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What changed in APi Group Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of APi Group Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+265 added−272 removedSource: 10-K (2024-02-28) vs 10-K (2023-03-01)

Top changes in APi Group Corp's 2023 10-K

265 paragraphs added · 272 removed · 219 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

44 edited+2 added−4 removed71 unchanged
Biggest changeOur focus on providing high quality service promotes deep, long-term relationships with our customers which often results in continued opportunities for new business and a reliable source of recurring revenue for ongoing inspection, maintenance, and monitoring services. We often provide services under master service and other service agreements, which can be multi-year agreements, subject to earlier termination.
Biggest changeWe have low customer concentration with no single customer accounting for more than 5% of our total net revenues for 2023. Our focus on providing high quality service promotes deep, long-term relationships with our customers which often results in continued opportunities for new business and a reliable source of recurring revenue for ongoing inspection, maintenance, and monitoring services.
We operate our business under two primary operating segments, which are also our reportable segments: • Safety Services – A leading provider of safety services in North America, Asia Pacific, and Europe, focusing on end-to-end integrated occupancy systems (fire protection solutions, Heating, Ventilation, and Air Conditioning (“HVAC”), and entry systems), including design, installation, inspection, and service of these integrated systems.
We operate our business under two primary operating segments, which are also our reportable segments: • Safety Services – A leading provider of safety services in North America, Europe, and Asia Pacific, focusing on end-to-end integrated occupancy systems (fire protection solutions, Heating, Ventilation, and Air Conditioning (“HVAC”), and entry systems), including design, installation, inspection, and service of these integrated systems.
Lambert held increasingly senior legal roles at 3M Company and then General Mills, where he focused on global M&A, joint ventures, and various general counseling roles. Mr. Lambert began his career as an associate at Faegre & Benson (now Faegre Drinker) in its corporate finance group. Mr.
Lambert held increasingly senior legal roles at 3M Company and then General Mills, where he focused on global M&A, joint ventures, and various general counseling roles. Mr. Lambert began his career as an associate at Faegre & Benson (now Faegre Drinker) in its corporate finance group.
Our field-based leadership has the opportunity to participate in a development program focused on building foundational leadership skills. In addition, we offer less structured tools and opportunities for development, including individual development plans, executive coaching, strategic leadership advisory services and on-demand learning opportunities hosted on our learning management platform, our intranet site and through podcasts.
Our field-based leadership has the opportunity to participate in a development program focused on building foundational leadership skills. In addition, we offer structured tools and opportunities for development, including individual development plans, executive coaching, strategic leadership advisory services and on-demand learning opportunities hosted on our learning management platform, our intranet site and through podcasts.
Krumm began his career in public accounting working for consulting firms PwC, Arthur Andersen and Deloitte with a heavy emphasis on M&A/corporate finance. Mr. Krumm earned his bachelor’s degree from the University of Northern Iowa and his master’s degree in Business Administration from the University of Chicago Booth School of Business. 10 Louis B.
Krumm began his career in public accounting working for consulting firms PwC, Arthur Andersen and Deloitte with a heavy emphasis on M&A/corporate finance. Mr. Krumm earned his bachelor’s degree from the University of Northern Iowa and his master’s degree in Business Administration from the University of Chicago Booth School of Business. Louis B.
This also empowers the leaders of our businesses to drive business performance and execute key decisions, while highlighting the significant focus we place on ensuring members of our team receive continuous investment in their development. 5 Resilient Business Model with Multiple Levers to Navigate Downturns.
This also empowers the leaders of our businesses to drive business performance and execute key decisions, while highlighting the significant focus we place on ensuring members of our team receive continuous investment in their development. Resilient Business Model with Multiple Levers to Navigate Downturns.
We believe that we can grow our businesses and increase our market position by leveraging our scale and broad portfolio of services offerings to capitalize on demand for single-source national and international providers.
Leverage Our Scale and Services Portfolio. We believe that we can grow our businesses and increase our market position by leveraging our scale and broad portfolio of services offerings to capitalize on demand for single-source national and international providers.
We believe this presents attractive opportunities for us to drive growth in our businesses and enhance our market share positions. Disciplined Acquisition Platform with History of Strategic Acquisitions. We have a disciplined acquisition platform through which we systematically target, execute, and integrate strategic acquisitions. Since 2005, we have completed over 90 acquisitions.
We believe this presents attractive opportunities for us to drive growth in our businesses and enhance our market share positions. Disciplined Acquisition Platform with History of Strategic Acquisitions. We have a disciplined acquisition platform through which we systematically target, execute, and integrate strategic acquisitions. Since 2005, we have completed over 100 acquisitions.
Morton 48 Senior Vice President and Chief People Officer Russell A. Becker has served as a director of the Company since October 2019. Mr. Becker joined APi Group, Inc. in 2002 as its President and Chief Operating Officer and became its Chief Executive Officer in 2004. Prior to leading APi Group, Inc., Mr.
Morton 49 Senior Vice President and Chief People Officer Russell A. Becker has served as a director of the Company since October 2019. Mr. Becker joined APi Group, Inc. in 2002 as its President and Chief Operating Officer and became its Chief Executive Officer in 2004. Prior to leading APi Group, Inc., Mr.
We also have a stable cash flow profile driven by our focus on recurring services-based revenue and our asset-light business model, which requires minimal ongoing capital expenditures (which are typically approximately 1.5% of total net revenues). The mission-critical nature of our services and regulatory-driven inspection requirements provide predictable, recurring revenue stream opportunities.
We also have a stable cash flow profile driven by our focus on recurring services-based revenue and our asset-light business model, which requires minimal ongoing capital expenditures (which are typically less than 1.5% of total net revenues). The mission-critical nature of our services and regulatory-driven inspection requirements provide predictable, recurring revenue stream opportunities.
Our average project duration is relatively short, which helps mitigate inflationary exposure to cost of goods sold or changes in labor expense that some peers may experience in an inflationary environment. Historically, we have managed inflationary pressure through cost efficiency and cost saving actions, when needed.
Our average project duration is relatively short, which helps mitigate inflationary exposure to cost of goods sold or changes in labor expense that some peers may experience in an inflationary environment. 5 Table of Contents Historically, we have managed inflationary pressure through cost efficiency and cost saving actions, when needed.
In North America, we provide a single point of contact for customers with a regional or national portfolio of properties through our National Service Group (“NSG”) team within our Safety Services segment, which enhances our understanding of customers on a national scale and allows us to build more meaningful relationships with our customers.
In North America, we provide a single point of contact for customers with a regional or national portfolio of properties through our National Service Group (“NSG”) team within our Safety Services segment, which 8 Table of Contents enhances our understanding of customers on a national scale and allows us to build more meaningful relationships with our customers.
We offer a comprehensive, competitive portfolio of health, financial and well-being benefits aligned with market practice and legal requirements in each country in which we operate. Our benefit programs support our employees bringing their best self to work as they support their mental, physical, and financial needs and goals.
We offer a comprehensive, competitive portfolio of health, financial and well-being benefits aligned with market practice and legal requirements in each country in which we operate. Our benefit programs support our team members bringing their best self to work as they support their mental, physical, and financial needs and goals.
We believe that we are one of the go-to-market leaders in each of the niche industries we serve, including the industry leader in fire protection and sprinkler services, among the top five specialty contractors in North America, and a large provider of fire and security solutions in many of the international markets we serve.
We believe that we are one of the go-to-market leaders in each of the niche industries we serve, including the industry leader in fire protection and sprinkler services, among the top five specialty contractors in North America, and a large provider of fire and security solutions in many of 4 Table of Contents the international markets we serve.
In addition, we could be held liable for significant penalties and damages under certain environmental laws and regulations. Our contracts with customers may also impose liabilities on us regarding environmental issues that arise through the performance of our services.
In addition, we could be held liable for significant penalties and damages under certain environmental laws and regulations. Our contracts with customers may also impose liabilities on us regarding environmental issues that arise through the performance of our 7 Table of Contents services.
Lambert earned his JD from Rutgers School of Law—Newark and a bachelor’s degree from the University of Michigan in Ann Arbor. Kristina M. Morton has served as Senior Vice President and Chief People Officer of the Company since February 2022. Prior to joining the Company, Ms.
Mr. 10 Table of Contents Lambert earned his JD from Rutgers School of Law—Newark and a bachelor’s degree from the University of Michigan in Ann Arbor. Kristina M. Morton has served as Senior Vice President and Chief People Officer of the Company since February 2022. Prior to joining the Company, Ms.
In addition, we have multiple programs geared towards increasing everyone’s awareness of our safety culture and to empower employees to stop work if risks are unmanageable. We are currently very focused on improving our fleet performance through defensive driver training, fleet technology, and company fleet assessments.
In addition, we have multiple programs geared towards increasing everyone’s 9 Table of Contents awareness of our safety culture and to empower employees to stop work if risks are unmanageable. We are very focused on improving our fleet performance through defensive driver training, fleet technology, and company fleet assessments.
Executive Officers Set forth below is certain information relating to our current executive officers. Name Age Title Russell A. Becker 57 Chief Executive Officer and President Kevin S. Krumm 48 Executive Vice President and Chief Financial Officer Louis B. Lambert 47 Senior Vice President, General Counsel and Secretary Kristina M.
Executive Officers Set forth below is certain information relating to our current executive officers. Name Age Title Russell A. Becker 58 Chief Executive Officer and President Kevin S. Krumm 49 Executive Vice President and Chief Financial Officer Louis B. Lambert 48 Senior Vice President, General Counsel and Secretary Kristina M.
We believe that a culture where every employee can grow, thrive, and feel they belong is a differentiator and enables us to attract and retain employees who also build inclusive relationships with our customers. We are committed to all dimensions of diversity including gender identity, race, sexual orientation, ability, backgrounds, and beliefs.
