APi Group Corp [APG] Filings

10-Q 1 apg-20230930.htm 10-Q apg-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________________

FORM 10-Q

___________________________________________________________

(Mark One)


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

For the quarterly period ended September 30, 2023


o			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 001-39275

____________________________________________________________

APi Group Corporation

(Exact Name of Registrant as Specified in its Charter)

____________________________________________________________


Delaware			98-1510303
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1100 Old Highway 8 NW New Brighton, Minnesota			55112
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (651) 636-4320

____________________________________________________________

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

APG

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 235,559,170 shares of common stock as of October 26, 2023.

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TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION			3

Item 1. Financial Statements			3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			38
Item 3. Quantitative and Qualitative Disclosures about Market Risk			53
Item 4. Controls and Procedures			55

PART II. OTHER INFORMATION			57

Item 1A. Risk Factors			57
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities			57
Item 4. Mine Safety Disclosures			57
Item 5. Other Information			57
Item 6. Exhibits			58

SIGNATURES			59

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

APi Group Corporation

Condensed Consolidated Balance Sheets (Unaudited)

(In millions, except share and per share data)


	September 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	461	$	605
Accounts receivable, net of allowances of $4 and $3 at September 30, 2023 and December 31, 2022, respectively	1,280		1,313
Inventories	155		163
Contract assets	530		459
Prepaid expenses and other current assets	226		112
Total current assets	2,652		2,652
Property and equipment, net	377		407
Operating lease right of use assets	227		222
Goodwill	2,404		2,382
Intangible assets, net	1,624		1,784
Deferred tax assets	107		108
Pension and post-retirement assets	407		392
Other assets	151		144
Total assets	$	7,949	$	8,091

Liabilities, Redeemable Convertible Preferred Stock, and Shareholders’ Equity
Current liabilities:
Short-term and current portion of long-term debt	$	256	$	206
Accounts payable	431		490
Contingent consideration and compensation liabilities	18		27
Accrued salaries and wages	320		337
Contract liabilities	474		463
Operating and finance leases	72		73
Other accrued liabilities	328		325
Total current liabilities	1,899		1,921
Long-term debt, less current portion	2,342		2,583
Pension and post-retirement obligations	37		40
Contingent consideration and compensation liabilities	10		6
Operating and finance leases	170		166
Deferred tax liabilities	340		340
Other noncurrent liabilities	122		111
Total liabilities	4,920		5,167

Commitments and contingencies (Note 15)

5.5% Series B Redeemable Convertible Preferred Stock, $0.0001 par value, 800,000 authorized shares, 800,000 shares issued and outstanding at September 30, 2023 and December 31, 2022; aggregate liquidation preference of $840	797		797

Shareholders’ equity:
Series A Preferred Stock, $0.0001 par value; 7,000,000 authorized shares; 4,000,000 shares issued and outstanding at September 30, 2023 and December 31, 2022	—		—
Common stock; $0.0001 par value, 500,000,000 authorized shares, 235,146,035 shares and 233,403,912 shares issued at September 30, 2023 and December 31, 2022, respectively (excluding 413,135 and 584,584 shares declared for stock dividend at September 30, 2023 and December 31, 2022, respectively)	—		—
Additional paid-in capital	2,562		2,558
Accumulated deficit	(36)		(164)
Accumulated other comprehensive loss	(294)		(267)
Total shareholders’ equity	2,232		2,127
Total liabilities, redeemable convertible preferred stock, and shareholders’ equity	$	7,949	$	8,091

See notes to condensed consolidated financial statements.

