ability to increase prices as costs rise, thereby reducing margins.

We primarily provide services pursuant to agreements that are cancelable by either party upon 30–90 days’ notice. As we generally incur higher initial costs on new contracts until the labor management and facilities operations normalize, our business associated with long-term client relationships is generally more profitable than short-term client relationships. If we lose a significant number of long-term clients, our profitability could be negatively impacted, even if we gain equivalent revenues from new clients.

We depend to a large extent on our relationships with our clients and our reputation for quality integrated facility solutions. As such, adverse publicity stemming from an accident or other incident involving our facility operations related to injury, illness, or death could harm our reputation, result in the cancellation of contracts, and expose us to significant liability.

Our business success depends on our ability to attract and retain qualified personnel and senior management.

Our future performance depends on the continuing services and contributions of our senior management and on our continued ability to attract and retain qualified personnel. Any unplanned turnover in senior management or inability to attract and retain qualified personnel could have a negative effect on our results of operations. We employ over 130,000 persons and our operations depend on the services of a large and diverse workforce. We must attract, train, and retain a large and growing number of qualified employees, while controlling related labor costs. Our ability

to control labor and benefit costs is subject to numerous internal and external factors, including changes in immigration policy, regulatory changes, prevailing wage rates, and competition we face from other companies for these employees. There is no assurance that we will be able to attract or retain qualified employees in the future, which could have a material adverse effect on our business, financial condition, and results of operations.

Our use of subcontractors or joint venture partners to perform work under customer contracts exposes us to liability and financial risk.

We depend on subcontractors or other parties, such as joint venture partners, to perform work in situations in which we are not able to self-perform the work involved. Such arrangements may involve subcontracts or joint venture relationships where we do not have direct control over the performing party. A failure, for whatever reason, by one or more of our subcontractors or joint venture partners to perform, or the alleged negligent performance of, the agreed-upon services may expose us to liability. Although we have in place controls and programs to monitor the work of our subcontractors and our joint venture partners, there can be no assurance that these controls or programs will have the desired effect, and we may incur significant liability as a result of the actions or inactions of one or more of our subcontractors or joint venture partners.

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.

We have business operations in jurisdictions outside of the United States, most significantly in the United Kingdom. Our international operations are subject to risks that are different from those we face in the United States, such as the requirement to comply with national and local regulatory requirements, including, but not limited to: the U.K. Bribery Act and other anti-corruption laws and laws respecting privacy; potential difficulties in staffing and labor disputes; differing local labor laws; credit risk or financial condition of local clients; and local political and social conditions. In addition, the operating results of our non-U.S. subsidiaries are translated into U.S. dollars, and those results are affected by movements in foreign currencies relative to the U.S. dollar. There can be no assurance that the foregoing factors will not have a material adverse effect on our international operations or on our consolidated financial condition and results of operations.

In addition, when we participate in joint ventures that operate outside of the United States where we are not a controlling party, we may have limited control over the joint venture. Any improper actions by our joint venture employees, partners, or agents, including, but not limited to, failure to comply with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and/or laws relating to human trafficking, could result in civil or criminal investigations, monetary and non-monetary penalties, or other consequences, any of which could have an adverse effect on our financial position as well as on our reputation and ability to conduct business.

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

Our business involves employing tens of thousands of employees, many of whom work at our clients’ facilities. We incur risks relating to our employment of these workers, including, but not limited to: claims of misconduct or negligence on the part of our employees; claims related to the employment of undocumented workers or unlicensed personnel; and claims by our employees of discrimination, harassment, or violations of wage and hour requirements. Some or all of these claims may lead to litigation, including class action litigation, and these matters may cause us to incur negative publicity with respect to these alleged problems. It is not possible to predict the outcome of these lawsuits or any other proceeding, and our insurance may not cover all claims that may be asserted against us. These lawsuits and other proceedings may consume substantial amounts of our financial and managerial resources. An unfavorable outcome with respect to these lawsuits and any future lawsuits could, individually or in the aggregate, cause us to incur substantial liabilities that could have a material adverse effect upon our business, reputation, financial condition, or results of operations.

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 against our earnings.

We use a combination of insured and self-insurance programs to cover workers’ compensation, general liability, automobile liability, property damage, and other insurable risks. We are responsible for claims both within and in excess of our retained limits under our insurance policies, and while we endeavor to purchase insurance coverage that is appropriate to our assessment of risk, we are unable to predict with certainty the frequency, nature, or magnitude of

clams for direct or consequential damages. If our insurance coverage proves to be inadequate or unavailable, our business may be negatively impacted.

The determination of required insurance reserves is dependent upon significant actuarial judgments. We use the results of actuarial studies to estimate insurance rates and insurance reserves for future periods and to adjust reserves, if appropriate, for prior years. Actual experience related to our insurance reserves can cause us to change our estimates for reserves and any such changes may materially impact results, causing significant volatility in our operating results. We have experienced material negative trends in our actuarial estimates and may continue to experience these and other material negative trends in future periods.

Should we be unable to renew our excess, umbrella, or other commercial insurance policies at competitive rates, it could have a material adverse impact on our business, as would the incurrence of catastrophic uninsured claims or the inability or refusal of our insurance carriers to pay otherwise insured claims. Further, to the extent that we self-insure our losses, deterioration in our loss control and/or continuing claim management efforts could increase the overall cost of claims within our retained limits. A material change in our insurance costs due to changes in the frequency of claims, the severity of the claims, the costs of excess/umbrella premiums, or regulatory changes could have a material adverse effect on our financial position, results of operations, or cash flows.

We have formed a wholly-owned captive insurance company, IFM Assurance Company (“IFM”), which we believe will provide us with increased flexibility in the end-to-end management of our insurance program. There can be no assurance that IFM will bring about the intended benefits or that it will provide us with the desired flexibility in the management of our insurance programs, because we may experience unanticipated events that will reduce or eliminate expected benefits, including anticipated savings related to coverage provided by IFM to our subsidiaries.

Our risk management and safety programs may not have the intended effect of reducing our liability for personal injury or property loss.

We attempt to mitigate risks relating to personal injury or property loss through the implementation of company-wide safety and loss control efforts designed to decrease the incidence of accidents or events that might increase our liability. It is expected that any such decrease would also have the effect of reducing our insurance costs for our casualty programs. However, incidents involving personal injury or property loss often are caused by multiple factors, a significant number of which are beyond our control. Therefore, there can be no assurance that our risk management and safety programs will have the desired effect of controlling costs and liability exposure.

Impairment of goodwill and long-lived assets could have a material adverse effect on our financial condition and results of operations.

We evaluate goodwill for impairment annually, in the fourth quarter, or more often if impairment indicators exist. We also review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the fair value of one of our reporting units is less than its carrying value, or if as a result of a recoverability test we conclude that the projected undiscounted cash flows are less than the carrying amount, we would record an impairment charge related to goodwill or long-lived assets, respectively. The assumptions used to determine impairment require significant judgment and the amount of the impairment could have a material adverse effect on our reported financial results for the period in which the charge is taken.

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

In certain geographic areas and service lines, our most profitable revenues are related to supplemental services requested by clients outside of the standard service specification. This contract type is commonly used in janitorial services and includes cleanup after tenant moves, construction cleanup, flood cleanup, and snow removal (“tag work”). A decline in occupancy rates could result in a decline in scope of work, including tag work, and depressed prices for our services. Slow domestic and international economic growth or other negative changes in global, national, and local economic conditions could have a negative impact on our business. Specifically, adverse economic conditions may result in clients cutting back on discretionary spending. Additionally, since a significant portion of our aviation services and parking revenues are tied to the number of airline passengers, hotel guests, and sports arena attendees, results for these businesses could be adversely affected by curtailment of business, personal travel, and discretionary spending. The use of ride sharing services and car sharing services may lead to a decline in parking demand at airports and in urban areas.

Energy efficiency projects are designed to reduce a client’s overall consumption of commodities such as electricity and natural gas. As such, downward fluctuations in commodity prices may reduce clients’ demand for our services. We also depend, in part, on federal and state legislation and policies that support energy efficiency projects. If current legislation or policies are amended, eliminated, or not extended beyond their current expiration dates, or if funding for energy incentives is reduced or delayed, it could also adversely affect our ability to obtain new business. In some instances, we offer certain of these clients guaranteed energy savings on installed equipment. In the event those guaranteed savings are not achieved, we may be required to pay liquidated or other damages. All of these factors could have an adverse effect on our financial position, results of operations, and cash flows.

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

The Tax Cuts and Jobs Act of 2017 was approved by Congress on December 20, 2017. When signed into law by President Donald J. Trump, this legislation will make significant changes to the U.S. Internal Revenue Code. Such changes include a reduction in the corporate tax rate and limitations on certain corporate deductions and credits, among other changes. Certain of these changes could have a negative impact on our business. In addition, adverse changes in the underlying profitability and financial outlook of our operations or changes in tax law could lead to changes in our valuation allowances against deferred tax assets on our consolidated balance sheets, which could materially affect our results of operations. Furthermore, we are subject to tax audits by governmental authorities, primarily in the United States and 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.

We could be subject to cyber-security risks, information technology interruptions, and business continuity risks.

Our information technology systems and those of our third-party providers could become subject to cyber-attacks, hacking, or other intrusions, which could result in operational disruptions or information misappropriation, such as theft of intellectual property or inappropriate disclosure of confidential information. In addition, to the extent centralized administrative locations are disabled for a long period of time, key business processes, such as accounts payable, information technology, payroll, and general management operations, could be interrupted. Any such operational disruptions and/or misappropriation of information could result in lost sales, negative publicity, or business delays that could have a material adverse effect on 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.

We participate in various multiemployer pension plans under union and industry-wide agreements, which provide defined pension benefits and other benefits to employees covered by collective bargaining agreements. Because of the nature of multiemployer plans, there are risks associated with participation in these plans that differ from single-employer plans. Assets contributed by an employer to a multiemployer plan are not segregated into a separate account and are not restricted to provide benefits only to employees of that contributing employer. In the event another participating employer in a multiemployer plan no longer contributes to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers, including us. In the event of the termination of a multiemployer pension plan or a withdrawal from a multiemployer pension plan, under applicable law we could incur material liabilities. We further discuss our participation in multiemployer pension and postretirement plans in Note 13, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements. In addition, the terms of collective bargaining agreements require us to contribute to health and welfare plans that require us to have appropriate systems in place to track contributions. The failure to make a contribution as a result of a systems failure could have a negative impact on our financial position.

At October 31, 2017, approximately 32% of our employees were subject to various local collective bargaining agreements, some of which will expire or become subject to renegotiation during 2018. In addition, at any given time we may face a number of union organizing drives. When one or more of our major collective bargaining agreements becomes subject to renegotiation or when we face union organizing drives, we and the union may disagree on important issues that could lead to a strike, work slowdown, or other job actions at one or more of our locations. In a market where we are unionized but competitors are not unionized, we could lose clients to such competitors. A strike, work slowdown, or other job action could disrupt our services, resulting in reduced revenues or contract cancellations.