We believe that a culture where every team member can grow, thrive, and feel they belong is a differentiator and enables us to attract and retain people who also build inclusive relationships with our customers. We are committed to all dimensions of diversity including gender identity, race, sexual orientation, ability, backgrounds, and beliefs.
We have not experienced and do not expect any significant strikes or work stoppages and believe our relations with employees covered by collective bargaining agreements are in good standing.
We have not experienced and do not expect any significant strikes or work stoppages and believe our relations with team members covered by collective bargaining agreements are in good standing.
Talent Development and Employee Engagement We believe our success in attracting and retaining qualified employees will be based on the quality of our training, leadership development and opportunities for growth and advancement. We offer multiple accelerated development programs focusing on advancing the business and leadership skills of employees.
Talent Development and Engagement We believe our success in attracting and retaining qualified team members will be based on the quality of our training, leadership development and opportunities for growth and advancement. We offer multiple accelerated development programs focusing on advancing the business and leadership skills of team members.
Competitive Pay, Benefits and Total Rewards and Practices Our total rewards philosophy is designed to align the compensation of our employees with Company financial results and individual performance, and to provide the appropriate market-competitive pay to attract, retain and incentivize employees to achieve superior performance.
Competitive Pay, Benefits and Total Rewards Practices Our total rewards philosophy is designed to align the compensation of our team members with Company financial results and performance, and to provide the appropriate market-competitive pay to attract, retain and incentivize team members to achieve superior performance.
Occupational Safety and Health Administration ("OSHA") per one hundred employees per year, also known as the OSHA recordable rate, was 1.0 during 2022 and 1.3 during 2021, respectively. Our rate of 1.0 is considerably less than the most recently published OSHA rate for our industry of 2.5.
Occupational Safety and Health Administration ("OSHA") per one hundred employees per year, also known as the OSHA recordable rate, was 0.96 during 2023 and 1.0 during 2022, respectively. Our rate of 0.96 is considerably less than the most recently published OSHA rate for our industry of 2.4.
The accruals are based upon known facts, historical trends and industry averages using the assistance of an actuary to project the extent of these obligations, and management believes such accruals are adequate. Human Capital Management Our number one value and priority is the safety, health and well-being of all of our employees.
The accruals are based upon known facts, historical trends, and industry averages using the assistance of an actuary to project the extent of these obligations and management believes such accruals are adequate. Growing and Developing our People Our number one value and priority is the safety, health and well-being of all of our team members.
Continue to Foster Leadership Development throughout All Levels and Geographies of the Organization. We plan to continue to invest in and support our leadership development culture through our Building Great Leaders® platform, which we believe will continue to empower the leaders across our businesses, drive business performance and create future cross-selling opportunities.
We plan to continue to invest in and support our leadership development culture through our Building Great Leaders® platform, which we believe will continue to empower the leaders across our businesses, drive business performance and create future cross-selling opportunities.
We believe that our revenue diversification across customers, end markets, geographies and projects, combined with our go-to-market strategy of selling inspection work first, regional approach to operating our businesses, specialty operations in niche markets, strong commitment to leadership development, long-standing customers with a robust reputation in the industries we serve, and strong safety track record differentiates us from our competitors.
We believe that our revenue diversification across customers, end markets, geographies and projects, combined with our go-to-market strategy of selling inspection work first, regional approach to operating our businesses, specialty operations in niche markets, strong commitment to leadership development, long-standing customers with a robust reputation in the industries we serve, and strong safety track record differentiates us from our competitors. 3 Table of Contents We have a disciplined acquisition platform which has historically provided strategic acquisitions that are integrated into our operations.
Our employees are critical to the execution of our strategies and achieving business success. As of December 31, 2022, we had approximately 26,000 employees, of which approximately 13,000 were represented by unions and were subject to various collective bargaining agreements.
Our team members are critical to the execution of our strategies and achieving business success. As of December 31, 2023, we had approximately 29,000 team members, of which approximately 14,000 were represented by unions or were subject to various collective bargaining agreements.
As such, we are subject to national and local laws and regulations related to unionized labor and collective bargaining. 7 We also are subject to various environmental laws and regulations that impose liability and cleanup responsibility for releases of hazardous substances into the environment or potential liability for harm to persons or property.
We also are subject to various environmental laws and regulations that impose liability and cleanup responsibility for releases of hazardous substances into the environment or potential liability for harm to persons or property.
We have a winning leadership culture driven by entrepreneurial business leaders that deliver innovative solutions to our customers. 3 We believe that our core strategies of driving organic growth and growth through accretive acquisitions, promoting sharing of best practices across all of our businesses, and leveraging our scale and services offerings place us in the position to capitalize on opportunities and trends in the industries we serve, grow our businesses and advance our position in each of our markets.
We believe that our core strategies of driving organic growth and growth through accretive acquisitions, promoting sharing of best practices across all of our businesses, and leveraging our scale and services offerings place us in the position to capitalize on opportunities and trends in the industries we serve, grow our businesses and advance our position in each of our markets.
ITEM 1. B USINESS Our Business We are a global, market-leading business services provider of safety and specialty services in over 500 locations worldwide. We provide statutorily mandated and other contracted services to a strong base of long-standing customers across industries.
ITEM 1. BUSINESS Our Business We are a global, market-leading business services provider of safety and specialty services in over 500 locations worldwide. We provide statutorily mandated and other contracted services to a strong base of long-standing customers across industries. We have a winning leadership culture driven by entrepreneurial business leaders that deliver innovative solutions to our customers.
We have established safety standards covering the risks particular to our business, deployed through specific training and monitored by country-level inspection programs.
Health & Safety We have a safety culture that is grounded in our commitment to zero incidents. We have established safety standards covering the risks particular to our business, deployed through specific training and monitored by country-level inspection programs.
The remainder of our work is generated pursuant to contracts for specific projects or jobs that require shorter-term services. Customers are billed with varying frequency, the timing of which is generally dependent upon advance billing terms, milestone billings based on completion of certain phases of the work, or when services are provided.
Customers are billed with varying frequency, the timing of which is generally dependent upon advance billing terms, milestone billings based on completion of certain phases of the work, or when services are provided.
Additionally, a large portion of our business uses labor that is provided under collective bargaining agreements or is subject to works council processes.
Additionally, a large portion of our business uses labor that is provided under collective bargaining agreements or is subject to works council processes. As such, we are subject to national and local laws and regulations related to unionized labor and collective bargaining.
We do not anticipate experiencing significant procurement challenges, as the purchases of required materials can be sourced from multiple sources; however, tariffs or other changes in international trade relations or other factors such as the impact of pandemics, could result in limited availability of or increased costs for some materials. 8 Sales and Marketing Our success depends on developing and maintaining successful long-term relationships with key customers in each of the industries we serve.
We do not anticipate experiencing significant procurement challenges, as the purchases of required materials can be sourced from multiple sources; however, tariffs or other changes in international trade relations or other factors such as the impact of pandemics and regional conflicts, could result in limited availability of or increased costs for some materials.
Accelerate Growth through Acquisitions. We have a well-established acquisition platform with a track record of executing accretive acquisitions through our selective approach to targeting and assessing potential acquisitions that we believe align with our values and strategic priorities. We have a disciplined acquisition platform through which we systematically target, execute, and integrate strategic acquisitions.
Accelerate Growth through Acquisitions. We have a well-established acquisition platform with a track record of executing accretive acquisitions through our selective approach to targeting and assessing potential acquisitions that we believe align with our values and strategic priorities. We believe that the markets in which we operate, which are expanding internationally, are fragmented and lend themselves to continued opportunistic acquisitions.
State and local municipalities have deferred infrastructure spending for many years which has resulted in the need to rebuild or retrofit a large portion of the U.S. infrastructure.
State and local municipalities have deferred infrastructure spending for many years which has resulted in the need to rebuild or retrofit a large portion of the U.S. infrastructure. The Infrastructure Investment and Jobs Act, signed into law on November 15, 2021, includes $550 billion of newly authorized infrastructure spending through 2026.
Our culture of collaboration across our businesses provides significant cross-selling opportunities to leverage our current project base, existing relationships and professional expertise to provide additional services to our existing customers.
We believe we can continue to leverage specific technical and marketing strengths at the individual business-level to expand the services offered in each business’s market. Our culture of collaboration across our businesses provides significant cross-selling opportunities to leverage our current project base, existing relationships and professional expertise to provide additional services to our existing customers.
We are building and evolving our culture of inclusion through our day-to-day work through our leadership, learning and development. We monitor employee engagement through periodic engagement assessments and provide recommendations for follow up based on this work.
We are building and evolving our culture of inclusion through our day-to-day work through our leadership, learning and development. We monitor team member engagement through annual engagement assessments and provide recommendations for follow up based on this assessment. Our continued success will depend, in part, on our ability to continue to attract, motivate, retain and reward high-quality, skilled employees.
In addition, our increasing international footprint enhances our services platform with complementary offerings and cross-selling opportunities. Customers We have long-standing relationships with many customers in each of the industries we serve. We serve customers in both the public and private sectors, including commercial, industrial, distribution and fulfillment centers, manufacturing, education, healthcare, telecom, utilities, transmission, high tech, entertainment, and government.
In addition, our increasing international footprint enhances our services platform with complementary offerings and cross-selling opportunities. 6 Table of Contents Customers We have long-standing relationships with many customers in each of the industries we serve.
We intend to continue our emphasis on developing and maintaining long-term relationships with our customers by providing reliable, high-quality service in a professional manner. We believe we can continue to leverage specific technical and marketing strengths at the individual business-level to expand the services offered in each business’s market.
Sales and Marketing Our success depends on developing and maintaining successful long-term relationships with key customers in each of the industries we serve. We intend to continue our emphasis on developing and maintaining long-term relationships with our customers by providing reliable, high-quality service in a professional manner.
We believe that this culture will continue to support our decentralized operating model, which combines the personal attention of a small-to-medium sized company with the strength and support of an industry leader. 6 Leverage Our Scale and Services Portfolio.