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APi Group Corporation

Condensed Consolidated Statements of Operations (Unaudited)

(In millions, except per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net revenues	$	1,784	$	1,735	$	5,169	$	4,855
Cost of revenues	1,273		1,295		3,737		3,604
Gross profit	511		440		1,432		1,251
Selling, general, and administrative expenses	407		379		1,148		1,138
Operating income	104		61		284		113
Interest expense, net	37		33		112		88
(Gain) loss on extinguishment of debt, net	—		(5)		3		(5)
Non-service pension benefit	(3)		(10)		(9)		(32)
Investment income and other, net	(4)		(3)		(9)		(5)
Other expense, net	30		15		97		46
Income before income taxes	74		46		187		67
Income tax provision	20		18		59		16
Net income	$	54	$	28	$	128	$	51
Net income attributable to common shareholders:
Stock dividend on Series B Preferred Stock	(11)		(11)		(33)		(33)
Net income attributable to common shareholders	$	43	$	17	$	95	$	18
Net income per common share:
Basic	$	0.15	$	0.06	$	0.32	$	0.06
Diluted	0.15		0.06		0.32		0.06
Weighted average shares outstanding:
Basic	235		234		235		233
Diluted	270		266		269		266

See notes to condensed consolidated financial statements.

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APi Group Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(In millions)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income	$	54	$	28	$	128	$	51
Other comprehensive income (loss):
Fair value change - derivatives, net of tax benefit (expense) of $—, $(16), $(2), and $(27), respectively	1		51		7		82
Foreign currency translation adjustment	(63)		(86)		(22)		(311)
Comprehensive income (loss)	$	(8)	$	(7)	$	113	$	(178)

See notes to condensed consolidated financial statements.

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APi Group Corporation

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

(In millions, except share amounts)


	Preferred Stock Issued and Outstanding			Common Stock Issued and Outstanding			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
	Shares	Amount		Shares	Amount
Balance, December 31, 2022	4,000,000	$	—	233,403,912	$	—	$	2,558	$	(164)	$	(267)	$	2,127
Net income	—	—		—	—		—		26		—		26
Fair value change - derivatives	—	—		—	—		—		—		(9)		(9)
Foreign currency translation adjustment	—	—		—	—		—		—		14		14
Gain on dedesignated derivatives amortized from AOCI into income	—	—		—	—		—		—		(4)		(4)
Series B Preferred Stock dividend	—	—		1,082,877	—		—		—		—		—
Share repurchases	—	—		(541,316)	—		(12)		—		—		(12)
Profit sharing plan contributions	—	—		631,194	—		14		—		—		14
Share-based compensation and other, net	—	—		636,233	—		9		—		—		9
Balance, March 31, 2023	4,000,000	$	—	235,212,900	$	—	$	2,569	$	(138)	$	(266)	$	2,165
Net income	—	—		—	—		—		48		—		48
Fair value change - derivatives	—	—		—	—		—		—		15		15
Foreign currency translation adjustment	—	—		—	—		—		—		27		27
Gain on dedesignated derivatives amortized from AOCI into income	—	—		—	—		—		—		(4)		(4)
Series B Preferred Stock dividend	—	—		436,992	—		—		—		—		—
Share repurchases	—	—		(428,688)	—		(11)		—		—		(11)
Share-based compensation and other, net	—	—		49,201	—		7		—		—		7
Balance, June 30, 2023	4,000,000	$	—	235,270,405	$	—	$	2,565	$	(90)	$	(228)	$	2,247
Net income	—	—		—	—		—		54		—		54
Fair value change - derivatives	—	—		—	—		—		—		1		1
Foreign currency translation adjustment	—	—		—	—		—		—		(63)		(63)
Gain on dedesignated derivatives amortized from AOCI into income	—	—		—	—		—		—		(4)		(4)
Share repurchases	—	—		(656,489)	—		(18)		—		—		(18)
Share-based compensation and other, net	—	—		532,119	—		15		—		—		15
Balance, September 30, 2023	4,000,000	$	—	235,146,035	$	—	$	2,562	$	(36)	$	(294)	$	2,232

