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. This MD&A is provided as a
supplement to, and should be read in conjunction with, our Financial Statements
and our Annual Report on Form 10-K for the year ended October 31, 2020, which
has been filed with the SEC. This MD&A contains forward-looking statements about
our business, operations, and industry that involve risks and uncertainties,
such as statements regarding our plans, objectives, expectations, and
intentions. Our future results and financial condition may be materially
different from those we currently anticipate. See "Forward-Looking Statements"
for more information.
Throughout the MD&A, amounts and percentages may not recalculate due to
rounding. Unless otherwise indicated, all information in the MD&A and references
to years are based on our fiscal years, which end 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.




COVID-19 Pandemic
COVID-19 has resulted in a worldwide health Pandemic. To date, COVID-19 has
surfaced in regions all around the world and resulted in business slowdowns and
shutdowns, as well as global travel restrictions. We, along with many of our
clients, have been impacted by recommendations and/or mandates from federal,
state, and local authorities to practice social distancing, to refrain from
gathering in groups, and, in some areas, to refrain from non-essential movements
outside of homes. The Pandemic has also created unanticipated circumstances and
uncertainty, disruption, and significant volatility in the broader economy.
These factors have led to lower demand for some of our services in certain
end-markets, particularly in our Aviation segment. Refer to "Consolidated
Results of Operations" and "Results of Operations by Segment" for additional
information related to the impact of the Pandemic on our financial results.
Given the unprecedented and uncertain nature and potential duration of this
situation, we cannot reasonably estimate the full extent of the impact the
Pandemic will have on our financial condition, results of operations, or cash
flows. The ultimate extent of the effects of the Pandemic on our company is
highly uncertain and will depend on future developments, and we may continue to
experience adverse effects on our business, consolidated results of operations,
financial position, and cash flows resulting from a recessionary economic
environment that may persist.
Our priority has been and continues to be the health, safety, and support of our
employees, our clients, and the communities that we serve. We have also taken
actions to strengthen our liquidity, cash flows, and financial position to help
mitigate potential future impacts on our operations and financial performance.
These priorities and measures include, but are not limited to, the following:
Health and Safety of our Employees and Clients
As the Pandemic has developed, we have taken steps to support our employees and
clients based on recommendations from various global experts, including the
World Health Organization, the Centers for Disease Control and Prevention, the
Occupational Safety and Health Administration, and the U.K. National Health
Service. To help protect our employees and our clients, face masks and other
personal protective equipment ("PPE") are being used by our employees. We have
also encouraged our employees to practice social distancing and wash hands
frequently. Additionally, we transitioned many office-based employees to a
remote work environment, suspended non-essential travel, and adopted
technologies to allow employees to effectively perform their functions remotely.
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Client Focus
Over the past few years, we have focused on consolidating purchasing activities
to leverage our scale and identify preferred suppliers. While we have seen a
reduction in the availability of supplies and an increase in costs, our
procurement efforts have helped create a positive supply chain for our company
and clients during the Pandemic. We will continue to monitor our supply chain
for potential impacts as future developments unfold.
The Pandemic continues to create a dynamic client environment, and we are
working diligently to ensure our clients' changing staffing and service needs
are met. We developed new cleaning initiatives in accordance with various
protocols issued by global experts, including deep cleaning services, special
project cleaning services, and other work orders.
In April 2020, we announced our EnhancedCleanTM Program ("EnhancedClean"), an
innovative solution that helps provide clients with healthy spaces. We designed
EnhancedClean under the guidance of experts on infectious diseases and
industrial hygiene to help provide our clients with processes that use
hospital-grade disinfectants, specialized equipment, and innovative solutions
and technology. These solutions include: hygiene and safety protocols,
utilization of disinfecting procedures and products for high-touch surfaces,
employment of PPE, and communication and training protocols.
Management of Direct Labor
As we adapt to the changing demand environment resulting from the Pandemic, we
continue to actively manage direct labor and related personnel costs, including
furloughs or reduced hours for certain frontline employees in markets
significantly impacted by business slowdowns and shutdowns.
Liquidity, Cash Flows, and Financial Position
As of July 31, 2021, we had $505.4 million of cash and cash equivalents, and we
had net cash provided by operating activities of $258.8 million during the nine
months ended July 31, 2021. We have taken and continue to take actions to help
preserve cash, increase liquidity, and strengthen our financial position,
including:
•Amending our Credit Facility on June 28, 2021, to increase our borrowing
capacity and further enhance our financial flexibility (refer to "Liquidity and
Capital Resources" for more information);
•Focusing on collection of client receivables and monitoring the adequacy of our
reserves;
•Extending vendor payment terms where possible;
•Utilizing certain governmental relief efforts (as further described below); and
•Suspending share repurchases under our share repurchase program.
In response to the Pandemic, Congress enacted the CARES Act on March 27, 2020.
The CARES Act provides various tax provisions, including payroll tax provisions,
which we have evaluated for applicability. Through December 31, 2020, we
deferred approximately $132 million of payroll tax, which the CARES Act requires
to be remitted in equal parts by December 31, 2021, and December 31, 2022. The
CARES Act did not have a material impact on our income tax provision.
Additionally, we received grants under the United Kingdom's job retention scheme
to reimburse us for a portion of certain furloughed employees' salaries.
As a result of the actions taken above, we were able to strengthen our cash flow
during the third quarter. As of July 31, 2021, this resulted in a borrowing
capacity of $1.1 billion, reflecting covenant restrictions, in addition to the
cash and cash equivalents amount noted above.
As we look to navigate the post-pandemic period and build on our 2020 Vision, we
plan to make further investments in our employees, the client experience, and
new technologies, which we expect will drive long-term profitable growth through
an industry-based go-to-market approach. These investments should provide our
employees with opportunities for career growth and development, our clients with
client-facing technology, and the Company with industry-leading data, analytics,
processes, and tools.
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Insurance