Our programmatic training and development curriculum focuses on a range of topics from enhancing technical capabilities to developing soft skills, and decision-making training to enable independent company leadership. We believe that this culture will continue to support our decentralized operating model, which combines the personal attention of a small-to-medium sized company with the strength and support of an industry leader.
We believe that the markets in which we operate, which are expanding internationally, are fragmented and lend themselves to continued opportunistic acquisitions. We have grown, and plan to continue to drive growth, through accretive acquisitions, targeting businesses in our existing segments and those complementary to our service offerings.
We have grown, and plan to continue to drive growth, through accretive acquisitions targeting businesses in our existing segments and those complementary to our service offerings. Continue to Foster Leadership Development throughout All Levels and Geographies of the Organization.
Our priorities are unified around maintaining business continuity while identifying and implementing operational efficiencies, cost synergies, and integration of organizational processes to drive margin expansion.
Since 2005, we have completed over 100 acquisitions. We target companies that align with our strategic priorities and demonstrate key value drivers such as culture, geography, end markets and client base, capabilities, and leadership. Our priorities are unified around maintaining business continuity while identifying and implementing operational efficiencies, cost synergies, and integration of organizational processes to drive margin expansion.
The Infrastructure Investment and Jobs Act signed into law on November 15, 2021 includes $550 billion of newly authorized infrastructure spending over the next 5 years. 4 Our Competitive Strengths We believe that the following are our key competitive strengths: Leading Market Positions in Diverse Set of Niche Industries.
Our Competitive Strengths We believe that the following are our key competitive strengths: Leading Market Positions in Diverse Set of Niche Industries.
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We have a disciplined acquisition platform which has historically provided strategic acquisitions that are integrated into our operations. Since 2005, we have completed more than 90 acquisitions. We target companies that align with our strategic priorities and demonstrate key value drivers such as culture, geography, end markets and client base, capabilities, and leadership.
Added
We serve customers in both the public and private sectors, including commercial, industrial, distribution and fulfillment centers, manufacturing, education, healthcare, telecom, utilities, transmission and integrity, high tech, entertainment, government and infrastructure. Our customers range from Fortune 500 companies with diverse, worldwide operations to single-location companies.
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Our programmatic training and development curriculum focuses on a range of topics from enhancing technical capabilities to developing soft skills, and decision-making training to enable independent company leadership.
Added
We often provide services under master service and other service agreements, which can be multi-year agreements, subject to earlier termination. The remainder of our work is generated pursuant to contracts for specific projects or jobs that require shorter-term services.
Removed
Our customers range from Fortune 500 companies with diverse, worldwide operations to single-location companies. We have low customer concentration with no single customer accounting for more than 5% of our total net revenues for 2022.
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Our continued success will depend, in part, on our ability to continue to attract, motivate, retain and reward high-quality, skilled employees. 9 Health & Safety We have a safety culture that is grounded in our commitment to zero incidents.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

68 edited+12 added−5 removed210 unchanged
Biggest changeOur projects expose our employees to electrical lines and equipment, pipelines carrying potentially explosive or toxic materials, heavy equipment, transportation accidents, adverse weather conditions and the risk of damage to equipment and property from hazardous conditions such as working at heights. 20 These hazards, among others, can cause personal injuries and loss of life, severe damage to or destruction of property and equipment and other consequential damages and could lead to suspension of operations and large damage claims which could, in some cases, substantially exceed the amount we charge for the associated services.
Biggest changeThese hazards, among others, can cause personal injuries and loss of life, severe damage to or destruction of property and equipment and other consequential damages and could lead to suspension of operations and large damage claims which could, in some cases, substantially exceed the amount we charge for the associated services.
Accordingly, our business is and will in the future be subject to risks associated with doing business internationally, including: • laws and regulations that dictate how we conduct business; • changes or instability in a specific country’s or region’s political or economic conditions, including inflation or currency devaluation; • political, financial market or economic instability relating to epidemics or pandemics; • laws and regulations that tax or otherwise restrict repatriation of earnings or other funds or otherwise limit distributions of capital; • changes to existing or new domestic or international tax laws; • trade protection measures, such as tariff increases, and import and export licensing and control requirements; • potentially negative consequences from fluctuations in foreign currency exchange rates; • difficulties repatriating income or capital, whether due to temporary blocking, taxes, tariffs or otherwise, where income from work outside the United States in non-U.S. dollars exceed our local currency needs; 11 • expropriation and governmental regulation restricting foreign ownership or requiring reversion or divestiture; • laws and regulations governing our employee relations, including occupational health and safety matters and employee compensation and benefits matters; • our ability to comply with, and the costs of compliance with, anti-bribery laws such as the Foreign Corrupt Practices Act and similar local anti-bribery laws; • uncertainties regarding legal or judicial systems, including inconsistencies between and within laws, regulations and decrees, and judicial application thereof, and delays in the judicial process; and • difficulty in recruiting and retaining trained personnel in our international operations.
Accordingly, our business is and will in the future be subject to risks associated with doing business internationally, including: • laws and regulations that dictate how we conduct business; • changes or instability in a specific country’s or region’s political or economic conditions, including inflation or currency devaluation; • political, financial market or economic instability relating to epidemics or pandemics; • laws and regulations that tax or otherwise restrict repatriation of earnings or other funds or otherwise limit distributions of capital; • changes to existing or new domestic or international tax laws; • trade protection measures, such as tariff increases, and import and export licensing and control requirements; • potentially negative consequences from fluctuations in foreign currency exchange rates; • difficulties repatriating income or capital, whether due to temporary blocking, taxes, tariffs or otherwise, where income from work outside the United States in non-U.S. dollars exceed our local currency needs; • expropriation and governmental regulation restricting foreign ownership or requiring reversion or divestiture; • laws and regulations governing our employee relations, including occupational health and safety matters and employee compensation and benefits matters; • our ability to comply with, and the costs of compliance with, anti-bribery laws such as the Foreign Corrupt Practices Act and similar local anti-bribery laws; • uncertainties regarding legal or judicial systems, including inconsistencies between and within laws, regulations and decrees, and judicial application thereof, and delays in the judicial process; and 11 Table of Contents • difficulty in recruiting and retaining trained personnel in our international operations.
The market price of our common stock on the NYSE may fluctuate as a result of several factors, including the following: • our operating and financial performance and prospects; • variations in our quarterly operating results or those of other companies in our industries; • volatility in our industries, the industries of our customers and suppliers and the securities markets; • risks relating to our businesses and industries, including those discussed above; 26 • strategic actions by us or our competitors; • damage to our reputation, including as a result of issues relating to the quality or safety of the services we provide and systems we install; • actual or expected changes in our growth rates or our competitors’ growth rates; • investor perception of us, the industries in which we operate, the investment opportunity associated with the common stock and our future performance; • addition to or departure of our executive officers; • changes in financial estimates or publication of research reports by analysts regarding our common stock, other comparable companies, or our industries generally, or termination of coverage of our common stock by analysts; • our failure to meet estimates or forecasts made by analysts, if any; • trading volume of our common stock; • future sales of our common stock by us or our stockholders; • economic, legal and regulatory factors unrelated to our performance; • adverse or new pending litigation against us; or • issuance of future annual Series A Preferred Stock dividends and quarterly Series B Preferred Stock dividends which are intended to be settled in common stock.
The market price of our common stock on the NYSE may fluctuate as a result of several factors, including the following: • our operating and financial performance and prospects; • variations in our quarterly operating results or those of other companies in our industries; • volatility in our industries, the industries of our customers and suppliers and the securities markets; • risks relating to our businesses and industries, including those discussed above; • strategic actions by us or our competitors; • damage to our reputation, including as a result of issues relating to the quality or safety of the services we provide and systems we install; • actual or expected changes in our growth rates or our competitors’ growth rates; • investor perception of us, the industries in which we operate, the investment opportunity associated with the common stock and our future performance; • addition to or departure of our executive officers; • changes in financial estimates or publication of research reports by analysts regarding our common stock, other comparable companies, or our industries generally, or termination of coverage of our common stock by analysts; • our failure to meet estimates or forecasts made by analysts, if any; • trading volume of our common stock; 26 Table of Contents • future sales of our common stock by us or our stockholders; • economic, legal and regulatory factors unrelated to our performance; • adverse or new pending litigation against us; or • issuance of future annual Series A Preferred Stock dividends and quarterly Series B Preferred Stock dividends which are intended to be settled in common stock.
Costs incurred as a result of claims could adversely affect our business, financial condition, results of operations and cash flows. 23 Our failure to comply with environmental laws could result in significant liabilities and increased environmental regulations could result in increased costs. We often perform services in and around environmentally-sensitive areas.
Costs incurred as a result of claims could adversely affect our business, financial condition, results of operations and cash flows. Our failure to comply with environmental laws could result in significant liabilities and increased environmental regulations could result in increased costs. We often perform services in and around environmentally-sensitive areas.
There can be no assurance, however, that our efforts will prevent the risk of a security breach of our databases or systems that could adversely affect our business. 27 Data privacy, identity protection and information security compliance may require significant resources and presents certain risks.
There can be no assurance, however, that our efforts will prevent the risk of a security breach of our databases or systems that could adversely affect our business. Data privacy, identity protection and information security compliance may require significant resources and presents certain risks.
In addition, Section 203 of the DGCL restricts certain “business combinations” with “interested stockholders” for three years following the date that a person becomes an interested stockholder unless: (1) the “business combination” or the transaction which caused the person or entity to become an interested stockholder is approved by the Board of Directors prior to such business combination or transactions; (2) upon the completion of the transaction in which the person or entity becomes an “interested stockholder,” such interested stockholder holds at least 85% of our voting stock not including (i) shares held by officers and directors and (ii) shares held by employee benefit plans under certain circumstances; or (3) at or after the person or entity becomes an “interested stockholder,” the “business combination” is approved by the Board of Directors and holders of at least 66 2/3% of the outstanding voting stock, excluding shares held by such interested stockholder.