Moreover, negotiating a first time agreement or renegotiating an existing collective bargaining agreement could result in a substantial increase in labor and benefits expenses that we may be unable to pass through to clients.

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, investors’ perceptions of our Company and, as a result, the value of our common stock.

Pursuant to Section 404 of the Sarbanes Oxley Act of 2002 and related rules, our management is required to report on, and our independent registered public accounting firm is required to attest to, the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing, and possible remediation. We have acquired entities that did not have any publicly traded debt or equity and therefore were not required to conform to the rules and regulations of the SEC, especially as it relates to internal control structure. As such, upon acquisition by us, such entities may not have in place all the necessary controls as required by the Public Company Accounting Oversight Board. The integration of acquired entities into our internal control over financial reporting has required and will continue to require significant time and resources from our management and other personnel and will increase our compliance costs. We are required to include our assessment of the effectiveness of the internal controls over financial reporting of entities we acquire in our overall assessment. We plan to complete the evaluation and integration of internal controls over financial reporting and report our assessment within the required time frame. Failure to maintain an effective internal control environment could have a material adverse effect on our ability to accurately report our financial results, the market’s perception of our business, and our stock price.

Our business may be negatively impacted by adverse weather conditions.

Weather conditions such as snow storms, heavy flooding, hurricanes, and other fluctuations in temperatures can negatively impact portions of our business. Within our Technical Solutions segment, cooler than normal temperatures in the summer could reduce the need for servicing of air conditioning units, resulting in reduced revenues and profitability. Within Parking and Aviation services, snow can lead to reduced travel activity, as well as increases in certain costs, both of which negatively affect gross profit. On the other hand, the absence of snow during the winter could cause us to experience reduced revenues in our B&I segment, as many of our contracts specify additional payments for snow-related services.

Catastrophic events, disasters, and terrorist attacks could disrupt our services.

Catastrophic events, disasters, and acts of terrorism may result in reduced revenues, property damage, or economic dislocations throughout the country. These events may increase the volatility of financial results due to unforeseen costs with partial or no corresponding compensation from clients.

Actions of activist investors could disrupt our business.

Public companies have been the target of activist investors. In the event that a third party, such as an activist investor, proposes to change our governance policies, board of directors, or other aspects of our operations, our review and consideration of such proposals may create a significant distraction for our management and employees. This could negatively impact our ability to execute our 2020 Vision and may require our management to expend significant time and resources. Such proposals may also create uncertainties with respect to our financial position and operations and may adversely affect our ability to attract and retain key employees.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

Our principal executive office is located at One Liberty Plaza, 7^th Floor, New York, New York 10006. As part of our 2020 Vision, in 2016 we began consolidating our operations to increase efficiency and effectiveness.

Principal Properties as of October 31, 2017



Location	Character of Office	Approximate Square Feet	Lease Expiration Date, Unless Owned	Segment
Alpharetta, Georgia	IT Datacenter and Technical Solutions Headquarters	25,000	Owned	All
Atlanta, Georgia	Operations Support	37,000	10/31/2027	All
Cleveland, Ohio	GCA Services Headquarters	32,400	1/31/2024	GCA Services
Houston, Texas	Prior COO Divisional Headquarters	11,000	8/31/2018	B&I
New York, New York	Corporate Headquarters	44,000	1/3/2032	Corporate, B&I
Sugar Land, Texas	Enterprise Services	62,500	3/31/2028	All

In addition to the above properties, we have other offices, warehouses, and parking facilities in various locations, primarily in the United States. We believe that these properties are well maintained, in good operating condition, and suitable for the purposes for which they are used.

ITEM 3. LEGAL PROCEEDINGS.

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. 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 Augustus, Hall, and Davis, et al. v. American Commercial Security Services, filed July 12, 2005, in the Superior Court of California, Los Angeles County (the “Augustus case”)

The Augustus case was a certified class action involving violations of certain California state laws relating to rest breaks. The case centered on whether requiring security guards to remain on call during rest breaks violated Section 226.7 of the California Labor Code. On July 31, 2012, the Superior Court of California, Los Angeles County (the “Superior Court”), entered summary judgment in favor of plaintiffs in the amount of approximately $89.7 million (the “common fund”). Subsequently, the Superior Court also awarded plaintiffs’ attorneys’ fees of approximately $4.5 million in addition to approximately 30% of the common fund. Under California law, post-judgment interest on a judgment accrues at a rate of 10% simple interest per year from the date the judgment is entered until it is satisfied. We appealed the Superior Court’s rulings to the Court of Appeals of the State of California, Second Appellate District (the “Appeals Court”). On December 31, 2014, the Appeals Court issued its opinion, reversing the judgment in favor of the plaintiffs and vacating the award of $89.7 million in damages and the attorneys’ fees award. The plaintiffs filed a petition for review with the California Supreme Court on March 4, 2015, and on April 29, 2015, the California Supreme Court granted the plaintiffs’ petition. On December 22, 2016, the California Supreme Court rendered its decision, holding

that on-call and on-duty rest breaks are prohibited by California law, and reversed the Appeals Court judgment on this issue. The amount of post-judgment interest as of December 22, 2016 was approximately $41.2 million.

On February 6, 2017, ABM Security Services, Inc., a wholly-owned subsidiary of ABM Industries Incorporated, entered into a Class Action Settlement and Release with plaintiffs Jennifer Augustus, Delores Hall, Emanuel Davis, and Carlton Anthony Waite, on behalf of themselves and the settlement class members, to settle the Augustus case on a class-wide basis for $110.0 million (the “Augustus Settlement Agreement”). On March 17, 2017, the Augustus Settlement Agreement was amended to address certain procedural matters, and it received final approval of the Superior Court on July 6, 2017. The Augustus Settlement Agreement called for two payments of $55.0 million each. The first payment was made on July 19, 2017, and the second payment, plus an additional payment of $4.8 million for payroll taxes, was made on August 29, 2017.

Karapetyan v. ABM Industries Incorporated and ABM Security Services, Inc., et al., filed on October 23, 2015, pending in the United States District Court for the Central District of California (the “Karapetyan case”)

The Karapetyan case was a putative class action in which the plaintiff sought to represent a class of security guards who worked during time periods subsequent to the class period in the Augustus case. The plaintiff alleged that ABM violated certain California state laws relating to meal and rest breaks and other wage and hour claims. On April 17, 2017, ABM Industries Incorporated, ABM Security Services, Inc., ABM Onsite Services, Inc., and ABM Onsite Services – West, Inc. entered into a Class Action Settlement and Release with plaintiff Vardan Karapetyan, on behalf of himself and the settlement class members, to settle the Karapetyan case on a class-wide basis for $5.0 million. The United States District Court for the Central District of California granted final approval of the settlement on September 7, 2017. The full settlement payment in the amount of $5.0 million, plus an additional $0.2 million in payroll taxes, was made on October 13, 2017.

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. 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.

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, pending in the Superior Court of Washington for King County (the “Isse” case)

The Hussein case was a certified class action involving a class of certain hourly Air Serv employees at Seattle-Tacoma International Airport in SeaTac, Washington. The plaintiffs alleged that Air Serv violated a minimum wage requirement in an ordinance 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, the King County Superior Court issued a decision that invalidated the Ordinance as it applied to workers at SeaTac airport. Subsequently, the Washington Supreme Court reversed the Superior Court’s decision. 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 lawsuits 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 will require court approval because of the nature of the claims being released. We are working with our clients to obtain partial or full reimbursement for the settlements.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information and Dividends

Our common stock is listed on the New York Stock Exchange (NYSE: ABM). The following table sets forth the high and low sales prices of our common stock on the New York Stock Exchange and quarterly cash dividends declared on shares of common stock for the periods indicated.



	Fiscal Quarter
(in dollars)	First		Second		Third		Fourth
Fiscal Year 2017
Price range of common stock
High	$	45.03	$	44.68	$	44.93	$	45.12
Low	$	38.04	$	39.41	$	40.36	$	37.12
Dividends declared per share	$	0.170	$	0.170	$	0.170	$	0.170
Fiscal Year 2016
Price range of common stock
High	$	30.25	$	33.39	$	37.85	$	40.47
Low	$	26.50	$	28.45	$	32.03	$	36.63
Dividends declared per share	$	0.165	$	0.165	$	0.165	$	0.165

We have paid cash dividends every quarter since 1965. Future dividends will be determined based on our earnings, capital requirements, financial condition, and other factors considered relevant by our Board of Directors.

Stockholders

At December 8, 2017, there were 3,275 registered holders of our common stock.

Performance Graph

The following graph compares the five-year cumulative total return for our common stock against the Standard & Poor’s SmallCap 600 Index (“S&P 600”) and the Standard & Poor’s 500 Index (“S&P 500”). As our competitors are principally privately held, we do not believe it is feasible to construct a peer group comparison on an industry or line-of-business basis.



	INDEXED RETURNS Years Ended October 31,
Company / Index	2012		2013		2014		2015		2016		2017
ABM Industries Incorporated	$	100	$	148.5	$	152.7	$	160.3	$	224.9	$	245.4
S&P 500 Index	100		127.2		149.1		156.9		164.0		202.7
S&P SmallCap 600 Index	100		139.1		152.0		156.3		166.3		212.7

This performance graph shall not be deemed to be “soliciting material” or “filed” with the Securities and Exchange Commission, or subject to Regulation 14A or 14C, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended. The comparisons in the performance graph are based on historical data and are not indicative of, or intended to forecast, the possible future performance of our common stock.

ITEM 6. SELECTED FINANCIAL DATA.

The following selected financial data should be read in conjunction with Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 8., “Financial Statements and Supplementary Data.” Unless otherwise indicated, all references to years are to our fiscal year, which ends on October 31.