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	Preferred Stock Issued and Outstanding			Common Stock Issued and Outstanding			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
	Shares	Amount		Shares	Amount
Balance, December 31, 2021	4,000,000	$	—	224,625,193	$	—	$	2,560	$	(237)	$	—	$	2,323
Net loss	—	—		—	—		—		(7)		—		(7)
Fair value change - derivatives	—	—		—	—		—		—		9		9
Foreign currency translation adjustment	—	—		—	—		—		—		(59)		(59)
Series A Preferred Stock dividend	—	—		7,539,697	—		—		—		—		—
Series B Preferred Stock dividend	—	—		519,469	—		—		—		—		—
Share repurchases	—	—		(531,431)	—		(11)		—		—		(11)
Profit sharing plan contributions	—	—		622,655	—		15		—		—		15
Share-based compensation and other, net	—	—		413,029	—		8		—		—		8
Balance, March 31, 2022	4,000,000	$	—	233,188,612	$	—	$	2,572	$	(244)	$	(50)	$	2,278
Net income	—	—		—	—		—		30		—		30
Fair value change - derivatives	—	—		—	—		—		—		22		22
Foreign currency translation adjustment	—	—		—	—		—		—		(166)		(166)
Series B Preferred Stock dividend	—	—		686,455	—		—		—		—		—
Share repurchases	—	—		(681,329)	—		(11)		—		—		(11)
Share-based compensation and other, net	—	—		24,584	—		3		—		—		3
Balance, June 30, 2022	4,000,000	—		233,218,322	—		2,564		(214)		(194)		2,156
Net income	—	—		—	—		—		28		—		28
Fair value change - derivatives	—	—		—	—		—		—		51		51
Foreign currency translation adjustment	—	—		—	—		—		—		(86)		(86)
Series B Preferred Stock dividend	—	—		739,015	—		—		—		—		—
Share repurchases	—	—		(738,572)	—		(11)		—		—		(11)
Share-based compensation and other, net	—	—		567,370	—		12		—		—		12
Balance, September 30, 2022	4,000,000	$	—	233,786,135	$	—	$	2,565	$	(186)	$	(229)	$	2,150

See notes to condensed consolidated financial statements.

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APi Group Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net income	$	128	$	51
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	59		60
Amortization	167		165
Restructuring charges, net of cash paid	17		12
Deferred taxes	5		(9)
Share-based compensation expense	19		14
Profit-sharing expense	14		10
Non-cash lease expense	55		49
Net periodic pension benefit	(9)		(32)
Loss (gain) on extinguishment of debt, net	3		(5)
Other, net	3		13
Pension contributions	(3)		(27)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	23		(104)
Contract assets	(78)		(134)
Inventories	2		(25)
Prepaid expenses and other current assets	(62)		(25)
Accounts payable	(47)		68
Accrued liabilities and income taxes payable	(27)		(6)
Contract liabilities	9		46
Other assets and liabilities	(61)		(39)
Net cash provided by operating activities	217		82
Cash flows from investing activities:
Acquisitions, net of cash acquired	(57)		(2,881)
Purchases of property and equipment	(64)		(60)
Proceeds from sales of property and equipment	13		10
Net cash used in investing activities	(108)		(2,931)
Cash flows from financing activities:
Proceeds from long-term borrowings	—		1,104
Payments on long-term borrowings	(206)		(33)
Repurchases of long-term borrowings	—		(30)
Payments of debt issuance costs	—		(25)
Repurchases of common stock	(41)		(33)
Proceeds from equity issuances	—		797
Payments of acquisition-related consideration	(4)		(6)
Restricted shares tendered for taxes	(2)		(1)
Net cash (used in) provided by financing activities	(253)		1,773
Effect of foreign currency exchange rate change on cash, cash equivalents, and restricted cash	(1)		(17)
Net decrease in cash, cash equivalents, and restricted cash	(145)		(1,093)
Cash, cash equivalents, and restricted cash, beginning of period	607		1,491
Cash, cash equivalents, and restricted cash, end of period	$	462	$	398
Supplemental cash flow disclosures:
Cash paid for interest	$	119	$	81
Cash paid for income taxes, net of refunds	70		24
Accrued consideration issued in business combinations	5		1
Shares of common stock issued to profit sharing plan	14		13

See notes to condensed consolidated financial statements.

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APi Group Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Amounts in millions, except shares and where noted otherwise)

NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Nature of business

APi Group Corporation (the “Company” or “APG”) is a global, market-leading business services provider of safety and specialty services in over 500 locations worldwide.