In addition, Section 203 of the DGCL restricts certain “business combinations” with “interested stockholders” for three years following the date that a person becomes an interested stockholder unless: (1) the “business combination” or the transaction which caused the person or entity to become an interested stockholder is approved by the Board of Directors prior to such business combination or transactions; (2) upon the completion of the transaction in which the person or entity becomes an “interested stockholder,” such interested stockholder holds at least 85% of our voting stock not including (i) shares held by officers and directors and (ii) shares held by employee benefit plans under certain circumstances; or (3) at or after the person or entity becomes an “interested stockholder,” the “business combination” is approved by the Board of 25 Table of Contents Directors and holders of at least 66 2/3% of the outstanding voting stock, excluding shares held by such interested stockholder.
Additionally, delays on a particular project, including delays in designs, engineering information or materials provided to us by the customer or a third party, delays or difficulties in equipment and material delivery, schedule changes, delays from failure to timely obtain permits or rights-of-way or to meet other regulatory requirements, weather-related delays, governmental, industry, political and other factors, some of which are beyond our control, could result in cancellations or deferrals of project work, which could lead to a decline in revenue, or, for project deferrals, could cause us to incur costs for standby pay, and could lead to personnel shortages on other projects scheduled to commence at a later date.
Additionally, delays on a particular project, including delays in designs, engineering information or materials provided to us by the customer or a third party, delays or difficulties in equipment and material delivery, schedule changes, delays from failure to timely obtain permits or rights-of-way or to meet other regulatory requirements, weather-related delays, governmental, industry, political and other factors, some of which are beyond our control, could result in cancellations or deferrals of project work, which 12 Table of Contents could lead to a decline in revenue, or, for project deferrals, could cause us to incur costs for standby pay, and could lead to personnel shortages on other projects scheduled to commence at a later date.
In connection with our preparation of our consolidated financial statements for the years ended December 31, 2022, 2021, and 2020, we and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
In connection with our preparation of our consolidated financial statements for the years ended December 31, 2023, 2022, and 2021, we and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
Furthermore, we operate in an environment in which there are different and potentially conflicting data privacy laws in effect in the various U.S. states and foreign jurisdictions in which we operate, we must understand and comply with each law and standard in each of these jurisdictions while ensuring the data is secure and we could be subject to potentially substantial fines and penalties for non-compliance for major breach, theft or loss of personal data.
Furthermore, we operate in an environment in which there are different and potentially conflicting data privacy laws in effect in the various U.S. states and foreign jurisdictions in which we operate, we must understand and comply with each law and standard in each of these jurisdictions while ensuring the data is secure and we could be subject to potentially substantial fines and penalties for non- 27 Table of Contents compliance for major breach, theft or loss of personal data.
Certain of our coverages are subject to large deductibles or have high self-insured retention amounts, our policies do not cover all possible claims, and certain legacy risks at Chubb were assumed without insurance coverage. Accordingly, we are effectively self-insured for a substantial number of actual and potential claims.
Certain of our coverages are subject to large deductibles or have high self-insured retention amounts, our policies do not cover all possible claims, and certain legacy risks at Chubb were assumed without insurance coverage. Accordingly, 16 Table of Contents we are effectively self-insured for a substantial number of actual and potential claims.
The challenging conditions we encounter in our projects may include, without limitation, (i) hard to reach terrain and difficult site conditions; (ii) challenging engineering, procurement and construction phases, which may occur over extended time periods; (iii) difficulties or delays in designs or materials provided by the customer or a third party; (iv) equipment and material delivery delays; (v) schedule changes; (vi) delays from customer failure to timely obtain rights-of-way; (vii) weather-related delays, (viii) COVID-19-related changes to working conditions or disruptions; and (ix) delays by subcontractors in completing their portion of the project.
The challenging conditions we encounter in our projects may include, without limitation, (i) hard to reach terrain and difficult site conditions; (ii) challenging engineering, procurement and construction phases, which may occur over extended time periods; (iii) difficulties or delays in designs or materials provided by the customer or a third party; (iv) equipment and material delivery delays; (v) schedule changes; (vi) delays from customer failure to timely obtain rights-of-way; (vii) weather-related delays; and (viii) delays by subcontractors in completing their portion of the project.
The amount of additional funds, if any, that we may be obligated to contribute to these plans in the future cannot be estimated due to uncertainty of the future levels of work that require the specific use of union employees covered by these plans, as well as the future contribution levels and possible surcharges on contributions applicable to these plans.
The amount of additional funds, if any, that we may be obligated to contribute to these plans in the future cannot be estimated due to uncertainty of the future levels of work that 18 Table of Contents require the specific use of union employees covered by these plans, as well as the future contribution levels and possible surcharges on contributions applicable to these plans.
A violation of these laws and regulations could result in imposition of fines and penalties, the termination of a government contract or debarment from proposing on government contracts in the future. Further, despite our decentralized nature, a violation at one of our locations could impact other locations’ ability to propose on and perform government contracts.
A violation of these laws 17 Table of Contents and regulations could result in imposition of fines and penalties, the termination of a government contract or debarment from proposing on government contracts in the future. Further, despite our decentralized nature, a violation at one of our locations could impact other locations’ ability to propose on and perform government contracts.
In addition, to the extent we intend to pay dividends on our common stock, we will pay such dividends at such times (if any) and in such amounts (if any) as the Board determines appropriate. We have equity instruments outstanding that would require us to issue additional shares of common stock.
In addition, to the extent we intend to pay dividends on our common stock, we will pay such dividends at such times (if any) and in such amounts (if any) as the Board determines appropriate. 24 Table of Contents We have equity instruments outstanding that would require us to issue additional shares of common stock.
The potential difficulties of integrating the operations of the Chubb business include, among others: • implementing our business plan and strategy for the business; • continued unanticipated issues in integrating personnel, operations, systems and technology infrastructure, particularly after the end of the transitional services provided by the seller; • coordinating geographically dispersed organizations; • changes in applicable laws and regulations or conditions imposed by regulators; 13 • deploying internal controls over financial reporting; • operating risks inherent in the Chubb business and our existing life safety businesses; and • realizing the expected synergies from the Chubb Acquisition.
The potential difficulties of integrating the operations of the Chubb business include, among others: • continued unanticipated issues in integrating personnel, operations, systems and technology infrastructure, particularly after the end of the transitional services provided by the seller; • coordinating geographically dispersed organizations; • changes in applicable laws and regulations or conditions imposed by regulators; • deploying internal controls over financial reporting; • operating risks inherent in the Chubb business and our existing life safety businesses; and • realizing the expected synergies from the Chubb Acquisition.
If the field location maps supplied to us are not accurate, or if objects are present in the soil that are not indicated on the field location maps, our underground work could strike objects in the soil, some of which may contain pollutants. These objects may also rupture, resulting in the discharge of pollutants.
If the field location maps supplied to us are not accurate, or if objects are present in the soil that are not indicated on the 23 Table of Contents field location maps, our underground work could strike objects in the soil, some of which may contain pollutants. These objects may also rupture, resulting in the discharge of pollutants.
Additionally, an increased volume of alleged statutory violations or matters referred to an agency for potential resolution could result in significant attorney fees and settlement costs that could, in the aggregate, materially impact our financial condition.
Additionally, an increased volume of alleged statutory violations or matters referred to an agency for potential resolution 21 Table of Contents could result in significant attorney fees and settlement costs that could, in the aggregate, materially impact our financial condition.
As of December 31, 2022, approximately 49% of our employees were covered by collective bargaining agreements in the U.S. or similar employment and labor obligations in other countries in which we conduct business. The terms of these agreements limit our discretion in the management of covered employees and our ability to nimbly implement changes to meet business needs.
As of December 31, 2023, approximately 48% of our employees were covered by collective bargaining agreements in the U.S. or similar employment and labor obligations in other countries in which we conduct business. The terms of these agreements limit our discretion in the management of covered employees and our ability to nimbly implement changes to meet business needs.
As previously disclosed in its Annual Reports on Form 10-K for the years ended December 31, 2021 and 2020, management identified material weaknesses related to our internal control over financial reporting.
As previously disclosed in our Annual Reports on Form 10-K for the years ended December 31, 2022 and 2021, management identified material weaknesses related to our internal control over financial reporting.
We are also exposed to increases in energy prices, including as they relate to gasoline prices for our rolling-stock fleet of approximately 18,500 vehicles. Additionally, the price of fuel required to run our vehicles and equipment is unpredictable and fluctuates based on events outside our control.
We are also exposed to increases in energy prices, including as they relate to gasoline prices for our rolling-stock fleet of approximately 12,200 vehicles. Additionally, the price of fuel required to run our vehicles and equipment is unpredictable and fluctuates based on events outside our control.
General Risk Factors In the event of a cybersecurity incident, we could experience operational interruptions, incur substantial additional costs, become subject to legal or regulatory proceedings or suffer damage to our reputation.
In the event of a cybersecurity incident, we could experience operational interruptions, incur substantial additional costs, become subject to legal or regulatory proceedings or suffer damage to our reputation.
For example, it may: 15 • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, dividends, innovation, and other general corporate purposes; • cause credit rating agencies to view our debt level negatively; • increase our vulnerability to general adverse economic and industry conditions; • limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; • limit our ability to make strategic acquisitions, introduce new technologies or pursue business opportunities; and • place us at a competitive disadvantage compared to our competitors that have less indebtedness.
For example, it may: • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, dividends, innovation, and other general corporate purposes; • cause credit rating agencies to view our debt level negatively; • increase our vulnerability to general adverse economic and industry conditions; • limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; • limit our ability to make strategic acquisitions, introduce new technologies or pursue business opportunities; and • place us at a competitive disadvantage compared to our competitors that have less indebtedness. 15 Table of Contents In addition, the Credit Agreement governing the credit facilities contains covenants that restrict our operations.
