Revenues

12 Months Ended

Oct. 31, 2019

Revenue from Contract with Customer [Abstract]

REVENUES

Impact of Adopting Topic 606 and Topic 853 on the Consolidated Financial Statements

On November 1, 2018, we recorded a pre-tax increase of $9.1 million to our opening retained earnings as a result of adopting Topic 606. These changes primarily related to: (i) the capitalization of certain commission costs that were previously expensed as incurred; (ii) the deferral of revenue, and the associated margin, on uninstalled materials associated with certain project type contracts that will now be recognized when installation is substantially complete; and (iii) the deferral of initial franchise license fees that were previously recognized when the franchise license term began but will now be recognized over the term of the initial franchise arrangement. Changes to our consolidated balance sheets include the separate presentation of costs incurred in excess of amounts billed, which were previously included in trade accounts receivable, net. Additionally, in accordance with Topic 853, rent expense related to service concession arrangements, which was previously classified as an operating expense, is now classified as a reduction of revenues.



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

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

The impact of adopting Topic 606 on our consolidated balance sheet as of October 31, 2019 was as follows:



	As of October 31, 2019
(in millions)	Under Historical Guidance		Effect of Adoption		As Reported
ASSETS
Current assets
Other current assets	$	46.3	$	9.2	$	55.5
Other noncurrent assets	107.7		12.7		120.3

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Other accrued liabilities	$	153.1	$	5.1	$	158.2
Deferred income tax liability, net	47.3		0.5		47.7
Retained earnings	840.1		16.2		856.3

The impact of adopting Topic 606 and Topic 853 on our consolidated statements of comprehensive income for the year ended October 31, 2019 was as follows:



	Year Ended October 31, 2019
(in millions, except per share amounts)	Under Historical Guidance		Effect of Adoption			As Reported
Revenues	$	6,546.2	$	(47.6	)	$	6,498.6
Operating expenses	5,816.2		(48.6		)	5,767.5
Selling, general and administrative expenses	459.7		(6.7		)	452.9
Income tax provision	30.7		2.0			32.7
Net income	121.6		5.8			127.4

Net income per common share — Basic	$	1.83	$	0.09		$	1.91
Net income per common share — Diluted	$	1.82	$	0.09		$	1.90

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

Disaggregation of Revenues

We generate revenues under several types of contracts, which are further described in Note 2, “Basis of Presentation and Significant Accounting Policies.” Generally, the type of contract is determined by the nature of the services provided by each of our major service lines throughout our reportable segments; therefore, we disaggregate revenue from contracts with customers into major service lines. We have determined that disaggregating revenue into these categories best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Our reportable segments are Business & Industry (“B&I”), Aviation, Technology and Manufacturing (“T&M”), Education, and Technical Solutions, as described in Note 19, “Segment and Geographic Information.”



	Year Ended October 31, 2019
(in millions)	B&I		Aviation		T&M		Education		Technical Solutions		Total
Major Service Line
Janitorial⁽¹⁾	$	2,316.1	$	125.8	$	739.7	$	756.3	$	—	$	3,937.9
Parking⁽²⁾	511.5		335.3		25.9		3.1		—		875.8
Facility Services⁽³⁾	423.1		72.1		151.4		88.0		—		734.6
Building & Energy Solutions⁽⁴⁾	—		—		—		—		593.2		593.2
Airline Services⁽⁵⁾	0.6		484.1		0.1		—		—		484.8
	$	3,251.4	$	1,017.3	$	917.0	$	847.4	$	593.2	$	6,626.3
Elimination of inter-segment revenues											(127.7		)
Total											$	6,498.6

⁽¹⁾Janitorial arrangements provide a wide range of essential cleaning services for commercial office buildings, airports and other transportation centers, educational institutions, government buildings, health facilities, industrial buildings, retail stores, and stadiums and arenas. These arrangements are often structured as monthly fixed-price, square-foot, cost-plus, and tag services contracts.

⁽²⁾ Parking arrangements provide parking and transportation services for clients at various locations, including airports and other transportation centers, commercial office buildings, educational institutions, health facilities, hotels, and stadiums and arenas. Certain of our management reimbursement, leased location, and allowance arrangements are considered service concession agreements and are accounted for under the guidance of Topic 853. For the year ended October 31, 2019, rent expense related to service concession arrangements, previously recorded within operating expenses, has been recorded as a reduction of the related parking service revenues. These arrangements are structured as management reimbursement, leased location, and allowance contracts.

⁽³⁾ Facility Services arrangements provide onsite mechanical engineering and technical services and solutions relating to a broad range of facilities and infrastructure systems that are designed to extend the useful life of facility fixed assets, improve equipment operating efficiencies, reduce energy consumption, lower overall operational costs for clients, and enhance the sustainability of client locations. These arrangements are generally structured as monthly fixed-price, cost-plus, and tag services contracts.

⁽⁴⁾ Building & Energy Solutions arrangements provide custom energy solutions, electrical, HVAC, lighting, and other general maintenance and repair services for clients in the public and private sectors and are generally structured as Energy Savings and Fixed-Price Repair and Refurbishment contracts. We also franchise certain operations under franchise agreements relating to our Linc Network and TEGG brands, pursuant to franchise contracts.

⁽⁵⁾ Airline Services arrangements support airlines and airports with services such as passenger assistance, catering logistics, and airplane cabin maintenance. These arrangements are often structured as monthly fixed-price, cost-plus, transaction price, and hourly contracts.

Remaining Performance Obligations

At October 31, 2019, performance obligations that were unsatisfied or partially unsatisfied for which we expect to recognize revenue totaled $207.8 million. We expect to recognize revenue on approximately 79% of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter.

These amounts exclude variable consideration primarily related to: (i) contracts where we have determined that the contract consists of a series of distinct service periods and revenues are based on future performance that cannot be estimated at contract inception; (ii) parking contracts where we and the customer share the gross revenues or operating profit for the location; and (iii) contracts where transaction prices include performance incentives that are based on future performance and therefore cannot be estimated at contract inception. We apply the practical expedient that permits exclusion of information about the remaining performance obligations with original expected durations of one year or less.

Contract Balances

The following tables present the balances in our contract assets and contract liabilities:



(in millions)	October 31, 2019		November 1, 2018
Contract assets
Billed trade receivables⁽¹⁾	$	978.7	$	918.9
Unbilled trade receivables⁽¹⁾	56.9		74.3
Costs incurred in excess of amounts billed⁽²⁾	72.6		40.1
Capitalized commissions⁽³⁾	21.8		15.1

⁽¹⁾Included in trade accounts receivable, net, on the consolidated balance sheets. The fluctuation correlates directly to the execution of new customer contracts and to invoicing and collections from customers in the normal course of business.

⁽²⁾Increase is primarily due to the timing of payments on our contracts measured using the cost-to-cost method of revenue recognition.

⁽³⁾Included in other current assets and other noncurrent assets on the consolidated balance sheets. During the year ended October 31, 2019, we capitalized $16.4 million of new costs and amortized $9.7 million of previously capitalized costs. There was no impairment loss recorded on the costs capitalized.



(in millions)	Year Ended October 31, 2019
Contract liabilities⁽¹⁾
Balance at beginning of year	$	41.7
Additional contract liabilities	250.8
Recognition of deferred revenue	(254.5		)
Balance at end of year	$	38.0

⁽¹⁾ Included in other accrued liabilities on the consolidated balance sheets.