Principles of consolidation

The accompanying interim unaudited condensed consolidated financial statements (the “Interim Statements”) include the accounts of the Company and of its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. These Interim Statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and do not include all of the information and footnotes required by generally accepted accounting principles in the United States of America (“U.S. GAAP”) for complete financial statements. The condensed consolidated balance sheets as of December 31, 2022, were derived from audited financial statements for the year then ended but do not include all of the information and footnotes required by U.S. GAAP with respect to annual financial statements. In the opinion of management, the Interim Statements include all adjustments (including normal recurring accruals) necessary for a fair presentation of the Company’s consolidated financial position, results of operations, and cash flows for the dates and periods presented. It is recommended that these Interim Statements be read in conjunction with the Company’s audited annual consolidated financial statements and accompanying footnotes thereto for the year ended December 31, 2022. Results for interim periods are not necessarily indicative of the results to be expected for a full fiscal year or for any future period.

Cash, cash equivalents, and restricted cash

The Company considers all highly liquid investments purchased with an original maturity date of three months or less to be cash equivalents. Restricted cash is reported as other current assets in the condensed consolidated balance sheets. Restricted cash reflects collateral against certain bank guarantees.

Investments

The Company holds investments in joint ventures, the majority of which are accounted for under the equity method of accounting as the Company does not exercise control over the joint ventures. The Company exercises control over one joint venture that is consolidated into the Company's financial statements and the results for that joint venture for the three and nine months ended September 30, 2023 were immaterial. The Company’s share of earnings from the non-consolidated joint ventures was $1 and $2 during the three months ended September 30, 2023 and 2022, respectively, and $5 and $3 during the nine months ended September 30, 2023 and 2022, respectively. The earnings are recorded within investment income and other, net in the condensed consolidated statements of operations. The investment balances were $6 and $4 as of September 30, 2023 and December 31, 2022, respectively, and are recorded within other assets in the condensed consolidated balance sheets.

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS

See the discussion below for information pertaining to the effects of recent accounting pronouncements as updated from the discussion in the Company’s 2022 audited consolidated financial statements included in the Company’s Annual Report on Form 10-K filed on March 1, 2023.

In August 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-05, Business Combinations— Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, which requires that a joint venture apply a new basis of accounting upon formation. As a result, a newly formed joint venture would initially measure its assets and liabilities at fair value. ASU 2023-05 is effective for joint ventures with a formation date on or after January 1, 2025, with early

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adoption permitted. The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements, but does not expect the impact to be material.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, which incorporates certain SEC disclosure requirements into the FASB Accounting Standards Codification. This update will improve disclosure and presentation requirements of a variety of topics and align the requirements in the FASB codification with the SEC’s regulations. The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements, but does not expect the impact to be material.

NOTE 3. BUSINESS COMBINATIONS

The Company regularly evaluates potential acquisitions that strategically fit with the Company’s existing portfolio or expand the Company’s portfolio into a new and attractive business area. Acquisitions are accounted for as business combinations using the acquisition method of accounting. As such, the Company makes a preliminary allocation of the purchase price to the tangible assets, identifiable intangible assets acquired, and liabilities assumed. In the months after closing, as the Company obtains additional information about the acquired assets and liabilities and learns more about the newly acquired business, it is able to refine the estimates of fair value and more accurately allocate the purchase price. The purchase price is allocated to acquired assets and liabilities assumed based upon their estimated fair values, with limited exceptions as permitted pursuant to U.S. GAAP, as determined based on estimates and assumptions deemed reasonable by the Company. The Company engages third-party valuation specialists to assist with the preparation of critical assumptions and calculations of the fair value of acquired tangible and intangible assets in connection with significant acquisitions. The excess of the purchase price over the tangible and intangible assets acquired and liabilities assumed is recorded as goodwill. Goodwill is attributable to the workforce of the acquired businesses, the complementary strategic fit and resulting synergies these businesses bring to existing operations, and the opportunities in new markets expected to be achieved from the expanded platform.

2023 Acquisitions

The Company completed an acquisition included within the Safety Services segment on June 30, 2023 ("Acquisition A23"). Consideration for Acquisition A23 included cash paid at closing of $30, cash deposited into escrow for future deferred payments of $5, and accrued consideration of $3. The results of operations of this acquisition are included in the Company’s condensed consolidated statements of operations from the date of acquisition.