	Years Ended October 31,
	2017			2016			2015		2014		2013
(in millions, except per share amounts)
Statements of Comprehensive Income Data
Revenues⁽¹⁾	$	5,453.6		$	5,144.7		$	4,897.8	$	4,649.7	$	4,427.8
Operating profit⁽²⁾	101.9			54.7			73.6		114.8		105.3
Income from continuing operations	78.1			62.3			54.1		66.9		62.6
(Loss) income from discontinued operations, net of taxes⁽³⁾	(74.3		)	(5.1		)	22.2		8.7		10.3
Per Share Data
Net income per common share — Basic
Income from continuing operations	$	1.35		$	1.11		$	0.95	$	1.19	$	1.14
Net income	$	0.07		$	1.02		$	1.35	$	1.35	$	1.33
Net income per common share — Diluted
Income from continuing operations	$	1.34		$	1.09		$	0.94	$	1.17	$	1.12
Net income	$	0.07		$	1.01		$	1.33	$	1.32	$	1.30
Weighted-average common and common equivalent shares outstanding
Basic	57.7			56.3			56.7		56.1		54.9
Diluted	58.3			56.9			57.4		57.1		56.1
Dividends declared per common share	$	0.680		$	0.660		$	0.640	$	0.620	$	0.600
Statements of Cash Flow Data
Net cash provided by operating activities of continuing operations	$	101.7		$	110.5		$	145.5	$	115.6	$	125.2
Cash paid for income taxes, net of refunds received⁽⁴⁾	11.8			12.6			23.7		32.9		18.7

	At October 31,
(in millions)	2017			2016			2015		2014		2013
Balance Sheet Data
Total assets	$	3,812.6		$	2,278.8		$	2,130.7	$	2,176.5	$	2,106.2
Trade accounts receivable, net of allowances⁽⁵⁾	1,038.1			803.7			742.9		687.3		633.5
Goodwill⁽⁶⁾	1,864.2			912.8			867.5		854.7		822.5
Other intangible assets, net of accumulated amortization⁽⁷⁾	430.1			103.8			111.4		127.5		142.4
Long-term debt, net⁽⁸⁾	1,161.3			268.3			158.0		319.8		314.9
Insurance claims	495.4			423.8			387.4		349.7		358.0

⁽¹⁾ Revenues in 2017 included $208.1 million associated with acquisitions, including $169.7 million related to the September 1, 2017 acquisition of GCA Services Group (“GCA”).

⁽²⁾Factors affecting comparability of operating profit consisted of the following:

•

Operating profit in 2017 was positively impacted by a $17.4 million impairment recovery related to our Government Services business, a $10.9 million lower self-insurance adjustment related to prior year claims, a reduction in restructuring and related expenses, and procurement and organizational savings from our 2020 Vision initiatives. Operating profit in 2017 was unfavorably impacted by $24.2 million of transaction expenses related to the GCA acquisition.

•

Operating profit in 2016 was negatively impacted by insurance expense of $49.6 million, consisting of a $32.9 million unfavorable self-insurance adjustment related to prior year claims and $16.7 million of higher insurance expense due to an increase in the rate used to record our insurance reserves during 2016. Operating profit was also unfavorably impacted by $29.0 million of 2020 Vision restructuring and related charges and a $22.5 million impairment charge for the Government Services business, consisting of both goodwill and long-lived asset charges. Operating profit in 2016 was favorably impacted by approximately $22 million in savings from our 2020 Vision initiatives.


•	Operating profit in 2015 was negatively impacted by a $35.9 million unfavorable self-insurance adjustment related to prior year claims.

⁽³⁾Loss from discontinued operations in 2017 included $120.0 million of settlements related to the Augustus and Karapetyan cases associated with the former Security business. Income from discontinued operations for 2015 reflected the $14.4 million after-tax gain on the sale of the Security business.

⁽⁴⁾ Cash paid for income taxes was lower by approximately $10 million for both 2017 and 2016 and $20 million during 2015 due to cash tax savings related to coverage provided by IFM Assurance Company, our wholly-owned captive insurance company. During 2014, cash paid for income taxes increased as certain tax assets were substantially utilized.

⁽⁵⁾Trade accounts receivable, net of allowances, increased by $118.1 million on September 1, 2017 as a result of the GCA acquisition.

⁽⁶⁾ Goodwill increased by $933.9 million on September 1, 2017 as a result of the GCA acquisition and by $53.8 million on December 1, 2015 due to the acquisition of Westway Services Holdings (2014) Ltd. (“Westway”).

⁽⁷⁾ Other intangible assets, net of accumulated amortization, increased by $349.0 million on September 1, 2017 as a result of the GCA acquisition.

⁽⁸⁾On September 1, 2017, we refinanced and replaced our existing $800.0 million credit facility with a new secured $1.7 billion credit facility, which we used to partially fund the GCA acquisition. During 2015, we used the cash proceeds from the sale of the Security business to pay down a portion of our line of credit.

ITEM 7. 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 consolidated financial statements and the accompanying notes (“Financial Statements”). This MD&A contains both historical and forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. 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. Factors that might cause such differences include, but are not limited to, those discussed in Part 1. of this Form 10-K under Item 1A., “Risk Factors,” which are incorporated herein by reference. Our future results and financial condition may be materially different from those we currently anticipate.

Throughout the MD&A, amounts and percentages may not recalculate due to rounding. In addition, we have revised our prior period segment information to reflect ABM’s reorganization and a related reclassification of certain Corporate expenses. Concurrent with the reorganization, we recategorized certain expenses that were historically included in operating expenses to selling, general and administrative expenses. Unless otherwise indicated, all information in the MD&A and references to years are based on our fiscal year, which ends on October 31.

Business Overview

ABM is a leading provider of integrated facility solutions, customized by industry, with a mission to make a difference, every person, every day.

2020 Vision

Phase 1 Industry Realignment

Effective November 1, 2016, we reorganized our reportable segments to reflect how we now manage our business by industry group:

Phase 2 Developments

Consistent Excellence

During 2017, we conducted a thorough evaluation of our field operations across the country to identify best practices (The “ABM Way”) in account planning, labor management, manager development, and safety and risk management. As a result of this site-by-site review, we began to codify best practices, and throughout our company we are piloting ABM Way procedures, including initiating team cleaning and instituting a daily moment of safety. We also continue to make investments in technology platforms to help drive and sustain our 2020 Vision strategy.

Cost Optimization

We are migrating more of our back office functions to our Enterprise Services Center in Sugar Land, Texas and are continuing to consolidate our procurement activities. Our procurement initiatives resulted in savings of $10.0 million during 2017.

Talent Development

One of the key underpinnings of our 2020 Vision is the investment in people and the development of key personnel. Our Talent Development Group has improved front line leadership training initiatives, began the centralization of talent acquisition for staff and management, and completed a full talent assessment program identifying emerging leaders throughout the Company. By prioritizing these initiatives, we believe we are building a stronger organization that will enable us to be a leader in industry-based facility solutions.

2018 and Beyond

We will continue to roll out The ABM Way procedures we began to identify in 2017. In addition, we are in the process of creating a standardized sales culture, focusing on driving long term, profitable sales and effective cross-selling processes. We expect The ABM Way and our new sales organization will build the foundation upon which we can profitably deliver leading industry-based facility solutions.

Developments and Trends

GCA Services Group

On September 1, 2017, we acquired GCA Services Group (“GCA”), a provider of integrated facility services to educational institutions and commercial facilities, for approximately $1.3 billion, consisting of $839.9 million in cash and approximately 9.4 million shares of ABM common stock with a fair value of $421.3 million at closing, which amounts exclude shares withheld for taxes.

We expect this acquisition to be transformative and to accelerate our 2020 Vision as GCA’s client-centric goals and philosophies align closely with those of ABM. As a result of this acquisition, the revenue within our Education industry group is expected to increase from $250 million to approximately $850 million annually. We also estimate a $500 million increase in annual revenue within our other industry groups, including Business & Industry and High Tech. We further anticipate opportunities to cross-sell the services of our Technical Solutions business to GCA’s existing educational base. We expect this acquisition will strengthen all of our industry groups and, in particular, position our Education industry group as a leader in this market segment.

Due to the timing of the acquisition and integration of GCA’s standalone operations into our industry groups, GCA was separately managed and reported in 2017. Among other changes, once we integrate GCA into our industry group model in 2018, we anticipate our Education industry group will become a reportable segment. We also expect to present a new Technology & Manufacturing reportable segment, that will combine our High Tech industry group and the legacy GCA and ABM Industrial & Manufacturing (“I&M”) businesses. ABM’s legacy I&M business was included in the B&I segment.

We anticipate cost synergies relating to the GCA acquisition of approximately $20–$30 million annually within two years. In connection with the acquisition, we expect to incur one-time transaction and integration related expenses of approximately $70 million, which includes approximately $19 million of financing costs that are being amortized over the term of the new credit facility. We will also incur higher interest expense as a result of an increased level of debt and higher amortization expense.

Government Services Business

In connection with the held-for-sale classification of the Government Services business in 2016, we wrote down goodwill and long-lived assets of this business by $22.5 million to reflect our best estimate of fair value less costs to sell, using all information available at that time. During the second quarter of 2017, we received an offer from a strategic buyer to purchase this business for approximately $35.0 million, which was higher than our previous estimate of fair value less costs to sell. As a result, we recorded a $17.4 million impairment recovery to adjust the fair value of certain previously impaired assets to the valuation of the assets as implied by the agreed-upon sales price, less estimated costs to sell. On May 31, 2017, we sold this business for $35.5 million.

Legal

On July 6, 2017, ABM Security Services, Inc., a wholly-owned subsidiary of ABM Industries Incorporated, entered into a Class Action Settlement and Release to settle the Consolidated Cases of Augustus, Hall, and Davis, et al. v. American Commercial Security Services, on a class-wide basis for $110.0 million, as approved by the Superior Court of California, Los Angeles County. The first payment of $55.0 million was made on July 19, 2017, and the second payment of $55.0 million, plus an additional payment of $4.8 million for payroll taxes, was made on August 29, 2017, both of which were funded from operating cash flows and borrowings under our credit facility.

In connection with Karapetyan v. ABM Industries Incorporated and ABM Security Services, Inc., et al. (the “Karapetyan case”), we entered into a Class Action Settlement and Release with plaintiff Vardan Karapetyan, on behalf of himself and the settlement class members, to settle the Karapetyan case on a class-wide basis for $5.0 million. The United States District Court for the Central District of California granted final approval of the settlement on September 7, 2017. The full settlement payment in the amount of $5.0 million, plus an additional $0.2 million in payroll taxes, was made on October 13, 2017.

As these settlements were related to the former Security business, the amounts are reflected in discontinued operations throughout this MD&A. These settlements are tax deductible and will result in an estimated $50 million in cash tax savings, the majority of which we expect to receive in 2018.

Insurance

During 2017, we performed actuarial studies of our casualty insurance programs that considered changes in claim developments and claim payment activity for the period commencing May 1, 2016 and ending April 30, 2017 for all policy years in which open claims existed. Based on the results of these studies, which included analyzing recent loss development patterns, comparing the loss development patterns against benchmarks, and applying actuarial projection methods to estimate the ultimate losses, we increased our total reserves for known claims as well as our estimate of the loss amounts associated with claims incurred but not reported (“IBNR Claims”) for years prior to 2017 by $22.0 million during 2017. This adjustment was $10.9 million lower than the total adjustment related to prior year claims of $32.9 million in 2016.

2020 Vision Restructuring and Related Costs

In connection with the execution of our 2020 Vision, we originally anticipated total pre-tax restructuring and related charges would range from $45 million to $60 million. Additional costs were incurred, mainly related to additional use of external advisors for initial pricing and furthering of procurement efforts to enhance and support our 2020 Vision initiatives. As a result, our total pre-tax restructuring and related charges were slightly higher than the range we originally estimated. We do not expect to incur significant 2020 Vision restructuring and related expenses in the future.