(closed to new members and future benefit accrual) and Canada (closed to new members), are financed predominantly through externally invested pension plan assets via externally managed funds and insurance companies, which investments are subject to market, interest rate and inflation risks.
(closed to new members and future benefit accrual). The funded plan in Canada (closed to new members) is financed predominantly through externally invested pension plan assets via externally managed funds and insurance companies, which investments are subject to market, interest rate and inflation risks.
These laws and regulations, and the economic, financial, political and regulatory impact of the U.K.’s decision to leave the European Union, could increase the cost and complexity of doing business in the U.K. and negatively impact our financial position and results of operations. ITEM 1B. U NRESOLVED STAFF COMMENTS Not applicable.
These laws and regulations, and the 28 Table of Contents economic, financial, political and regulatory impact of the U.K.’s decision to leave the European Union, could increase the cost and complexity of doing business in the U.K. and negatively impact our financial position and results of operations. ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable.
Furthermore, the industries we serve can be cyclical in nature. Fluctuations in end-user demand within those industries, or in the supply of services within those industries, can affect demand for our services. As a result, our business may be adversely affected by industry declines or by delays in new projects.
Fluctuations in end-user demand within those industries, or in the supply of services within those industries, can affect demand for our services. As a result, our business may be adversely affected by industry declines or by delays in new projects.
A portion of our agreements with customers contain fixed price terms. Under these contracts, we typically set the price of our services on a per unit or aggregate basis and assume the risk that costs associated with our performance may be greater than what we estimated.
Under these contracts, we typically set the price of our services on a per unit or aggregate basis and assume the risk that costs associated with our performance may be greater than what we estimated.
Our substantial indebtedness may adversely affect our cash flow and our ability to operate our business and fulfill our obligations under our indebtedness. As of December 31, 2022, on a consolidated basis, we had $2,212 million in principal amount of debt outstanding under our credit facilities, $614 million of senior notes, and other indebtedness totaling approximately $6 million.
Our substantial indebtedness may adversely affect our cash flow and our ability to operate our business and fulfill our obligations under our indebtedness. As of December 31, 2023, on a consolidated basis, we had $1,737 million in principal amount of debt outstanding under our credit facilities, $614 million of senior notes, and other indebtedness totaling approximately $5 million.
Approximately 38% of our revenue was derived from areas outside the United States for the year ended December 31, 2022.
Approximately 37% of our revenue was derived from areas outside the United States for the year ended December 31, 2023.
In addition, the Credit Agreement governing the credit facilities contains covenants that restrict our operations. These covenants restrict, among other things, our ability to incur additional debt, grant liens, pay cash dividends, enter new lines of business, redeem our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions.
These covenants restrict, among other things, our ability to incur additional debt, grant liens, pay cash dividends, enter new lines of business, redeem our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions.
Our revenue and results of operations can be subject to seasonal and other variations. These deviations are influenced by various factors, including weather, customer spending patterns, proposal seasons, project schedules, holidays, and timing, in particular, for large, non-recurring projects. In particular, many of the construction projects in North America that demand our services include significant outdoor work.
These deviations are influenced by various factors, including weather, customer spending patterns, proposal seasons, project schedules, holidays, and timing, in particular, for large, non-recurring projects. In particular, many of the construction projects in North America that demand our services include significant outdoor work.
In addition, we have various outstanding equity awards to employees and directors under the APi Group Corporation 2019 Equity Incentive Plan. As of December 31, 2022, we had 13,574,813 shares of common stock available under this Plan.
In addition, we have various outstanding equity awards to employees and directors under the APi Group Corporation 2019 Equity Incentive Plan. As of December 31, 2023, we had 12,625,337 shares of common stock available under this Plan.
To the extent those plans are underfunded, U.S. regulations, including the Employee Retirement Income Security Act of 1974, as amended by the Multiemployer Pension Plan Amendments Act of 1980, may subject us to substantial liabilities under those plans if we withdraw from them or if they are terminated or experience a mass withdrawal. 18 In addition, certain U.S. multiemployer pension plans to which we contribute or may contribute in the future are in “endangered,” “seriously endangered” or “critical” status.
To the extent those plans are underfunded, U.S. regulations, including the Employee Retirement Income Security Act of 1974, as amended by the Multiemployer Pension Plan Amendments Act of 1980, may subject us to substantial liabilities under those plans if we withdraw from them or if they are terminated or experience a mass withdrawal.
Financial Risks Adverse developments in the credit markets could adversely affect the funding of significant projects and therefore reduce demand for our services. Adverse developments in the credit markets, including reduced liquidity or rising interest rates, could reduce the availability of funding for large capital projects that require our services.
Adverse developments in the credit markets, including reduced liquidity or rising interest rates, could reduce the availability of funding for large capital projects that require our services.
Pending and future wage and hour litigation, including claims relating to the U.S. Fair Labor Standards Act, analogous state laws, or other state wage and hour laws could result in significant attorney fees and settlement costs. Resolution of non-litigated alleged wage and hour violations could also negatively impact our performance.
Fair Labor Standards Act, analogous state laws, or other state wage and hour laws could result in significant attorney fees and settlement costs. Resolution of non-litigated alleged wage and hour violations could also negatively impact our performance.
The level of activity in the new construction of oil and natural gas pipelines, oil and natural gas exploration and production in the U.S. has been volatile. A reduction in these activities generally results in decreased demand for our support services in that industry.
The level of activity in the new construction of oil and natural gas pipelines, oil and natural gas exploration and production in the U.S. has been volatile. A reduction in these activities generally results in decreased demand for our support services in that industry. Therefore, if these expenditures decline, our business is likely to be adversely affected.
As a result, our backlog as of any particular date is an uncertain indicator of the amount of or timing of future revenues and earnings. Risks Related to Our Workforce Our unionized workforce and related obligations could adversely affect our operations.
As a result, our backlog as of any particular date is an uncertain indicator of the amount of or timing of future revenues and earnings. R ISKS R ELATED T O O UR W ORKFORCE Our unionized workforce and related obligations could adversely affect our operations.
The occurrence of accidents in the course of our business could result in significant liabilities, employee turnover, increase the costs of our projects or harm our ability to perform under our contracts or enter into new customer contracts, all of which may subject us to liabilities, affect customer relationships, result in higher operating costs, negatively impact employee morale and result in higher employee turnover and could materially adversely affect our profitability and our financial condition.
The occurrence of accidents in the course of our business could result in significant liabilities, employee turnover, increase the costs of our projects or harm our ability to perform under our contracts or enter into new customer contracts, all of which may subject us to liabilities, affect customer relationships, result in higher operating costs, negatively impact employee morale and result in higher employee turnover and could materially adversely affect our profitability and our financial condition. 20 Table of Contents C LAIMS A ND L ITIGATION R ISKS We are and may become subject to periodic litigation which may adversely affect our business and financial performance.
Risks Related to Acquisitions Our business strategy includes acquiring companies and making investments that complement our existing businesses. These acquisitions and investments could be unsuccessful or consume significant resources, which could adversely affect our operating results.
R ISKS R ELATED T O A CQUISITIONS Our business strategy includes acquiring companies and making investments that complement our existing businesses. These acquisitions and investments could be unsuccessful or consume significant resources, which could adversely affect our operating results.
ITEM 1A. RISK FACTORS Risks Related to Our Business We have expanded our international operations, which subjects us to economic, political and other risks. With the Chubb Acquisition in January 2022, our international operations have been greatly expanded.
ITEM 1A. RISK FACTORS R ISKS R ELATED T O O U R B USINES S We have expanded our international operations, which subjects us to economic, political and other risks. With the Chubb Acquisition in January 2022, our international operations have been greatly expanded.
Risks Related to Our Customer Base We serve customers who are involved in energy exploration, production and transportation, and adverse developments affecting activities in these industries, reduced demand for oil and natural gas products, or increased regulation of exploration and production, could have a material adverse effect on our results of operations.
R ISKS R ELATED T O O UR C USTOMER B ASE We serve customers who are involved in energy exploration, production and transportation, and adverse developments affecting activities in these industries, reduced demand for oil and natural gas products, or increased regulation of exploration and production, could have a material adverse effect on our results of operations.
Additionally, some of our fixed price contracts do not allow us to adjust our prices and, as a result, increases in material or fuel costs could reduce our profitability with respect to such projects. 17 Some of our subsidiaries are government contractors, and they are subject to complex rules and regulations governing government contractors, and their contracts with government entities are subject to audit.
Additionally, some of our fixed price contracts do not allow us to adjust our prices and, as a result, increases in material or fuel costs could reduce our profitability with respect to such projects.
Such a decline would likely reduce the demand for certain of our services. 22 The industries we serve can be seasonal, cyclical and affected by weather conditions at project sites and other variations, the combined effects of which can potentially delay cash flows and adversely impact our results of operations.
The industries we serve can be seasonal, cyclical and affected by weather conditions at project sites and other variations, the combined effects of which can potentially delay cash flows and adversely impact our results of operations. Our revenue and results of operations can be subject to seasonal and other variations.
The industry is traditionally cyclical in nature and economic downturns can adversely affect the willingness and ability of our customers to commit to capital expenditures.
The industry is traditionally cyclical in nature and economic downturns can adversely affect the willingness and ability of our customers to commit to capital expenditures. Such a decline would likely reduce the demand for certain of our services.
These potential events could also impact our ability to be timely paid for our current services, which could adversely affect our cash flows and margins. Risks Related to Our Occupational Hazards Our businesses at times perform services under challenging conditions involving factors outside of our control.
These potential events could also impact our ability to be timely paid for our current services, which could adversely affect our cash flows and margins. 19 Table of Contents R ISKS R ELATED T O O UR O CCUPATIONAL H AZARDS Our businesses at times perform services under challenging conditions involving factors outside of our control.