During the nine months ended September 30, 2023, the Company completed four individually immaterial acquisitions for aggregate consideration transferred of $24, made up of cash paid at closing of $22 and accrued consideration of $2. The results of operations of these acquisitions are included in the Company’s condensed consolidated statement of operations from their respective dates of acquisition and were not material.

The Company has not finalized its accounting for the acquisitions and will make appropriate adjustments to the purchase price allocation prior to completion of the measurement periods, as required. Based on preliminary estimates, the total amount of goodwill from acquisitions expected to be deductible for tax purposes is $38.

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the dates of acquisition:

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	Acquisition A23		Other 2023 acquisitions
Cash paid at closing	$	30	$	22
Cash deposited into escrow	5		—
Accrued consideration	3		2
Total net consideration	$	38	$	24

Accounts receivable	$	8	$	—
Contract assets	1		—
Intangible assets	13		5
Goodwill	20		19
Accounts payable	(1)		—
Contract liabilities	(3)		—
Net assets acquired	$	38	$	24

2022 Chubb Acquisition

During 2022, the Company completed its acquisition of the Chubb fire and security business (the "Chubb Acquisition"). The Chubb fire and security business (the "Chubb business" or "Chubb") is a globally recognized fire safety and security services provider, offering customers complete and reliable services from design and installation to monitoring and on-going maintenance and recurring services. The Chubb business is headquartered in the United Kingdom, and has operations in 17 countries, expanding the Company's geographic footprint to a total of over 20 countries. The results of the Chubb business are reported within the Company's Safety Services segment.

Based on U.S. income tax principles related to acquisitions of non-U.S. entities, none of the total amount of goodwill is deductible for U.S. income tax purposes.

The following table summarizes the final fair values of the assets acquired and liabilities assumed at the date of the Chubb Acquisition:


Cash paid at closing	$	2,935
Working capital and net indebtedness adjustment	(42)
Total net consideration	$	2,893

Cash	$	60
Accounts receivable	426
Inventories	68
Contract assets	183
Other current assets	25
Property and equipment	73
Operating lease right of use assets	146
Pension and post-retirement assets	626
Other noncurrent assets	8
Intangible assets	1,200
Goodwill	1,367
Accounts payable	(192)
Contract liabilities	(162)
Accrued expenses	(255)
Finance and operating lease liabilities	(148)
Pension and post-retirement obligations	(56)
Deferred tax liabilities	(383)
Other noncurrent liabilities	(93)
Net assets acquired	$	2,893

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Accrued consideration

The Company’s acquisition purchase agreements typically include deferred payment provisions, often to sellers who become employees of the Company or its subsidiaries. The provisions are made up of three general types of arrangements, contingent compensation and contingent consideration (both of which are contingent on the future performance of the acquired entity) and deferred payments related to indemnities. Contingent compensation arrangements are typically contingent on the former owner’s future employment with the Company, and the related amounts are recognized over the required employment period, which is typically one to four years. Contingent consideration arrangements are not contingent on employment and are included as part of purchase consideration at the time of the initial acquisition and are paid over a one to four year period. The liability for deferred payments is recognized at the date of acquisition based on the Company’s best estimate and is typically payable over a one to three year period. Deferred payments are not contingent on any future performance or employment obligations and can be offset for working capital true-ups, and representations and warranty items.

The total contingent compensation arrangement liability was $7 and $19 at September 30, 2023, and December 31, 2022, respectively. The maximum payout of these arrangements upon completion of the future performance periods was $15 and $25, inclusive of the $7 and $19, accrued as of September 30, 2023, and December 31, 2022, respectively. The contingent compensation liability is included in contingent consideration and compensation liabilities in the condensed consolidated balance sheets for all periods presented. The Company primarily determines the contingent compensation liability based on forecasted cumulative earnings compared to the cumulative earnings target set forth in the arrangement. Compensation expense associated with these arrangements is recognized ratably over the required employment period.

The contingent consideration obligations are measured at fair value each reporting period and changes in estimates of fair value are recognized in earnings. For additional considerations regarding the fair value of the Company's contingent consideration liabilities, see Note 8 - "Fair Value of Financial Instruments."