(in millions)	Year Ended October 31, 2017		Cumulative
External Support Fees	$	12.1	$	28.0
Employee Severance	0.5		13.8
Other Project Fees	5.7		10.4
Lease Exit	2.6		5.7
Asset Impairment	—		4.7
Total	$	20.9	$	62.5

United States Tax Reform

The Tax Cuts and Jobs Act of 2017 was approved by Congress on December 20, 2017, and as of the filing of this report, it is awaiting signature by President Donald J. Trump. The law includes significant changes to the U.S. corporate income tax system, including a Federal corporate rate reduction from 35% to 21%, limitations on the deductibility of interest expense and executive compensation, and the transition of U.S. international taxation from a worldwide tax system to a territorial tax system. This change may result in a U.S. tax liability on those earnings which have not previously been repatriated to the U.S., with future foreign earnings potentially not subject to U.S. income taxes when repatriated. The majority of the provisions will have an impact on ABM beginning in fiscal years 2018 and 2019. We are in the process of analyzing the final legislation and determining an estimate of the financial impact.

Key Financial Highlights


•	Revenues increased by $308.9 million, or 6.0%, during 2017, as compared to 2016. Organic revenue increased 2.0%.

•

Operating profit increased by $47.2 million, or 86.2%, during 2017, as compared to 2016. The increase in operating profit is primarily attributable to the impairment recovery related to our Government Services business, a lower self-insurance adjustment, a reduction in restructuring and related expenses, and procurement and organizational savings from our 2020 Vision initiatives. This increase was partially offset by a contract termination within our Aviation business and $24.2 million of transaction expenses related to the GCA acquisition.


•	Net cash provided by operating activities of continuing operations was $101.7 million during 2017.


•	Dividends of $39.5 million were paid to shareholders, and dividends totaling $0.680 per common share were declared during 2017.


•	At October 31, 2017, total outstanding borrowings under our credit facility were $1.2 billion, and we had up to $350.8 million of borrowing capacity under our line of credit, subject to covenant restrictions that may limit the amount we can borrow.

Results of Operations

The Year Ended October 31, 2017 Compared with the Year Ended October 31, 2016

Consolidated



	Years Ended October 31,
($ in millions)	2017			2016			Increase / (Decrease)
Revenues	$	5,453.6		$	5,144.7		$	308.9		6.0%
Operating expenses	4,881.2			4,603.4			277.8			6.0%
Gross margin	10.5		%	10.5		%	—
Selling, general and administrative expenses	436.6			410.1			26.5			6.5%
Restructuring and related expenses	20.9			29.0			(8.1		)	(28.1)%
Amortization of intangible assets	31.6			25.0			6.6			26.5%
Impairment (recovery) loss	(18.5		)	22.5			(41.0		)	NM*
Operating profit	101.9			54.7			47.2			86.2%
Income from unconsolidated affiliates, net	4.2			7.6			(3.4		)	(44.6)%
Interest expense	(19.2		)	(10.4		)	(8.8		)	(84.3)%
Income from continuing operations before income taxes	86.9			51.9			35.0			67.3%
Income tax (provision) benefit	(8.8		)	10.4			(19.2		)	NM*
Income from continuing operations	78.1			62.3			15.8			25.3%
Loss from discontinued operations, net of taxes	(74.3		)	(5.1		)	(69.2		)	NM*
Net income	3.8			57.2			(53.4		)	(93.3)%
Other comprehensive income (loss)
Foreign currency translation	9.7			(26.3		)	36.0			NM*
Other, net of taxes	1.6			(0.2		)	1.8			NM*
Comprehensive income	$	15.2		$	30.7		$	(15.5	)	(50.5)%

* Not meaningful

Revenues

Revenues increased by $308.9 million, or 6.0%, during 2017, as compared to 2016. The increase in revenues was primarily attributable to $208.1 million of incremental revenues from acquisitions, including GCA, and organic growth of $121.0 million in Aviation and $38.5 million in Business & Industry (“B&I”). This increase was partially offset by the sale of our Government Services business on May 31, 2017, the loss of certain contracts in our Emerging Industries Group, and the completion of a large energy savings performance contract (“ESPC”).

Operating Expenses

Operating expenses increased by $277.8 million, or 6.0%, during 2017, as compared to 2016. Gross margin remained flat at 10.5% in 2017 and 2016. Gross margin was positively impacted by a lower self-insurance adjustment related to prior year claims and savings from our 2020 Vision initiatives. However, gross margin was negatively impacted by a contract termination within our Aviation business and the loss of a multi-location janitorial account in our Emerging Industries Group.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $26.5 million, or 6.5%, during 2017, as compared to 2016. The increase in selling, general and administrative expenses was primarily related to:


•	$24.2 million of transaction expenses related to the GCA acquisition;


•	an $8.1 million increase in costs associated with 2020 Vision technology investments;


•	$5.8 million of higher compensation and related expenses primarily related to hiring additional personnel to support our 2020 Vision initiatives, which was reduced by a reversal of certain expenses related to incentive plans;


•	$4.1 million of incremental selling, general and administrative expenses related to the GCA acquisition; and


•	a $2.3 million increase in legal expenses.

This increase was partially offset by:


•	an $8.8 million reduction in bad debt expense primarily associated with the absence of specific reserves for certain client receivables that were recorded in 2016;


•	a $3.2 million reimbursement during 2017 of previously expensed fees associated with a concluded internal investigation into a foreign entity formerly affiliated with a joint venture;


•	a $2.7 million decrease in sales tax reserve compared with the sales tax reserve in 2016; and


•	organizational savings from our 2020 Vision initiatives.

Restructuring and Related Expenses

Restructuring and related costs decreased by $8.1 million, or 28.1%, during 2017, as compared to 2016, as a result of the completion of our 2020 Vision organizational realignment and related employee severance in 2016.

Impairment Recovery

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, we recorded a pre-tax gain of approximately $1.2 million, which is reflected as part of impairment (recovery) loss in the results of operations table above.

Interest Expense

Interest expense increased by $8.8 million, or 84.3%, during 2017, as compared to 2016, primarily related to increased borrowings and higher relative interest rates under our new credit facility to fund the GCA acquisition.

Income Taxes

During 2017, we had an income tax provision of $8.8 million, compared with an income tax benefit of $10.4 million in the prior year. In 2017 we benefited from $17.8 million related to expiring statutes of limitations for an uncertain tax position, compared with $20.8 million in 2016. The 2017 period also benefited from $3.6 million of excess tax benefits related to the vesting of share-based compensation awards and $1.9 million of tax credits for energy efficient government buildings, compared with $2.2 million and $1.2 million in 2016, respectively. Additionally, in 2016 we benefited from Work Opportunity Tax Credits (“WOTC”) of $5.1 million from the retroactive reinstatement of the WOTC for calendar year 2015. Both periods benefited from in-year WOTC.

Loss from Discontinued Operations, Net of Taxes

Loss from discontinued operations, net of taxes was $74.3 million during 2017 related to a legal reserve established in connection with the Augustus and Karapetyan settlement agreements. Refer to “Developments and Trends—Legal,” above, for additional details.

Foreign Currency Translation

During 2017 we recognized as a component of our comprehensive income a foreign currency translation gain of $9.7 million compared with a loss of $26.3 million during 2016. This change was related to the U.S. Dollar (“USD”) weakening against the Great Britain Pound (“GBP”) during 2017. 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

Our reportable segments consist of B&I, Aviation, Emerging Industries Group, Technical Solutions, and the newly acquired GCA Services. As the Government Services business has been sold and is no longer part of our ongoing operations, we have excluded a discussion of its 2017 results in this report. We have also excluded a discussion of the GCA Services segment based on the timing of the acquisition.

Financial Information for Each Reportable Segment



	Years Ended October 31,
($ in millions)	2017			2016			Increase / (Decrease)
Revenues
Business & Industry	$	2,992.5		$	2,949.1		$	43.4		1.5%
Aviation	988.1			851.8			136.3			16.0%
Emerging Industries Group	777.1			801.9			(24.8		)	(3.1)%
Technical Solutions	439.6			425.3			14.3			3.4%
GCA Services	169.7			—			169.7			NM*
Government Services	86.5			116.7			(30.2		)	(25.8)%
	$	5,453.6		$	5,144.7		$	308.9		6.0%
Operating profit (loss)
Business & Industry	$	154.0		$	135.4		$	18.6		13.7%
Operating profit margin	5.1		%	4.6		%	56 bps
Aviation	28.8			27.7			1.1			3.8%
Operating profit margin	2.9		%	3.3		%	(34) bps
Emerging Industries Group	45.9			61.0			(15.1		)	(24.9)%
Operating profit margin	5.9		%	7.6		%	(171) bps
Technical Solutions	39.0			28.9			10.1			34.8%
Operating profit margin	8.9		%	6.8		%	207 bps
GCA Services	3.4			—			3.4			NM*
Operating profit margin	2.0		%	NM*			NM*
Government Services	21.8			(23.4		)	45.2			NM*
Operating profit (loss) margin	25.2		%	(20.1		)%	NM*
Corporate	(185.0		)	(167.2		)	(17.8		)	(10.7)%
Adjustment for income from unconsolidated affiliates, net, included in Aviation and Government Services	(4.1		)	(6.5		)	2.4			37.3%
Adjustment for tax credits for energy efficient government buildings, included in Technical Solutions	(1.9		)	(1.2		)	(0.7		)	(52.9)%
	$	101.9		$	54.7		$	47.2		86.2%

* Not meaningful



Business & Industry
	Years Ended October 31,
($ in millions)	2017			2016			Increase
Revenues	$	2,992.5		$	2,949.1		$	43.4	1.5%
Operating profit	154.0			135.4			18.6		13.7%
Operating profit margin	5.1		%	4.6		%	56 bps

B&I revenues increased by $43.4 million, or 1.5%, during 2017, as compared to 2016. The increase was primarily attributable to new janitorial business, including new contract wins in the U.K. and additional tag revenue, as well as expansion of existing facility services accounts. Management reimbursement revenues for this segment totaled $234.2 million and $227.8 million during 2017 and 2016, respectively.

Operating profit increased by $18.6 million, or 13.7%, during 2017, as compared to 2016. Operating profit margin increased by 56 bps to 5.1% in 2017 from 4.6% in 2016. The increase in operating profit margin was primarily

associated with higher margin revenues, cost control savings from our 2020 Vision initiatives, and lower legal settlement costs. This increase was partially offset by reserves recorded for multiemployer union benefit obligations from previous years and by lower profit margins associated with certain leased location arrangements.



Aviation
	Years Ended October 31,
($ in millions)	2017			2016			Increase / (Decrease)
Revenues	$	988.1		$	851.8		$	136.3	16.0%
Operating profit	28.8			27.7			1.1		3.8%
Operating profit margin	2.9		%	3.3		%	(34) bps

Aviation revenues increased by $136.3 million, or 16.0%, during 2017, as compared to 2016. The increase was primarily attributable to organic growth in parking, transportation, passenger services, cabin cleaning, and facility services. Management reimbursement revenues for this segment totaled $80.4 million and $78.2 million during 2017 and 2016, respectively.