Further, if our partners experience cost overruns or project performance issues that we are unable to adequately address, the customer may terminate the project, which could result in legal liability to us, harm our reputation and reduce our profit or increase our loss on a project. 12 Improperly managed projects or project delays may result in additional costs or claims against us, which could have a material adverse effect on our financial condition, operating results, and cash flows.
Further, if our partners experience cost overruns or project performance issues that we are unable to adequately address, the customer may terminate the project, which could result in legal liability to us, harm our reputation and reduce our profit or increase our loss on a project.
Violations of the applicable rules and regulations could result in a subsidiary being barred from future government contracts. Government contractors must comply with many regulations and other requirements that relate to the award, administration and performance of these contracts, and government contracts are subject to audit.
Government contractors must comply with many regulations and other requirements that relate to the award, administration and performance of these contracts, and government contracts are subject to audit.
The loss of any of our executive officers or other key employees or the inability to identify, hire, train, retain, and manage skilled personnel, could harm our business. 28 Increases in healthcare costs could adversely affect our financial results.
Competition for qualified personnel in our industries, especially with respect to specialized projects or unique skill sets in applicable trades, is intense. The loss of any of our executive officers or other key employees or the inability to identify, hire, train, retain, and manage skilled personnel, could harm our business. Increases in healthcare costs could adversely affect our financial results.
The success of the Chubb Acquisition depends, in part, on our ability to successfully integrate and operate the Chubb business in conjunction with our existing life safety businesses and transition from the services and systems provided by the seller. While we successfully separated from Carrier as of December 31, 2022, the separation process has been complex, costly and time-consuming.
The success of the Chubb Acquisition depends, in part, on our ability to successfully integrate and operate the Chubb business in conjunction with our existing life safety businesses and transition from the services and systems provided by the seller.
A portion of our current business and a portion of our future growth is expected to result from public and private investments in infrastructure. As a result, reduced or delayed spending, including the impact of government sequestration programs or other changes in budget priorities could result in the deferral, delay or disruption of our projects.
As a result, reduced or delayed spending, including the impact of government sequestration programs or other changes in budget priorities could result in the deferral, delay or disruption of our projects.
Claims and Litigation Risks We are and may become subject to periodic litigation which may adversely affect our business and financial performance. We are subject to various lawsuits, administrative proceedings and claims that arise in the ordinary course of business.
We are subject to various lawsuits, administrative proceedings and claims that arise in the ordinary course of business.
However, given the uncertainties associated with these types of contracts, it is possible for actual costs to vary from estimates previously made, which may result in reductions or reversals of previously recorded revenue and profits. 14 We carry a significant amount of goodwill and identifiable intangible assets on our consolidated balance sheets.
On a historical basis, we believe that we have made reasonably reliable estimates of the progress towards completion on our long-term contracts. However, given the uncertainties associated with these types of contracts, it is possible for actual costs to vary from estimates previously made, which may result in reductions or reversals of previously recorded revenue and profits.
As of December 31, 2022, the Company had $1,120 million notional amount outstanding in interest rate swap agreements, which includes an aggregate $400 million notional amount of forward-starting swaps that commence in January 2023 and a four-year $720 million notional swap that exchanges a variable rate of interest for a fixed rate over the term of the agreement.
As of December 31, 2023, the Company had $1,120 million notional amount outstanding in interest rate swap agreements that exchange a variable rate of interest for a fixed rate over the term of the agreement.
Therefore, if these expenditures decline, our business is likely to be adversely affected. 19 A portion of our expected future growth is based on the ability and willingness of public and private entities to invest in infrastructure.
A portion of our expected future growth is based on the ability and willingness of public and private entities to invest in infrastructure. A portion of our current business and a portion of our future growth is expected to result from public and private investments in infrastructure.
In connection with the Chubb Acquisition, we also maintain defined benefit pension plans outside of the U.S. Our non-U.S. defined benefit pension plans include both funded and unfunded plans. The funded plans, such as in the U.K.
In connection with the Chubb Acquisition, we also maintain defined benefit pension plans outside of the U.S. Our non-U.S. defined benefit pension plans include both funded and unfunded plans. We completed a pension buy-in transaction during 2023 and entered into insurance contracts with a global insurance company for the funded plan in the U.K.
As a result, seasonal changes and adverse weather conditions can adversely affect our business operations through declines in demand for our services and alterations and delays in applicable schedules. Adverse weather conditions can reduce demand for our services and reduce sales or render our contracting operations less efficient resulting in under-utilization of crews and equipment and lower contract profitability.
As a result, seasonal changes and adverse weather conditions can adversely affect our business operations through declines in demand for our services and alterations and delays in applicable schedules.
However, we may not maintain interest rate swaps with respect to all of our floating rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk.
However, we may not maintain interest rate swaps with respect to all of our floating rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk. In addition, these agreements expose us to the risk that other parties to the agreements will not perform or that the agreements will be unenforceable.
Claims of this nature could also have a negative impact on customer confidence in our businesses and services.
Claims of this nature could also have a negative impact on customer confidence in our businesses and services. Current or future claims could have a material adverse effect on our reputation, business, financial condition and results of operations.
It is uncertain whether we will be successful in litigating or otherwise resolving these types of claims and lawsuits in the future and we continue to evaluate different strategies related to claims filed against us.
It is uncertain whether we will be successful in litigating or otherwise resolving these types of claims and lawsuits in the future and we continue to evaluate different strategies related to claims filed against us. Unfavorable rulings, judgments or settlement terms in future cases could have a material adverse impact on our financial condition, results of operations, and cash flows.
Current or future claims could have a material adverse effect on our reputation, business, financial condition and results of operations. 21 We are and may become subject to periodic regulatory proceedings, including Fair Labor Standards Act (“FLSA”) and state wage and hour class action lawsuits, which may adversely affect our business and financial performance.
We are and may become subject to periodic regulatory proceedings, including Fair Labor Standards Act (“FLSA”) and state wage and hour class action lawsuits, which may adversely affect our business and financial performance. Pending and future wage and hour litigation, including claims relating to the U.S.
Any impairment in the value of our goodwill would have an adverse non-cash impact on our results of operations and reduce our net worth. As of December 31, 2022, we had goodwill of $2,382 million, which is maintained in various reporting units.
Any impairment in the value of our goodwill would have an adverse non-cash impact on our results of operations and reduce our net worth.
If our estimates materially diverge from our realized liabilities, adjustments to our balance sheet may be required and these increased liabilities would be recorded in the period that the experience becomes known. Risks Related to Our Contracts We may not accurately estimate the costs associated with services provided under fixed price contracts, which could impair our financial performance.
If our estimates materially diverge from our realized liabilities, adjustments to our balance sheet may be required and these increased liabilities would be recorded in the period that the experience becomes known.
In addition, the Chubb business may not meet our expectations, causing our financial results to differ from our own or the investment community’s expectations. Any of these factors could have a negative effect on our financial condition, results of operations, and cash flows.
In addition, the Chubb business may not meet our expectations, causing our financial results to differ from our own or the investment community’s expectations.
Earnings for future periods may be impacted by impairment charges for goodwill and intangible assets. Goodwill is the excess of purchase price over the fair value of the net assets of acquired businesses. We assess goodwill and identifiable intangible assets for impairment each year, or more frequently if circumstances suggest an impairment may have occurred.
We carry a significant amount of goodwill and identifiable intangible assets on our consolidated balance sheets. Earnings for future periods may be impacted by impairment charges for goodwill and intangible assets. Goodwill is the excess of purchase price over the fair value of the net assets of acquired businesses.
As a result and in connection with our preparation of our consolidated financial statements herein for the year ended December 31, 2022, we and our independent registered public accounting firm identified a material weakness over user access controls related to an information technology system and a material weakness related to the ineffective operation of process level controls over revenue recognition.
As a result and in connection with our preparation of our consolidated financial statements herein for the year ended December 31, 2023, we and our independent registered public accounting firm identified material weaknesses in financial reporting.
For example, in connection with the Chubb Acquisition, in January 2022 we issued shares of Series B Preferred Stock which have quarterly dividend rights and are convertible into common stock. 25 Delaware law and our organizational documents contain certain provisions, including anti-takeover provisions, which limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
Delaware law and our organizational documents contain certain provisions, including anti-takeover provisions, which limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
Risks Related to the Industries in Which We Operate We have significant operations in highly competitive markets, and our failure to effectively compete could reduce our market share and harm our financial performance.
R ISKS R ELATED T O T HE I NDUSTRIES I N W HICH W E O PERATE We have significant operations in highly competitive markets, and our failure to effectively compete could reduce our market share and harm our financial performance.
Additionally, we have a significant amount of identifiable intangible assets and fixed assets that could also be subject to impairment.
As of December 31, 2023, we had goodwill of $2,471 million, which is maintained in various reporting units. 14 Table of Contents Additionally, we have a significant amount of identifiable intangible assets and fixed assets that could also be subject to impairment.
In addition, these agreements expose us to the risk that other parties to the agreements will not perform or that the agreements will be unenforceable. 16 We are effectively self-insured against many potential liabilities. We are insured through a wholly-owned insurance captive and third party carriers.
We are effectively self-insured against many potential liabilities. We are insured through a wholly-owned insurance captive and third party carriers.
Removed
On a historical basis, we believe that we have made reasonably reliable estimates of the progress towards completion on our long-term contracts.
Added
Improperly managed projects or project delays may result in additional costs or claims against us, which could have a material adverse effect on our financial condition, operating results, and cash flows.
Removed
Management has taken meaningful steps to improve our internal control over financial reporting to remediate the previously reported material weaknesses; however, certain IT general controls and process level controls were implemented late in 2022.
Added
Any of these factors could have a negative effect on our financial condition, results of operations, and cash flows. 13 Table of Contents F INANCIA L R ISKS Adverse developments in the credit markets could adversely affect the funding of significant projects and therefore reduce demand for our services.