The total liability for deferred payments was $14 and $9 at September 30, 2023 and December 31, 2022, respectively, and is included in contingent consideration and compensation liabilities in the condensed consolidated balance sheets for all periods presented.

NOTE 4. ASSETS HELD FOR SALE

During the three months ended September 30, 2023, the Company determined its intent to sell an infrastructure/utility operating company in its Specialty Services segment (the "Operating Company"), and classified the net book value of the Operating Company as held for sale in the condensed consolidated balance sheets. As of September 30, 2023, the Operating Company remains classified as held for sale. Pursuant to the authoritative literature, the Company evaluated the recoverability of the carrying value of the assets and liabilities held for sale. During the three months ended September 30, 2023, the Company recorded an impairment charge of $13 in selling, general, and administrative expenses in the condensed consolidated statements of operations related to impairment of goodwill, intangible assets, and other assets.

The following table presents information related to the major classes of assets recorded in prepaid expenses and other current assets and liabilities recorded in other accrued liabilities that were classified as held for sale in the condensed consolidated balance sheets:


	September 30, 2023
Accounts receivable	$	14
Inventories	2
Contract assets	6
Property and equipment, net	27
Operating lease right of use assets	2
Accounts payable	(8)
Other current liabilities	(3)
Noncurrent operating and finance leases	(3)
Total assets and liabilities held for sale	$	37

On October 3, 2023, the Company entered into a definitive agreement to sell the Operating Company for $37. The sale is expected to close before December 31, 2023.

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NOTE 5. RESTRUCTURING

During 2022, the Company announced its multi-year Chubb restructuring program designed to drive efficiencies and synergies and optimize operating margin. The Chubb restructuring program includes expenses related to workforce reductions, lease termination costs, and other facility rationalization costs through fiscal year 2024.

During the nine months ended September 30, 2023, the Company incurred pre-tax restructuring costs within the Safety Services segment of $21 in connection with the Chubb restructuring program. Since the Chubb Acquisition, the Company has incurred aggregate restructuring costs of $51. As of September 30, 2023, the Company had $23 in restructuring liabilities recorded in other accrued liabilities on the condensed consolidated balance sheets for this plan.

In total, the Company estimates that it will recognize approximately $105 of restructuring costs related to the Chubb restructuring program by the end of fiscal year 2024.

For the restructuring program, employee-related costs consist of termination benefits provided to employees who have been involuntarily terminated and voluntary early retirement benefits. Program related costs include costs incurred as a direct result of the restructuring program such as consulting fees and facility relocation costs.

The following table summarizes the Company's restructuring program for the nine months ended September 30, 2023 and 2022:


	Employee termination benefits		Program related costs		Asset write-downs		Total
December 31, 2022	$	22	$	—	$	—	$	22
Charges	21		1		4		26
Payments	(18)		—		—		(18)
Reversals	(1)		—		—		(1)
Currency translation adjustment	(1)		—		—		(1)
September 30, 2023	$	23	$	1	$	4	$	28


	Employee termination benefits		Program related costs		Asset write-downs		Total
December 31, 2021	$	—	$	—	$	—	$	—
Charges	18		—		—		18
Payments	(6)		—		—		(6)
Currency translation adjustment	(1)		—		—		(1)
September 30, 2022	$	11	$	—	$	—	$	11

NOTE 6. NET REVENUES

Contracts with customers

The Company derives net revenues primarily from contracts with a duration of less than one week to three years (with the majority of contracts with durations of less than six months), which are subject to multiple pricing options, including fixed price, unit price, time and material, or cost plus a markup. Net revenues are primarily recognized by the Company over time utilizing the cost-to-cost measure of progress. Net revenues recognized at a point in time primarily relate to distribution contracts and short-term time and material contracts. The Company also enters into fixed-price service contracts related to monitoring, maintenance, and inspection of safety systems.