We review our self-insurance liabilities on a regular basis and adjust our
accruals accordingly. Actual claims activity or development may vary from our
assumptions and estimates, which may result in material losses or gains. As we
obtain additional information that affects the assumptions and estimates used in
our reserve liability calculations, we adjust our self-insurance rates and
reserves for future periods and, if appropriate, adjust our reserves for claims
incurred in prior accounting periods.
During the third quarter of 2021, we performed a comprehensive actuarial review
of the majority of our casualty insurance programs to evaluate changes made to
claims reserves and claims payment activity for the period of November 1, 2020,
through April 30, 2021. The Actuarial Review was comprehensive in nature and was
based on loss development patterns, trend assumptions, and underlying expected
loss costs during the period analyzed. The Actuarial Review and other actuarial
updates performed earlier in the year demonstrated that the changes we have made
to our risk management programs continue to positively impact the frequency and
severity of claims.
The claims management strategies and programs that we have implemented have
resulted in improvements. Furthermore, we continue to adjust our reserves
consistent with known fact patterns. Based on the results of the Actuarial
Review, we decreased our total reserves related to prior years for known claims
as well as our estimate of the loss amounts associated with IBNR claims by
$29.7 million during the nine months ended July 31, 2021. During the nine months
ended July 31, 2020, we decreased our total reserves related to prior year
claims by $15.1 million. We will continue to assess ongoing developments, which
may result in further adjustments to reserves.
During the fourth quarter of 2021, we expect to perform an update to our
Actuarial Review for our significant insurance programs that will use the most
recent claims data and consider changes in claims development and claims payment
activity for the periods analyzed. This review will be abbreviated in nature
based on actual versus expected development during the periods analyzed, will
rely on the key assumptions used in the Actuarial Review (most notably loss
development patterns, trend assumptions, and underlying expected loss costs),
and will include claims related to certain previously acquired businesses. This
review may lead to further adjustments to our insurance reserves.
Segment Reporting
Our current reportable segments consist of B&I, T&M, Education, Aviation, and
Technical Solutions, as further described below.
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                                         REPORTABLE SEGMENTS AND

DESCRIPTIONS


                                              B&I, our largest reportable

segment, encompasses janitorial, facilities


                                              engineering, and parking

services for commercial real estate properties,

[[Image Removed: abm-20210731_g4.jpg]] sports and entertainment venues, and traditional hospitals and non-acute


                                              healthcare facilities. B&I

also provides vehicle maintenance and other


                                              services to rental car

providers.

[[Image Removed: abm-20210731_g5.jpg]] T&M provides janitorial, facilities engineering, and parking services to


                                              industrial and high-tech

manufacturing facilities.


                                              Education delivers

janitorial, custodial, landscaping and grounds,

[[Image Removed: abm-20210731_g6.jpg]] facilities engineering, and parking services for public school


                                              districts, private schools,

colleges, and universities.


                                              Aviation supports airlines

and airports with services ranging from

[[Image Removed: abm-20210731_g7.jpg]] parking and janitorial to passenger assistance, catering logistics, air


                                              cabin maintenance, and

transportation.


                                              Technical Solutions

specializes in mechanical and electrical services.

[[Image Removed: abm-20210731_g8.jpg]] These services can also be leveraged for cross-selling across all of our


                                              industry groups, both

domestically and internationally.


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Key Financial Highlights
•Revenues increased by $149.0 million, or 10.7%, during the three months ended
July 31, 2021, as compared to the three months ended July 31, 2020, primarily
due to the recovery in volume of our business as Pandemic disruptions eased
(primarily in Aviation, B&I, and Technical Solutions), the expansion of certain
key clients within B&I, and new business within Aviation and Technical
Solutions.
•We had an operating loss of $9.4 million during the three months ended July 31,
2021, as compared to an operating profit of $93.6 million during the three
months ended July 31, 2020. This decrease was primarily attributed to the
accrual of a legal settlement for the Bucio case, the absence of management and
staff furloughs that occurred in the prior year in response to the Pandemic, and
increased expenditures for certain technology projects and other enterprise
initiatives. This decrease was partially offset by a reduction in bad debt
expense (primarily associated with higher reserves established for client
receivables in the prior year due to increasing credit risk resulting from the
Pandemic) and favorable insurance claims reserve adjustments related to prior
year claims based on recently completed actuarial assessments.
•Our effective tax rate on income from continuing operations was 9.7% for the
three months ended July 31, 2021, as compared to 29.9% for the three months
ended July 31, 2020.
•Net cash provided by operating activities was $258.8 million during the nine
months ended July 31, 2021.
•Dividends of $38.2 million were paid to shareholders and dividends totaling
$0.570 per common share were declared during the nine months ended July 31,
2021.
•On June 28, 2021, we amended our Credit Facility, extending the maturity date
from September 1, 2022 to June 28, 2026 and increasing the capacity of the
revolving credit facility from $800.0 million to $1.3 billion and the
then-remaining term loan outstanding from $620.0 million to $650.0 million. At
July 31, 2021, total outstanding borrowings under our Amended Credit Facility
were $660.0 million. At July 31, 2021, we had up to $1.1 billion of borrowing
capacity, reflecting covenant restrictions.
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