Operating profit increased by $1.1 million, or 3.8%, during 2017, as compared to 2016. Operating profit margin decreased by 34 bps to 2.9% in 2017 from 3.3% in 2016. The decrease in operating profit margin was primarily attributable to a contract termination during 2017 and operational issues in certain geographic markets. This decrease was partially offset by lower allocated costs from our 2020 Vision initiatives and the absence of both a penalty imposed by a regulatory agency and a specific reserve established for a client receivable in 2016.



Emerging Industries Group
	Years Ended October 31,
($ in millions)	2017			2016			Decrease
Revenues	$	777.1		$	801.9		$	(24.8	)	(3.1)%
Operating profit	45.9			61.0			(15.1		)	(24.9)%
Operating profit margin	5.9		%	7.6		%	(171) bps

Emerging Industries Group revenues decreased by $24.8 million, or 3.1%, during 2017, as compared to 2016. The decrease was primarily related to the losses of certain High Tech and Education facility services accounts. The decrease in revenues for this segment was partially offset by net new janitorial business in the Healthcare and Education industry groups.

Operating profit decreased by $15.1 million, or 24.9%, during 2017, as compared to 2016. Operating profit margin decreased by 171 bps to 5.9% in 2017 from 7.6% in 2016. The decrease in operating profit margin was primarily attributable to lower contribution margin from certain High Tech contracts, including the loss of a multi-location janitorial account, higher allocated costs from our 2020 Vision initiatives, and reserves recorded for multiemployer union benefit obligations from previous years.



Technical Solutions
	Years Ended October 31,
($ in millions)	2017			2016			Increase
Revenues	$	439.6		$	425.3		$	14.3	3.4%
Operating profit	39.0			28.9			10.1		34.8%
Operating profit margin	8.9		%	6.8		%	207 bps

Technical Solutions revenues increased by $14.3 million, or 3.4%, during 2017, as compared to 2016. The increase was primarily attributable to incremental revenues from acquisitions of $18.1 million and higher project revenues, partially offset by the completion of a large ESPC project.

Operating profit increased by $10.1 million, or 34.8%, during 2017, as compared to 2016. Operating profit margin increased by 207 bps to 8.9% in 2017 from 6.8% in 2016. The increase in operating profit margin was primarily attributable to the completion of a relatively lower margin ESPC project that started in 2016, the management of our

selling, general and administrative expenses, a reduction in bad debt, and higher operational tax credits for energy efficient government building projects.



Corporate
	Years Ended October 31,
($ in millions)	2017		2016		Increase
Corporate expenses	$	185.0	$	167.2	$	17.8	10.7%

Corporate expenses increased by $17.8 million, or 10.7%, during 2017, as compared to 2016. The increase in corporate expenses was primarily related to:


•	$24.2 million of transaction expenses related to the GCA acquisition;


•	an $8.1 million increase in costs associated with 2020 Vision technology investments;


•	a $5.8 million increase in other costs to support our 2020 Vision initiatives;


•	a $5.1 million increase in legal settlement costs, including a settlement relating to a case alleging certain minimum wage violations; and


•	a $2.3 increase in legal expenses.

This increase was partially offset by:


•	a $10.9 million decrease in self-insurance expense related to prior year claims as a result of an actuarial evaluation completed during 2017;


•	a $7.8 million decrease in restructuring and related costs as a result of the completion of our 2020 Vision organizational realignment;


•	the absence of a $5.2 million specific reserve established during 2016 for a portion of a client receivable that is the subject of ongoing litigation;


•	a $3.2 million reimbursement during 2017 of previously expensed fees associated with a concluded internal investigation into a foreign entity formerly affiliated with a joint venture; and


•	a $1.9 million decrease in sales tax reserve.

The Year Ended October 31, 2016 Compared with the Year Ended October 31, 2015

Consolidated



	Years Ended October 31,
($ in millions)	2016			2015			Increase / (Decrease)
Revenues	$	5,144.7		$	4,897.8		$	246.9		5.0%
Expenses
Operating expenses	4,603.4			4,392.3			211.1			4.8%
Gross margin	10.5		%	10.3		%	20 bps
Selling, general and administrative expenses	410.1			395.0			15.1			3.8%
Restructuring and related expenses	29.0			12.7			16.3			NM*
Amortization of intangible assets	25.0			24.2			0.8			3.1%
Impairment loss	22.5			—			22.5			100.0%
Operating profit	54.7			73.6			(18.9		)	(25.6)%
Income from unconsolidated affiliates, net	7.6			9.0			(1.4		)	(15.2)%
Interest expense	(10.4		)	(10.2		)	(0.2		)	(2.3)%
Income from continuing operations before income taxes	51.9			72.4			(20.5		)	(28.3)%
Income tax benefit (provision)	10.4			(18.3		)	28.7			NM*
Income from continuing operations	62.3			54.1			8.2			15.2%
(Loss) income from discontinued operations, net of taxes	(5.1		)	22.2			(27.3		)	NM*
Net income	57.2			76.3			(19.1		)	(25.0)%
Other comprehensive loss
Foreign currency translation	(26.3		)	(2.2		)	(24.1		)	NM*
Other, net of taxes	(0.2		)	(0.1		)	(0.1		)	89.1%
Comprehensive income	$	30.7		$	74.0		$	(43.3	)	(58.5)%

*Not meaningful

Revenues

Revenues increased by $246.9 million, or 5.0%, during 2016, as compared to 2015. The increase in revenues was attributable to organic growth in Aviation, B&I, Technical Solutions, and Emerging Industries Group and to $101.9 million of incremental revenues from acquisitions. This increase was partially offset by the completion of certain Government Services contracts.

Operating Expenses

Operating expenses increased by $211.1 million, or 4.8%, during 2016, as compared to 2015. Gross margin increased by 20 bps to 10.5% in 2016 from 10.3% in 2015. The increase in gross margin was primarily attributable to higher revenue contribution from our Technical Solutions business and savings from our 2020 Vision initiatives and the related timing of open positions. This increase was partially offset by higher insurance expense due to an increase in the rate used to record our insurance reserves and one more working day during 2016.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $15.1 million, or 3.8%, during 2016, as compared to 2015. The increase in selling, general and administrative expenses was primarily related to:


•	$12.9 million of incremental selling, general and administrative expenses related to acquisitions;


•	a $10.1 million increase in bad debt expense primarily associated with specific reserves established for client receivables;


•	$3.9 million higher outside services costs as a result of our 2020 Vision initiatives; and


•	a $3.3 million increase in sales tax reserve for certain sales tax audits.

The increase was partially offset by:


•	the absence of $4.6 million in severance expense related to the departures of our former CEO and CFO;


•	a $4.3 million year-over-year decrease in medical and dental expense as a result of actuarial evaluations completed in the three months ended April 30, 2016;


•	$4.0 million lower compensation and related expenses primarily related to savings from our 2020 Vision; and


•	a $2.4 million decrease in legal fees and settlement costs.

Restructuring and Related Expenses

Restructuring and related costs increased by $16.3 million during 2016, as compared to 2015, in connection with our 2020 Vision.

Impairment Loss

We recognized a $22.5 million impairment loss during 2016 associated with the Government Services business.

Income Taxes

Our income taxes for 2016 were favorably impacted by a benefit of $20.8 million related to expiring statutes of limitations for an uncertain tax position, $6.7 million of WOTC related to new hires in 2016, $5.1 million of WOTC from the retroactive reinstatement of the WOTC for calendar year 2015, $2.2 million of excess tax benefits related to the vesting of share-based compensation awards, and $1.2 million of tax credits for energy efficient government buildings.

Loss from Discontinued Operations, Net of Taxes

Loss from discontinued operations, net of taxes was $5.1 million in 2016, a deterioration of $27.3 million, as compared to income from discontinued operations, net of taxes of $22.2 million during 2015. We sold our Security business in 2015 and recognized a corresponding gain on the sale. The loss in 2016 was associated with costs related to this disposed business.

Foreign Currency Translation

During 2016 we recognized as a component of our comprehensive income a foreign currency translation loss of $26.3 million compared with a loss of $2.2 million during 2015. This change was related to the GBP weakening against the USD. 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



	Years Ended October 31,
($ in millions)	2016			2015			Increase / (Decrease)
Revenues
Business & Industry	$	2,949.1		$	2,890.3		$	58.8		2.0%
Aviation	851.8			790.0			61.8			7.8%
Emerging Industries Group	801.9			777.0			24.9			3.2%
Technical Solutions	425.3			296.9			128.4			43.3%
Government Services	116.7			143.7			(27.0		)	(18.8)%
	$	5,144.7		$	4,897.8		$	246.9		5.0%
Operating profit (loss)
Business & Industry	$	135.4		$	145.5		$	(10.1	)	(6.9)%
Operating profit margin	4.6		%	5.0		%	(44) bps
Aviation	27.7			28.8			(1.1		)	(3.8)%
Operating profit margin	3.3		%	3.7		%	(39) bps
Emerging Industries Group	61.0			50.4			10.6			21.1%
Operating profit margin	7.6		%	6.5		%	112 bps
Technical Solutions	28.9			17.7			11.2			63.8%
Operating profit margin	6.8		%	5.9		%	85 bps
Government Services	(23.4		)	2.9			(26.3		)	NM*
Operating profit margin	(20.1		)%	2.0		%	NM*
Corporate	(167.2		)	(160.7		)	(6.5		)	(4.1)%
Adjustment for income from unconsolidated affiliates, net, included in Aviation and Government Services	(6.5		)	(9.0		)	2.5			(28.2)%
Adjustment for tax credits for energy efficient government buildings, included in Technical Solutions	(1.2		)	(2.0		)	0.8			(38.2)%
	$	54.7		$	73.6		$	(18.9	)	(25.6)%

*Not meaningful



Business & Industry
	Years Ended October 31,
($ in millions)	2016			2015			Increase / (Decrease)
Revenues	$	2,949.1		$	2,890.3		$	58.8		2.0%
Operating profit	135.4			145.5			(10.1		)	(6.9)%
Operating profit margin	4.6		%	5.0		%	(44) bps

Business & Industry revenues increased by $58.8 million, or 2.0%, during 2016, as compared to 2015. The increase was primarily attributable to the expansion of existing janitorial accounts, including additional tag revenue. Management reimbursement revenues for this segment totaled $227.8 million and $216.6 million during 2016 and 2015, respectively.

Operating profit decreased by $10.1 million, or 6.9%, during 2016, as compared to 2015. Operating profit margin decreased by 44 bps to 4.6% in 2016 from 5.0% in 2015. The decrease in operating profit margin was primarily attributable to higher insurance expense, lower profit margins associated with certain leased location arrangements, one more working day during 2016, and the absence of a gain from a property sale. This decrease was partially offset by savings from our 2020 Vision initiatives and the related timing of open positions.