The Company disaggregates its net revenues primarily by segment, service type, and country from which revenues are invoiced, as the nature, timing, and uncertainty of cash flows are relatively consistent within each of these categories. The following tables provide disclosure of disaggregated net revenues by segment for the three and nine months ended September 30, 2023, and 2022. During 2023, the Company moved an immaterial business component within the Safety

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Services segment from the HVAC to the Life Safety reporting unit, and prior period amounts in this table have been recast to reflect the current period presentation. Disaggregated net revenues information is as follows:


	Three Months Ended September 30, 2023
	Safety Services		Specialty Services		Consolidated
Life Safety	$	1,084	$	—	$	1,084
Heating, Ventilation, and Air Conditioning ("HVAC")	133		—		133
Infrastructure/Utility	—		360		360
Fabrication	—		42		42
Specialty Contracting	—		167		167
Corporate and Eliminations	—		—		(2)
Net revenues	$	1,217	$	569	$	1,784


	Three Months Ended September 30, 2022
	Safety Services		Specialty Services		Consolidated
Life Safety	$	1,021	$	—	$	1,021
HVAC	133		—		133
Infrastructure/Utility	—		341		341
Fabrication	—		87		87
Specialty Contracting	—		162		162
Corporate and Eliminations	—		—		(9)
Net revenues	$	1,154	$	590	$	1,735


	Nine Months Ended September 30, 2023
	Safety Services		Specialty Services		Consolidated
Life Safety	$	3,250	$	—	$	3,250
HVAC	383		—		383
Infrastructure/Utility	—		907		907
Fabrication	—		155		155
Specialty Contracting	—		492		492
Corporate and Eliminations	—		—		(18)
Net revenues	$	3,633	$	1,554	$	5,169


	Nine Months Ended September 30, 2022
	Safety Services		Specialty Services		Consolidated
Life Safety	$	3,003	$	—	$	3,003
HVAC	371		—		371
Infrastructure/Utility	—		849		849
Fabrication	—		194		194
Specialty Contracting	—		477		477
Corporate and Eliminations	—		—		(39)
Net revenues	$	3,374	$	1,520	$	4,855

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	Three Months Ended September 30, 2023
	Safety Services		Specialty Services		Corporate and Eliminations		Consolidated
United States	$	595	$	559	$	(2)	$	1,152
France	140		—		—		140
Other	482		10		—		492
Net revenues	$	1,217	$	569	$	(2)	$	1,784


	Three Months Ended September 30, 2022
	Safety Services		Specialty Services		Corporate and Eliminations		Consolidated
United States	$	568	$	565	$	(9)	$	1,124
France	125		—		—		125
Other	461		25		—		486
Net revenues	$	1,154	$	590	$	(9)	$	1,735


	Nine Months Ended September 30, 2023
	Safety Services		Specialty Services		Corporate and Eliminations		Consolidated
United States	$	1,738	$	1,525	$	(18)	$	3,245
France	446		—		—		446
Other	1,449		29		—		1,478
Net revenues	$	3,633	$	1,554	$	(18)	$	5,169


	Nine Months Ended September 30, 2022
	Safety Services		Specialty Services		Corporate and Eliminations		Consolidated
United States	$	1,576	$	1,481	$	(39)	$	3,018
France	417		—		—		417
Other	1,381		39		—		1,420
Net revenues	$	3,374	$	1,520	$	(39)	$	4,855

For in-process contracts, the aggregate amount of transaction price allocated to the unsatisfied performance obligations at September 30, 2023 was $2,732. The Company expects to recognize revenue on approximately 87% of the remaining performance obligations over the next twelve months.

Contract assets and liabilities

Contract assets and contract liabilities are classified as current in the condensed consolidated balance sheets as all amounts are expected to be relieved within one year. The balances of accounts receivable, net of allowances, contract assets, and contract liabilities from contracts with customers as of September 30, 2023 and December 31, 2022 are as follows:


	Accounts receivable, net of allowances		Contract assets		Contract liabilities
Balance at September 30, 2023	$	1,280	$	530	$	474
Balance at December 31, 2022	1,313		459		463

The Company did not recognize significant revenues associated with the final settlement of contract value for any projects completed in prior periods. In accordance with industry practice, accounts receivable includes retentions receivable, a portion of which may not be received within one year. At Sep