Removed
As anticipated, a remediation effort of this magnitude takes multiple years to complete and we have made significant progress in 2021 and 2022 with our multi-year remediation plans.
Added
We assess goodwill and identifiable intangible assets for impairment each year, or more frequently if circumstances suggest an impairment may have occurred.
Removed
Unfavorable rulings, judgments or settlement terms in future cases could have a material adverse impact on our financial condition, results of operations, and cash flows. 24 Risks Related to Our Organizational Structure and Ownership of Our Stock We operate as a holding company and our principal source of operating cash is income received from our subsidiaries.
Added
While management was successful in completing its multi-year remediation of prior year material weaknesses within the legacy business, the establishment of internal controls over financial reporting at certain subsidiaries of the recently acquired Chubb fire and security business and the inability of a third-party service organization to provide a service auditors’ report led to the identification of new material weaknesses.
Removed
Competition for qualified personnel in our industries, especially with respect to specialized projects or unique skill sets in applicable trades, is intense.
Added
R ISKS R ELATED T O O UR C ONTRACTS We may not accurately estimate the costs associated with services provided under fixed price contracts, which could impair our financial performance. A portion of our agreements with customers contain fixed price terms.
Added
Some of our subsidiaries are government contractors, and they are subject to complex rules and regulations governing government contractors, and their contracts with government entities are subject to audit. Violations of the applicable rules and regulations could result in a subsidiary being barred from future government contracts.
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In addition, certain U.S. multiemployer pension plans to which we contribute or may contribute in the future are in “endangered,” “seriously endangered” or “critical” status.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of December 31, 2022, we owned approximately 55 facilities and leased approximately 515 facilities in the U.S., France, the United Kingdom, Australia, the Netherlands, and over 15 other countries. We believe that our existing facilities are sufficient for our current needs.
Biggest changeAs of December 31, 2023, we owned approximately 50 facilities and leased approximately 500 facilities in the U.S., France, the United Kingdom, Australia, the Netherlands, and over 15 other countries. We believe that our existing facilities are sufficient for our current needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe do not believe that the ultimate resolution of these matters will have a material adverse effect on our business, financial condition, results of operations or cash flows. ITEM 4.
Biggest changeWe do not believe that the ultimate resolution of these matters will have a material adverse effect on our business, financial condition, results of operations or cash flows.
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MINE SAFETY DISCLOSURES Information regarding mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this Annual Report. 29 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe SRP will expire on February 29, 2024 unless otherwise modified or earlier terminated by our Board of Directors at any time in its sole discretion. During 2022, we repurchased 2,505,723 shares for approximately $44 million under the SRP, leaving approximately $206 million of authorized repurchases.
Biggest changeThe SRP will expire on February 29, 2024 unless otherwise modified or earlier terminated by our Board of Directors at any time in its sole discretion. During the twelve months ended December 31, 2023 and 2022, we repurchased 1,626,493 and 2,505,723 shares of common stock for approximately $41 million and $44 million, respectively.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.” The holders of our Series B Preferred Stock are entitled to receive quarterly dividends in cash or (subject to the satisfactions of certain conditions) shares of our common stock, at our sole option (which we intend to settle in shares).
“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.” The holders of our Series B Preferred Stock are entitled to receive quarterly dividends in cash or (subject to the satisfactions of certain conditions) shares of our common stock, at our sole option (which we intend to settle in shares of common stock).
Because our services are diverse across our operating segments, APG does not believe that any single published industry index is appropriate for comparing shareholder return. Therefore, the peer group used in the performance graph combines publicly traded companies that have similar characteristics as one or more of APG’s segments.
Because our services are diverse across our operating segments, APG does not believe that any single published industry index is appropriate for comparing shareholder return. Therefore, the peer group used in the performance graph combines publicly traded 31 Table of Contents companies that have similar characteristics as one or more of APG’s segments.
See —“Stock Repurchase Program” above for additional information regarding the SRP. 30 Performance Graph The following graph summarizes the cumulative return on $100 invested in APG’s common stock, the S&P 500, the Russell 2000 Stock Index, and the common stock of a selected peer group of companies if invested on October 1, 2019, the date of the acquisition of APi Group (the "APi Acquisition"), until December 31, 2022.
Performance Graph The following graph summarizes the cumulative return on $100 invested in APG’s common stock, the S&P 500, the Russell 2000 Stock Index, and the common stock of a selected peer group of companies if invested on October 1, 2019, the date of the acquisition of APi Group (the "APi Acquisition"), until December 31, 2023.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market and Dividend Information Our common stock is listed on the NYSE under symbol “APG.” Common Stock As of February 22, 2023, there were 15 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES M ARKET AND D IVIDEND I NFORMATION Our common stock is listed on the NYSE under symbol “APG.” Common Stock As of February 21, 2024, there were approximately 15 holders of record of our common stock.
Quarterly dividends were paid to those holders in shares of common stock for each quarter of 2022. Refer to Note 18 – “Shareholders’ Equity” to our consolidated financial statements for additional information.
Quarterly dividends were paid to those holders in shares of common stock for each quarter of 2023. Refer to Note 19 – “Shareholders’ Equity and Redeemable Convertible Preferred Stock” to our consolidated financial statements for additional information.
(1) Peer group includes Cintas Corporation, Comfort Systems USA, Inc., EMCOR Group Inc., Jacobs Engineering Group Inc., Johnson Controls International plc, MasTec Inc., Otis Worldwide, and Quanta Services, Inc. Carrier has been removed from the Company's peer group after the Chubb Acquisition given it is no longer a comparable peer.
(1) Peer group includes Cintas Corporation, Comfort Systems USA, Inc., EMCOR Group Inc., Jacobs Engineering Group Inc., Johnson Controls International plc, MasTec Inc., Otis Worldwide, and Quanta Services, Inc. ITEM 6. [RESERVED] 32 Table of Contents
Removed
Issuer Purchases of Equity Securities The following table provides information about the Company’s purchases of equity securities during the quarter ended December 31, 2022: During the Three Months Ended December 31, 2022 Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) October 1, 2022 - October 31, 2022 — $ — — $ — November 1, 2022 - November 30, 2022 — — — — December 1, 2022 - December 31, 2022 554,391 18.74 554,391 206 Total 554,391 $ 18.74 554,391 $ 206 1.
Added
As of December 31, 2023, we had approximately $165 million of authorized repurchases remaining under the SRP. On February 26, 2024, our Board of Directors authorized a stock repurchase program to purchase up to an aggregate of $1,000 million of shares of our common stock.
Removed
This change had no material impact on the peer group data reflected in the table above. ITEM 6. [RESERVED] 31
Added
This stock repurchase program is indefinite, unless otherwise modified or terminated by our Board of Directors at any time in its sole discretion. Issuer Purchases of Equity Securities The Company did not have any purchases of equity securities during the quarter ended December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeGAAP financial measures below. 36 Operating Segment Results Net Revenues Years Ended December 31, Change ($ in millions) 2022 2021 $ % Safety Services $ 4,575 $ 2,080 $ 2,495 120.0 % Specialty Services 2,030 1,907 123 6.4 % Corporate and Eliminations (47 ) (47 ) — — $ 6,558 $ 3,940 $ 2,618 66.4 % Operating Income (Loss) Years Ended December 31, Change ($ in millions) 2022 2021 $ % Safety Services $ 256 $ 207 $ 49 23.7 % Safety Services operating margin 5.6 % 10.0 % Specialty Services $ 97 $ 78 $ 19 24.4 % Specialty Services operating margin 4.8 % 4.1 % Corporate and Eliminations $ (191 ) $ (149 ) $ (42 ) 28.2 % $ 162 $ 136 $ 26 19.1 % EBITDA Years Ended December 31, Change ($ in millions) 2022 2021 $ % Safety Services $ 492 $ 287 $ 205 71.4 % Safety Services EBITDA as a % of net revenues 10.8 % 13.8 % Specialty Services $ 206 $ 205 $ 1 0.5 % Specialty Services EBITDA as a % of net revenues 10.1 % 10.7 % Corporate and Eliminations $ (176 ) $ (151 ) $ (25 ) 16.6 % $ 522 $ 341 $ 181 53.1 % The following discussion breaks down the net revenues, operating income (loss), and EBITDA by operating segment for the years ended December 31, 2022 and 2021.
Biggest changeOperating Segment Results Net Revenues Years Ended December 31, Change ($ in millions) 2023 2022 $ % Safety Services $ 4,871 $ 4,575 $ 296 6.5 % Specialty Services 2,079 2,030 49 2.4 % Corporate and Eliminations (22) (47) NM NM $ 6,928 $ 6,558 $ 370 5.6 % Operating Income (Loss) Years Ended December 31, Change ($ in millions) 2023 2022 $ % Safety Services $ 396 $ 256 $ 140 54.7 % Safety Services operating margin 8.1 % 5.6 % Specialty Services $ 108 $ 97 $ 11 11.3 % Specialty Services operating margin 5.2 % 4.8 % Corporate and Eliminations $ (145) $ (191) NM NM $ 359 $ 162 $ 197 121.6 % 37 Table of Contents EBITDA Years Ended December 31, Change ($ in millions) 2023 2022 $ % Safety Services $ 607 $ 492 $ 115 23.4 % Safety Services EBITDA as a % of net revenues 12.5 % 10.8 % Specialty Services $ 217 $ 206 $ 11 5.3 % Specialty Services EBITDA as a % of net revenues 10.4 % 10.1 % Corporate and Eliminations $ (144) $ (176) NM NM $ 680 $ 522 $ 158 30.3 % NM = Not meaningful The following discussion breaks down the net revenues, operating income (loss), and EBITDA by operating segment for the years ended December 31, 2023 and 2022.