Aviation
	Years Ended October 31,
($ in millions)	2016			2015			Increase / (Decrease)
Revenues	$	851.8		$	790.0		$	61.8		7.8%
Operating profit	27.7			28.8			(1.1		)	(3.8)%
Operating profit margin	3.3		%	3.7		%	(39) bps

Aviation revenues increased by $61.8 million, or 7.8%, during 2016, as compared to 2015. The increase was primarily attributable to organic growth in parking, cabin cleaning, and passenger services. Management reimbursement revenues for this segment totaled $78.2 million and $71.7 million during 2016 and 2015, respectively.

Operating profit decreased by $1.1 million, or 3.8%, during 2016, as compared to 2015. Operating profit margin decreased by 39 bps to 3.3% in 2016 from 3.7% in 2015. The decrease in operating profit margin was primarily attributable to higher insurance expense and a penalty imposed by a regulatory agency. Also negatively impacting operating profit margin was the operations in one region of a large multi-regional contract during the three months ended January 31, 2016. Through corrective steps, we improved the profitability of this contract within the impacted region. This decrease in operating profit margin was partially offset by lower amortization expense of intangible assets.



Emerging Industries Group
	Years Ended October 31,
($ in millions)	2016			2015			Increase
Revenues	$	801.9		$	777.0		$	24.9	3.2%
Operating profit	61.0			50.4			10.6		21.1%
Operating profit margin	7.6		%	6.5		%	112 bps

Emerging Industries Group revenues increased by $24.9 million, or 3.2%, during 2016, as compared to 2015. The increase was primarily related to net new Education and High Tech business, partially offset by the completion of certain Healthcare contracts.

Operating profit increased by $10.6 million, or 21.1%, during 2016, as compared to 2015. Operating profit margin increased by 112 bps to 7.6% in 2016 from 6.5% in 2015. This increase in operating profit margin was primarily attributable to improved margins on existing Healthcare contracts, higher contribution margin from certain High Tech accounts, and savings from our 2020 Vision initiatives and the related timing of open positions. This increase was partially offset by higher insurance expense and one more working day during 2016.



Technical Solutions
	Years Ended October 31,
($ in millions)	2016			2015			Increase
Revenues	$	425.3		$	296.9		$	128.4	43.3%
Operating profit	28.9			17.7			11.2		63.8%
Operating profit margin	6.8		%	5.9		%	85 bps

Technical Solutions revenues increased by $128.4 million, or 43.3%, during 2016, as compared to 2015. The increase was primarily attributable to incremental revenues from acquisitions of $97.0 million and a large ESPC project.

Operating profit increased by $11.2 million, or 63.8% during 2016, as compared to 2015. Operating profit margin increased by 85 bps to 6.8% in 2016 from 5.8% in 2015. The increase in operating profit margin was attributable to savings from our 2020 Vision initiatives.



Government Services
	Years Ended October 31,
($ in millions)	2016			2015			Decrease
Revenues	$	116.7		$	143.7		$	(27.0	)	(18.8)%
Operating (loss) profit	(23.4		)	2.9			(26.3		)	NM*
Operating profit margin	(20.1		)%	2.0		%	NM*

*Not meaningful

Revenues from our Government Services segment decreased by $27.0 million, or 18.8%, during 2016, as compared to 2015. The decrease was primarily attributable to the completion of certain healthcare projects.

Operating loss was $23.4 million during 2016, a decrease of $26.3 million, as compared to operating profit of $2.9 million during 2015. The decrease in operating profit was primarily attributable to the $22.5 million impairment charge associated with the held-for-sale classification.



Corporate
	Years Ended October 31,
($ in millions)	2016		2015		Increase
Corporate expenses	$	167.2	$	160.7	$	6.5	4.1%

Corporate expenses increased by $6.5 million, or 4.1%, during 2016, as compared to 2015. The increase in corporate expenses was primarily related to:


•	a $16.9 million increase in restructuring and related costs, net of the reversal of share-based compensation expense, in connection with our 2020 Vision initiatives;


•	a $5.2 million increase in bad debt expense related to a specific reserve established for a client receivable that is the subject of ongoing litigation;


•	a $3.4 million increase in compensation and related expenses primarily due to the impact of annual salary increases and the absence of a bonus reversal related to certain incentive plans in the prior year;


•	a $3.3 million increase in sales tax reserve for certain sales tax audits; and


•	$1.7 million higher outside services costs incurred as a result of our 2020 Vision.

This increase was partially offset by:


•	a $4.7 million decrease in legal fees and settlement costs;


•	the absence of $4.6 million in severance expense related to the departures of our former CEO and CFO;


•	a $4.3 million year-over-year decrease in medical and dental expense as a result of actuarial evaluations completed in the three months ended April 30, 2016;


•	$4.1 million in savings from our 2020 Vision; and


•	a $3.0 million year-over-year decrease in self-insurance expense related to prior year claims as a result of actuarial evaluations completed in 2016.

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 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. We had accelerated cash tax savings related to coverage provided by IFM of approximately $10 million in both 2017 and 2016 and approximately $20 million in 2015. We project accelerated cash tax savings for 2018 to be approximately $10 million.

Credit Facility

On September 1, 2017, we refinanced and replaced our 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. The line of credit reduces to $800.0 million after one year. Borrowings under the Credit Facility were used to finance, in part, the cash portion of the purchase price related to the GCA acquisition, refinance certain existing indebtedness of ABM, and pay transaction costs.

At October 31, 2017, the total outstanding borrowings under our Credit Facility in the form of cash borrowings and standby letters of credit were $1.2 billion and $146.4 million, respectively. At October 31, 2017, we had up to $350.8 million of borrowing capacity under the Credit Facility, however covenant restrictions limited our borrowing capacity to $282.0 million.

Our ability to draw down available capacity under the Credit Facility is subject to, and limited by, compliance with certain financial covenants, which include a maximum leverage ratio of 4.75 to 1.0 that steps down to 3.50 to 1.0 by July 2020 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 October 31, 2017, we were in compliance with these covenants and expect to be in compliance in the foreseeable future.

Reinvestment of Foreign Earnings

We plan to reinvest our foreign earnings to fund future non-U.S. growth and expansion. As a result, we do not anticipate remitting such earnings to the United States and have not provided for federal and state income taxes or foreign withholding taxes that may result if such earnings of our foreign subsidiaries are remitted to the United States. We believe that our cash on hand in the United States, along with our Credit Facility and future domestic cash flows, are sufficient to satisfy our domestic liquidity requirements.

Proceeds from Federal Energy Savings Performance Contracts

As part of our Technical Solutions business, we enter into ESPCs with the federal government pursuant to which we agree to develop, design, engineer, and construct a project and guarantee that the project will satisfy agreed-upon performance standards. Proceeds from ESPC projects are generally received in advance of construction through agreements to sell the ESPC receivables to unaffiliated third parties. We use the advances from the third parties under these agreements to finance the projects, which are recorded as cash flows from financing activities. The use of the cash received under these arrangements to pay project costs is classified as operating cash flows.

Effect of Inflation

The rates of inflation experienced in recent years have not had a material impact on our financial statements. We attempt to recover increased costs by increasing prices for our services, to the extent permitted by contracts and competition.

Regulatory Environment and Environmental Compliance

Our operations are subject to various federal, state, and/or local laws regulating the discharge of materials into the environment or otherwise relating to the protection of the environment, such as discharge into soil, water, and air, and the generation, handling, storage, transportation, and disposal of waste and hazardous substances. In addition, from time to time we are involved in environmental matters at certain of our locations or in connection with our operations. Historically, the cost of complying with environmental laws or resolving environmental issues relating to locations or operations in the United States or abroad has not had a material adverse effect on our financial position, results of operations, or cash flows. We do not believe that the resolution of matters known at this time will be material.

Share Repurchases

On September 2, 2015, our Board of Directors authorized a program to repurchase up to $200.0 million shares of our common stock. 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. At October 31, 2017, authorization for $134.1 million of repurchases remained under our share repurchase program. We do not anticipate additional repurchases in the near future.

Repurchase Activity



	Years Ended October 31,
(in millions, except per share amounts)	2017		2016		2015
Total number of shares purchased	0.2		1.4		1.0
Average price paid per share	$	40.07	$	33.48	$	30.72
Total cash paid for share repurchases	$	7.9	$	46.6	$	31.4

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 operating activities of continuing operations was $101.7 million during 2017. 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.



	Years Ended October 31,
(in millions)	2017			2016			2015
Net cash provided by operating activities of continuing operations	$	101.7		$	110.5		$	145.5
Net cash (used in) provided by operating activities of discontinued operations	(96.1		)	(27.0		)	0.9
Net cash provided by operating activities	5.6			83.5			146.4

Net cash used in investing activities of continuing operations	(871.8		)	(131.7		)	(40.5		)
Net cash (used in) provided by investing activities of discontinued operations	—			(3.1		)	130.9
Net cash (used in) provided by investing activities	(871.8		)	(134.8		)	90.4

Net cash provided by (used in) financing activities	874.0			52.6			(216.9		)

Operating Activities of Continuing Operations

Net cash provided by operating activities of continuing operations decreased by $8.8 million during 2017, as compared to 2016. The decrease was primarily related to the timing of client receivable collections and income taxes payable, but was partially offset by the timing of vendor payments.

Net cash provided by operating activities of continuing operations decreased by $35.0 million during 2016, as compared to 2015. The decrease was primarily related to the timing of ESPC projects and trade receivable collections, as well as the timing of vendor payments. This decrease was partially offset by the timing of tax payments.

Operating Activities of Discontinued Operations

Net cash used in operating activities of discontinued operations increased by $69.1 million during 2017, as compared to 2016. This increase was primarily attributable to the payment of $120.0 million to settle the Augustus and Karapetyan cases, compared to the $20.0 million in taxes paid related to the sale of the Security business in 2016.

Net cash used in operating activities of discontinued operations increased by $27.9 million during 2016, as compared to 2015. This increase was primarily attributable to $20.0 million in taxes paid related to the sale of the Security business in 2016.

Investing Activities of Continuing Operations

Net cash used in investing activities of continuing operations increased by $740.1 million during 2017, as compared to 2016. The increase was primarily related to a $757.6 million year-over-year increase in cash paid, net of cash acquired, for acquisitions, largely due to the GCA acquisition.

Net cash used in investing activities of continuing operations increased by $91.2 million during 2016, as compared to 2015. The increase was primarily related to a $76.8 million year-over-year increase in cash paid, net of cash acquired, for acquisitions.

Investing Activities of Discontinued Operations

Net cash used in investing activities of discontinued operations decreased by $3.1 million during 2017, as compared to 2016. The decrease was related to the absence of the final working capital adjustment from the sale of the Security business.

Net cash used in investing activities of discontinued operations was $3.1 million in 2016, a decrease of $134.0 million, as compared to net cash provided by investing activities of discontinued operations of $130.9 million during 2015. We sold our Security business in 2015 and recognized $131.0 million of cash proceeds from the sale. The cash used in 2016 was associated with the payment of $3.1 million in settlement of the final working capital adjustment from the sale.

Financing Activities

Net cash provided by financing activities increased by $821.4 million during 2017, as compared to 2016. The increase was primarily related to higher net borrowings of $812.6 million associated with greater financing activity in the fourth quarter of 2017 to fund the GCA acquisition and $38.7 million in lower common stock repurchases. This increase was offset by $18.7 million of deferred financing costs paid on the new credit facility and $15.8 million of lower proceeds from ESPC projects during 2017.

The change in net cash provided by financing activities was $269.5 million in 2016 when compared to 2015. During 2016, our net cash provided by financing activities of $52.6 million was primarily a result of borrowings from our line of credit to fund two acquisitions made in 2016. During 2015, our net cash used in financing activities of $216.9 million was a result of the repayment of borrowings from our line of credit primarily resulting from the cash proceeds from the sale of our Security business. Also contributing to the change in net cash provided by financing activities was a $17.4 million increase in proceeds from ESPC projects, partially offset by higher common stock repurchases of $15.2 million.

Dividends

On December 13, 2017, we announced a quarterly cash dividend of $0.175 per share on our common stock, payable on February 5, 2018. We declared a quarterly cash dividend on our common stock every quarter during 2017, 2016, and 2015. We paid total annual dividends of $39.5 million, $36.9 million, and $36.0 million during 2017, 2016, and 2015, respectively.

Contractual Obligations



(in millions)	Commitments Due By Period
Contractual Obligations	Total		2018		2019-2020		2021-2022		Thereafter
Borrowings under term loan⁽¹⁾	$	800.0	$	20.0	$	100.0	$	680.0	$	—
Borrowings under line of credit⁽¹⁾	391.2		—		—		391.2		—
Fixed interest related to interest rate swaps⁽²⁾	44.4		9.5		18.9		16.0		—
Operating leases and other similar commitments⁽³⁾	319.0		79.7		89.0		65.5		84.8
Capital leases⁽³⁾	12.6		3.1		6.1		3.0		0.3
Information technology service agreements⁽⁴⁾	26.4		11.8		11.6		3.0		—
Benefit obligations⁽⁵⁾	31.3		7.6		5.4		4.7		13.7
Total	$	1,624.8	$	131.8	$	231.0	$	1,163.4	$	98.8

⁽¹⁾ Borrowings under our term loan and line of credit are presented at face value.

⁽²⁾ Our estimates of future interest payments are calculated based on our hedged borrowings under our Credit Facility, using the fixed rates under our interest rate swap agreements for the applicable notional amounts. See Note 12, “Credit Facility,” in the Financial Statements for additional disclosure related to our interest rate swaps. We exclude interest payments on our remaining borrowings from this table because the cash outlay for the interest is unknown. The interest payments on the borrowings under the Credit Facility will be determined based upon the average outstanding balance of our borrowings and the prevailing interest rate during that time.

⁽³⁾Reflects our contractual obligations to make future payments under non-cancelable operating leases, capital lease agreements, and other similar commitments for various facilities, vehicles, and other equipment.

⁽⁴⁾ Reflects our contractual obligations to make future payments for outsourced services and licensing costs pursuant to our information technology agreements.

⁽⁵⁾Reflects future expected payments relating to our defined benefit, postretirement, and deferred compensation plans. These amounts are based on expected future service and were calculated using the same assumptions used to measure our benefit obligation at October 31, 2017.

In addition to our company sponsored plans, we participate in certain multiemployer pension and other postretirement plans. The cost of these plans is equal to the annual required contributions determined in accordance with the provisions of negotiated collective bargaining arrangements. During 2017, 2016, and 2015, contributions made to these plans were $316.4 million, $290.4 million, and $282.1 million, respectively; however, our future contributions to the multiemployer plans are dependent upon a number of factors, including the funded status of the plans, the ability of other participating companies to meet ongoing funding obligations, and the level of our ongoing participation in these plans. As the amount of future contributions that we would be contractually obligated to make pursuant to these plans cannot be reasonably estimated, such amounts have been excluded from the above table. See Note 13, “Employee Benefit Plans,” in the Financial Statements for more information.

At October 31, 2017, our total liability for unrecognized tax benefits was $16.3 million. The resolution or settlement of these tax positions with the taxing authorities is subject to significant uncertainty, and therefore we are unable to make a reliable estimate of the amount or timing of cash that may be required to settle these matters. In addition, certain of these matters may not require cash settlements due to the exercise of credits and net operating loss carryforwards as well as other offsets, including the indirect benefit from other taxing jurisdictions that may be available.

We have no off-balance sheet arrangements other than unrecorded standby letters of credit and surety bonds. We use letters of credit and surety bonds in the ordinary course of business to ensure the performance of contractual obligations and to collateralize self-insurance obligations in the event we are unable to meet our claim payment obligations. As we already have reserves on our books for the claims costs, these do not represent additional liabilities. The bonds typically remain in force for one to five years and may include optional renewal periods. As of October 31, 2017, these letters of credit and surety bonds totaled $146.4 million and $486.2 million, respectively. Included in the total amount of surety bonds is $2.5 million of bonds with an effective date starting after October 31, 2017. Neither of these arrangements has a material current effect, or is reasonably likely to have a material future effect, on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in accordance with United States generally accepted accounting principles requires our management to make certain estimates that affect the reported amounts. We base our estimates on historical experience, known or expected trends, independent valuations, and various other assumptions that we believe to be reasonable under the circumstances. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. We believe the following critical accounting policies govern the more significant judgments and estimates used in the preparation of our financial statements.



Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions
Allowance for Doubtful Accounts We estimate the allowance for doubtful accounts based on a variety of factors, including an analysis of the historical rate of credit losses or write-offs, specific client concerns, and known or expected trends.	The determination of our allowance for doubtful accounts contains uncertainties because it requires our management to make assumptions and apply judgment about future uncollectible accounts. Actual write-offs and adjustments could differ from the allowance estimates due to unanticipated changes in the business environment as well as factors and risks associated with specific clients. In addition, adverse developments in negotiations or legal proceedings to obtain payment could result in the actual loss exceeding the estimated allowance.	We have not made any changes in the accounting methodology used to record our allowance for doubtful accounts during the past three years. A 10% change in our allowance for doubtful accounts would have affected net income by approximately $1.5 million for 2017.
Customer Relationships When we acquire a company, we determine the fair value on the acquisition date of assets acquired and liabilities assumed. We anticipate that for most acquisitions we will exercise significant judgment in estimating the fair value of intangible assets. In a typical acquisition, customer relationships are our most significant definite-lived intangible asset. In valuing these relationships, we engage a third-party valuation expert to fair value these assets using a version of the income approach known as the “excess earnings method.” This method uses a discounted cash flow approach that is derived from historical information, future revenue and operating profit margins, contributory asset charges, and the selection of an appropriate discount rate. We consider this approach the most appropriate valuation technique because the inherent value of these assets is their ability to generate current and future income.	The customer attrition rate and expected revenue growth are two significant estimates used to derive the projected revenues and profitability in the customer relationships valuation. Both of these estimates are influenced by many factors, including historical financial information, estimated retention rates, and management's expectations for future customer growth as a combined company. Another estimate that impacts the valuation is the contributory charge for the acquired workforce, which involves management assumptions based on historical experience, including interview time and new hire productivity. The estimated life is determined by calculating the number of years necessary to obtain 90% of the value of the discounted cash flows of the relationships and is directly tied to the accuracy of the above assumptions.	We have not made any changes in the accounting methodology used to determine the fair value of customer relationships during the last three years. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop the values of the identifiable intangible assets, we could record material impairment losses. With other assumptions held constant, a 10% increase in the calculated fair value of the GCA customer relationships would increase the annual amortization expense by $4.2 million in 2018. See the “Amortization and Impairment of Long-Lived Assets” critical accounting policy for information about impairment evaluations.



Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions
Amortization and Impairment of Long-Lived Assets Our long-lived assets include property, plant and equipment and amortizable intangible assets. We estimate the depreciable lives of our long-lived assets. For depreciable fixed assets, these depreciable lives are based on our accounting policy, which is intended to mirror the expected useful life of the asset. In determining the estimated useful life of amortizable intangible assets, such as customer relationships, we consider historical and projected revenues and related customer attrition rates, as well as historical experience and industry norms as a benchmark. We evaluate our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. These events and circumstances include, but are not limited to: higher than expected attrition for customer relationships; a current expectation that a long-lived asset will be disposed of significantly before the end of its previously estimated useful life, such as when we classify a business as held for sale; a significant adverse change in the extent or manner in which we use a long-lived asset; or a change in its physical condition. When one of these occurs, a recoverability test is performed that compares the projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying amount. If the projected undiscounted cash flows are less than the carrying amount, we calculate an impairment loss. The impairment loss calculation compares the fair value, which is based on projected discounted cash flows, to the carrying value. We record an impairment loss if the carrying value exceeds the fair value. If we recognize an impairment loss, the adjusted carrying amount of the asset becomes the new cost basis. For a depreciable long-lived asset, the new cost basis will be depreciated (amortized) over the remaining estimated useful life of that asset.	Our impairment evaluations require us to apply judgment in determining whether a triggering event has occurred, including the evaluation of whether it is more likely than not that a long-lived asset will be disposed of significantly before the end of its previously estimated useful life. Incorrect estimation of useful lives may result in inaccurate depreciation and amortization charges over future periods leading to future impairment. Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows. The determination of fair value for held-for-sale businesses involves significant judgments and assumptions. Development of estimates of fair values in this circumstance is complex and is dependent upon, among other factors, the composition of assets in the disposal group, the comparability of the disposal group to similar market transactions, and negotiations with third-party purchasers. Such factors bear directly on the range of potential fair values and the selection of the best estimates.	We have not made any changes in the accounting methodology used to evaluate the impairment of long-lived assets during the last three years. Additionally, we have not made any changes to the estimated useful lives of our long-lived assets during the last three years. If actual results are not consistent with the estimates and assumptions we used to calculate estimated future cash flows for impairment evaluations, we may be exposed to future impairment losses that could be material or subsequent impairment recoveries, leading to income statement volatility. During 2016, when we classified our Government Services business as held for sale, we were required to measure that business at the lower of its carrying value or fair value less estimated costs to sell. As a result of significant underperformance relative to expected operating results, we determined the fair value of this business was less than the carrying amount, which resulted in the recognition of a long-lived asset impairment charge of $15.3 million in 2016. During the second quarter of 2017, we received an offer from a strategic buyer to purchase this business for approximately $35.0 million, which was higher than our estimate of fair value less costs to sell. As a result, we recorded an $11.4 million impairment recovery to adjust the fair value of certain previously impaired assets to the valuation of the assets as implied by the agreed-upon sales price, less estimated costs to sell. We completed the sale for $35.5 million, therefore we did not recognize a material gain on sale. See the “Impairment of Goodwill” critical accounting policy, below, for details about the Government Services goodwill impairment charge and subsequent recovery.



Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions
Impairment of Goodwill We have elected to make the first day of our fourth quarter, August 1st, the annual impairment assessment date for goodwill. However, we could be required to evaluate the recoverability of goodwill more frequently if certain triggering events occur, such as a significant change in the business climate or the classification of a significant portion of our business as held for sale. We test the carrying value of goodwill for impairment at a “reporting unit” level by comparing the fair value of a reporting unit to its carrying amount. If the fair value of a reporting unit is less than its carrying value, an impairment charge will be recorded for the difference between the fair value and carrying value, but it is limited to the carrying value of the reporting unit’s goodwill.	We estimate the fair value of each reporting unit using a combination of the income approach and the market approach. The income approach incorporates the use of a discounted cash flow method in which the estimated future cash flows and terminal value are calculated for each reporting unit and then discounted to present value using an appropriate discount rate. In making these estimates, the weighted average cost of capital is utilized to calculate the present value of future cash flows and terminal value. Many variables go into estimating future cash flows, including our future sales growth and operating results. When estimating our projected revenue growth and future operating results, we consider industry trends, economic data, and our competitive advantage. The market approach estimates fair value by using market comparables for reasonably similar public companies. The valuation of our reporting units requires significant judgment in evaluation of recent indicators of market activity and estimated future cash flows, discount rates, and other factors. Our impairment analyses contain inherent uncertainties due to uncontrollable events that could positively or negatively impact the anticipated future economic and operating conditions.	We have not made any changes in the accounting methodology used to evaluate impairment of goodwill during the last three years, other than early adopting Accounting Standards Update 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. In addition, on November 1, 2016, we reorganized our reportable segments and goodwill reporting units to reflect how we now manage our business by industry group. At October 31, 2017, we had $1,864.2 million of goodwill. Our goodwill is included in the following segments: $473.3 million — B&I $124.2 million — Aviation $152.8 million — Emerging Industries Group $180.0 million — Technical Solutions $933.9 — Newly acquired GCA Services A goodwill impairment analysis was performed for each of our reporting units on both November 1, 2016 and August 1, 2017. Based on these studies, the implied fair value of each of our reporting units was substantially in excess of its carrying value. Therefore, we concluded there were no indicators of impairment. A 10% decrease in the estimated fair value of any of our reporting units would not have resulted in a different conclusion. An impairment analysis was performed for our Government Services business when it was classified as held for sale at October 31, 2016, resulting in an impairment charge of $6.0 million, based upon the estimated fair value of the business at the time of the assessment. As described in the "Amortization and Impairment of Long-Lived-Assets" critical accounting policy, above, during the second quarter of 2017 we received an offer from a strategic buyer to purchase this business for an amount in excess of our original estimate of fair value less costs to sell. In accordance with the held-for-sale accounting guidance, we recorded a full impairment recovery of the aforementioned $6.0 million goodwill impairment in 2017.



Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions
Insurance Reserves We use a combination of insured and self-insurance programs to cover workers’ compensation, general liability, automobile liability, property damage, and other insurable risks. Insurance claim liabilities represent our estimate of retained risks without regard to insurance coverage. We retain a substantial portion of the risk related to certain workers’ compensation and medical claims. Liabilities associated with these losses include estimates of both claims filed and IBNR Claims. With the assistance of third-party actuaries, we periodically review our estimate of ultimate losses for IBNR Claims and adjust our required self-insurance reserves as appropriate. As part of this evaluation, we review the status of existing and new claim reserves as established by our third-party claims administrators. The third-party claims administrators establish the case reserves based upon known factors related to the type and severity of the claims, demographic factors, legislative matters, and case law, as appropriate. We compare actual trends to expected trends and monitor claims developments. The specific case reserves estimated by the third-party administrators are provided to an actuary who assists us in projecting an actuarial estimate of the overall ultimate losses for our self-insured or high deductible programs, which includes the case reserves plus an actuarial estimate of reserves required for additional developments, including IBNR Claims. We utilize the results of actuarial studies to estimate our insurance rates and insurance reserves for future periods and to adjust reserves, if appropriate, for prior years.	Our self-insurance liabilities contain uncertainties due to assumptions required and judgment used. Costs to settle our obligations, including legal and healthcare costs, could fluctuate and cause estimates of our self-insurance liabilities to change. Incident rates, including frequency and severity, could fluctuate and cause the estimates in our self-insurance liabilities to change. These estimates are subject to: changes in the regulatory environment; fluctuations in projected exposures, including payroll, revenues, and the number of vehicle units; and the frequency, lag, and severity of claims. The full extent of certain claims, especially workers’ compensation and general liability claims, may not be fully determined for several years. In addition, if the reserves related to self-insurance or high deductible programs from acquired businesses are not adequate to cover damages resulting from future accidents or other incidents, we may be exposed to substantial losses arising from future developments of the claims.	We have not made any changes in the accounting methodology used to establish our self-insurance liabilities during the past three years. After analyzing the recent loss development patterns, comparing the loss development patterns against benchmarks, and applying actuarial projection methods to estimate the ultimate losses, we increased our total reserves for known claims as well as our estimate of the loss amounts associated with IBNR Claims for prior years by $22.0 million, $32.9 million, and $35.9 million during 2017, 2016, and 2015, respectively. It is possible that actual results could differ from recorded self-insurance liabilities. A 10% change in our projected ultimate losses would have affected net income by approximately $25.1 million for 2017.



Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions
Revenue Recognition We earn revenue under various types of service contracts. In all forms of service we provide, revenue is recognized when persuasive evidence of an arrangement exists, services have been rendered, the fee is fixed or determinable, and collectability is reasonably assured. The various types of service contracts are described below. Monthly Fixed-Price These arrangements are contracts in which the client agrees to pay a fixed fee every month over a specified contract term. A variation of a fixed-price arrangement is a square-foot arrangement, under which monthly billings are based on the actual square footage serviced. Cost-Plus These 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. 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. Transaction-Price These are agreements in which the clients are billed for each transaction performed on a monthly basis (e.g., wheelchair passengers served or aircrafts cleaned). Hourly These arrangements are contracts in which the client is billed a set hourly rate for each labor hour provided. Management Reimbursement Under these parking arrangements, we manage a parking facility for a management fee and pass through the revenue and expenses associated with the facility to the owner. These revenues and expenses are reported in equal amounts as costs reimbursed from our managed locations.	For our service contracts, the determination of the sales allowance contains uncertainties because it requires our management to make assumptions and apply judgment about the amount and timing of indeterminable billing errors and disputes. For certain ESPC and fixed-price repair and refurbishment arrangements for which we recognize revenue under the percentage-of-completion method, recognition of profit is dependent upon the accuracy of a variety of estimates, including: (1) engineering progress; (2) achievement of milestones; (3) incentives; (4) labor productivity; and (5) cost estimates. Such estimates are based on various professional judgments made with respect to those factors and are subject to change as each project proceeds and new information becomes available.	We have not made any changes in the accounting methodology used to record our sales allowance or to recognize revenue under the percentage-of-completion method during the past three years. For contracts where the percentage-of-completion method is used to recognize revenue, if actual costs differ from our assumptions, the amount of revenue and the related gross profit recognized will also fluctuate. As revenue earned under these types of contracts represent a small portion of our total revenue, any revisions to our estimated costs would not have a significant impact on our revenue or operating profit. A 10% change in our sales allowance would have affected net income by approximately $0.5 million for 2017.



Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions
Revenue Recognition (continued) Leased Location Under these parking arrangements, we generally pay to the property owner a fixed amount of rent, plus a percentage of revenues derived from monthly and transient parkers. We retain all revenues and we are responsible for most operating expenses incurred. Allowance Under these parking arrangements, we are paid a fixed or hourly fee to provide parking services, and we are responsible for certain operating expenses, as specified in the contract. ESPC and Fixed-Price Repair and Refurbishment We recognize revenue under these arrangements using the percentage-of-completion method of accounting, most often based on the cost-to-cost method. Under the percentage-of-completion method, revenues are recognized as the work progresses. The percentage of work completed is determined principally by comparing the actual costs incurred to date with the current estimate of total costs to complete. Estimated losses are recorded when identified. 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. Initial franchise fees are recognized when we have performed substantially all initial services required by the franchise agreement. Royalties are recognized in income as underlying franchisee sales occur. Other franchise fees charged to franchisees on a flat rate are recognized as earned. Sales Allowance In connection with our service contracts, we periodically issue credit memos to our clients that are recorded as a reduction in revenues and an increase to the allowance for billing adjustments. These credits can result from client vacancy discounts, job cancellations, property damage, and other items. We estimate our potential future losses on these client receivables based on an analysis of the historical rate of sales adjustments (credit memos, net of re-bills) and known or expected trends.



Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions
Income Taxes Our provision for income taxes is estimated for the tax jurisdictions where we operate. This process involves estimating actual current tax expense together with assessing temporary differences between financial reporting and tax reporting. These differences result in deferred tax assets and liabilities, which are reduced by a valuation allowance when, in the opinion of our management, it is more likely than not that all or a portion of the deferred tax assets will not be realized. All or a portion of the benefit of income tax positions is recognized only when we have made a determination that it is more likely than not that the tax position will be sustained upon examination, based upon the technical merits of the position and other factors. For tax positions that are determined as more likely than not to be sustained upon examination, the tax benefit recognized is the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.	Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. For example, our effective tax rates could be adversely affected by earnings being lower than anticipated in jurisdictions where we have lower statutory rates and higher than anticipated in jurisdictions where we have higher statutory rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in the relevant tax, accounting, and other laws, regulations, principles, and interpretations. Unrecognized tax benefits require significant management judgment regarding applicable statutes and their related interpretation as they apply to our particular facts and circumstances.	Although we believe that our income tax related judgments and estimates are reasonable, it is possible that our actual results could be different than what we expected, and we may be exposed to a material change in our total income tax expense, tax-related balances, or valuation allowances. Upon income tax audit, any unfavorable tax settlement may require use of our cash and result in an increase in our effective tax rate in the period of settlement. A favorable tax settlement could be recognized as a reduction in our effective tax rate in the period of settlement.
Contingencies and Litigation 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. We accrue for loss contingencies when losses become probable and are reasonably estimable. If the reasonable estimate of the loss is a range and no amount within the range is a better estimate, the minimum amount of the range is recorded as a liability. We do not accrue for contingent losses that, in our judgment, are considered to be reasonably possible but not probable.	Litigation outcomes are difficult to predict and are often resolved over long periods of time. Estimating probable and reasonably possible losses requires the analysis of multiple possible outcomes that often depend on judgments about potential actions by third parties, such as future changes in facts and circumstances, differing interpretations of the law, assessments of the amount of damages, and other factors beyond our control. There is the potential for a material adverse effect on our financial statements if one or more matters are resolved in a particular period in an amount materially in excess of what we anticipated. In addition, 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.	We have not made any changes in the accounting methodology used to establish our loss contingencies during the past three years. 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 $3 million. Factors underlying this estimated range of loss may change from time to time, and actual results may vary significantly from this estimate.

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