These non-U.S. GAAP financial measures, however, have limitations as analytical tools and should not be considered in isolation from, a substitute for, or superior to, the related financial information that we report in accordance with U.S. GAAP. The principal limitation of these non-U.S. GAAP financial measures is that they exclude significant expenses that are required by U.S.
GAAP financial measures, however, have limitations as analytical tools and should not be considered in isolation from, a substitute for, or superior to, the related financial information that we report in accordance with U.S. GAAP. The principal limitation of these non-U.S. GAAP financial measures is that they exclude significant expenses that are required by U.S.
Although we believe our calculations for tax returns are correct and the positions taken thereon are reasonable, the final outcome of income tax examinations could be materially different from our expectations and the estimates that are reflected in our consolidated financial statements, which could have a material effect on our results of operations, cash flows and liquidity. 46
Although we believe our calculations for tax returns are correct and the positions taken thereon are reasonable, the final outcome of income tax examinations could be materially different from our expectations and the estimates that are reflected in our consolidated financial statements, which could have a material effect on our results of operations, cash flows and liquidity.
For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in our financial statements. 45 We file income tax returns in numerous tax jurisdictions, including U.S. federal, most U.S. states and certain foreign jurisdictions.
For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in our financial statements. We file income tax returns in numerous tax jurisdictions, including U.S. federal, most U.S. states and certain foreign jurisdictions.
Business Combinations The determination of the fair value of net assets acquired in a business combination and estimates of acquisition-related contingent consideration requires estimates and judgments of future cash flow expectations for the acquired business and the related identifiable tangible and intangible assets. Fair values of net assets acquired are calculated using standard valuation techniques.
The determination of the fair value of net assets acquired in a business combination and estimates of acquisition-related contingent consideration requires estimates and judgments of future cash flow expectations for the acquired business and the related identifiable tangible and intangible assets. Fair values of net assets acquired are calculated using standard valuation techniques.
Although we believe our provision for income taxes is correct and the related assumptions are reasonable, the final outcome of tax matters could be materially different from what we currently anticipate, which could result in significant costs or benefits to us. See Note 13 – “Income Taxes” for additional discussion.
Although we believe our provision for income taxes is correct and the related assumptions are reasonable, the final outcome of tax matters could be materially different from what we currently anticipate, which could result in significant costs or benefits to us. See Note 14 – “Income Taxes” for additional discussion.
Selling, general, and administrative ("SG&A") expenses Selling expenses consist primarily of compensation and associated costs for sales and marketing personnel, costs of advertising, trade shows, and corporate marketing.
Selling, general, and administrative ("SG&A") expenses Selling expenses consist primarily of compensation and associated costs for sales and advertising, trade shows, and corporate marketing.
As part of this amendment, we entered into a $1,100 million seven-year incremental term loan ("2021 Term Loan"), the Revolving Credit Facility was upsized by $200 million to $500 million, the maturity date of the Revolving Credit Facility was extended five years, and the letter of credit sublimit was increased by $100 million to $250 million.
As part of this amendment, we entered into a $1,100 million seven-year incremental term loan ("2021 Term Loan"), the Revolving Credit Facility was upsized by $200 million to $500 million, the maturity date of the Revolving Credit Facility was extended five-years, and the letter of credit limit was increased by $100 million to $250 million.
Year ended December 31, 2021 versus year ended December 31, 2020 For a discussion of our 2021 results of operations, including a discussion of our financial results for the fiscal year ended December 31, 2021 compared to the fiscal year ended December 31, 2020, refer to Part I, Item 7, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 1, 2022.
Year ended December 31, 2022 versus year ended December 31, 2021 For a discussion of our 2022 results of operations, including a discussion of our financial results for the fiscal year ended December 31, 2022 compared to the fiscal year ended December 31, 2021, refer to Part I, Item 7, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 1, 2023.
Material Cash Requirements from Known Contractual and Other Obligations Our material cash requirements from known contractual and other obligations primarily relate to the following, for which information on both a short-term and long-term basis is provided in the indicated notes to the consolidated financial statements and expected to be satisfied using cash generated from operations: • Operating and Finance Leases – See Note 11 – "Leases." • Debt – See Note 12 – "Debt" for future principal payments and interest rates on our debt instruments. • Tax Obligations – See Note 13 – "Income Taxes." • Pension obligations – See Note 15 – "Pension." We make investments in our properties and equipment to enable continued expansion and effective performance of our business.
Material Cash Requirements from Known Contractual and Other Obligations Our material cash requirements from known contractual and other obligations primarily relate to the following, for which information on both a short-term and long-term basis is provided in the indicated notes to the consolidated financial statements and expected to be satisfied using cash generated from operations: • Operating and Finance Leases – See Note 12 – "Leases." • Debt – See Note 13 – "Debt" for future principal payments and interest rates on our debt instruments. • Tax Obligations – See Note 14 – "Income Taxes." • Pension obligations – See Note 16 – "Pension." We make investments in our properties and equipment to enable continued expansion and effective performance of our business.
In cases where operational transactions represent a material currency risk, we generally enter into cross-currency swaps. Refer to Note 9 - "Derivatives" to our consolidated financial statements included in this Annual Report for additional information on our hedging activities.
In cases where operational transactions represent a material currency risk, we generally enter into cross-currency swaps. Refer to Note 10 - "Derivatives" to our consolidated financial statements included in this Annual Report for additional information on our hedging activities.
As of December 31, 2022, we had $277 million aggregate principal amount of 4.750% Senior Notes outstanding. Debt Covenants As of December 31, 2022 and 2021, we were in compliance with all covenants contained in the indentures governing the 4.125% Senior Notes and the 4.750% Senior Notes, and the Credit Agreement.
As of December 31, 2023, we had $277 million aggregate principal amount of 4.750% Senior Notes outstanding. Debt Covenants As of December 31, 2023 and 2022, we were in compliance with all covenants contained in the indentures governing the 4.125% Senior Notes and the 4.750% Senior Notes, and the Credit Agreement.
Overview We are a global, market-leading business services provider of safety and specialty services in over 500 locations worldwide. We provide statutorily mandated and other contracted services to a strong base of long-standing customers across industries. We have a winning leadership culture driven by entrepreneurial business leaders that deliver innovative solutions to our customers.
O VERVIEW We are a global, market-leading business services provider of safety and specialty services in over 500 locations worldwide. We provide statutorily mandated and other contracted services to a strong base of long-standing customers across industries. We have a winning leadership culture driven by entrepreneurial business leaders that deliver innovative solutions to our customers.
Cost of revenues Cost of revenues consists of direct labor, materials, subcontract costs, and indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation costs. Labor costs are considered to be incurred as the work is performed.
Cost of revenues Cost of revenues consists of direct labor, materials, subcontract costs, and indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation costs. Labor costs are considered to be incurred as the work is performed. Subcontractor labor is recognized as the work is performed.
We have recorded goodwill in connection with our historical acquisitions of businesses. Upon acquisition, these businesses were either combined into one of the existing components or managed on a stand-alone basis as an individual component. The components are aligned to one of our two reportable segments, Safety Services or Specialty Services.
We have recorded goodwill in connection with our historical acquisitions of businesses. Upon acquisition, these businesses were either combined into one of the existing components or managed on a stand-alone basis as an individual component. 45 Table of Contents The components are aligned to one of our two reportable segments, Safety Services or Specialty Services.
Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised from time to time on an on-going basis.
Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised on an on-going basis.
See Note 3 – “Recent Accounting Pronouncements” for further information regarding new accounting standards, including the anticipated dates of adoption and the effects on our consolidated financial position, results of operations or liquidity. 42 Critical Accounting Estimates The preparation of financial statements and related disclosures in conformity with U.S.
See Note 3 – “Recent Accounting Pronouncements” for 43 Table of Contents further information regarding new accounting standards, including the anticipated dates of adoption and the effects on our consolidated financial position, results of operations or liquidity. CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements and related disclosures in conformity with U.S.
When the current estimate of total costs for a performance obligation indicates a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident. 43 The timing of revenue recognition may differ from the timing of invoicing to customers.
When the current estimate of total costs for a performance obligation indicates a loss, a 44 Table of Contents provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident. The timing of revenue recognition may differ from the timing of invoicing to customers.
Management believes these measures are useful to investors since they (a) permit investors to view our performance using the same tools that management uses to evaluate our past performance, reportable business segments and prospects for future performance, (b) permit investors to compare us with our peers, and (c) in the case of EBITDA, determines certain elements of management’s incentive compensation.
Management believes these measures are useful to investors since they (a) permit investors to view our performance using the same tools that management uses to evaluate our past performance, reportable business segments and prospects for future performance, (b) permit investors to compare us with our peers, and (c) in the case of EBITDA, determines certain elements of management’s incentive compensation. 38 Table of Contents These non-U.S.
The interest rate applicable to borrowings under the Revolving Credit Facility is, at our option, either (a) a base rate plus an applicable margin equal to 1.25% or (2) a Eurocurrency rate (adjusted for statutory reserves) plus an applicable margin equal to 2.25%.
The interest rate applicable to borrowings under the Revolving Credit Facility is, at our option, either (a) a base rate plus an applicable margin equal to 1.25% or (2) a Term SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.25% plus a CSA.
Our capital expenditures are expected to be approximately 1.5% of annual net revenues. Recently Issued Accounting Pronouncements We review new accounting standards to determine the expected impact, if any, of the adoption of such standards will have on our financial position and/or results of operations.
Our capital expenditures are typically less than 1.5% of annual net revenues. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS We review new accounting standards to determine the expected impact, if any, of the adoption of such standards will have on our financial position and/or results of operations.
Our capital expenditures were approximately $79 million and $55 million in the years ended December 31, 2022 and 2021, respectively. 39 In 2022, our Board of Directors authorized a stock repurchase program, authorizing the purchase of up to an aggregate of $250 million of common stock through February 2024.
Our capital expenditures were approximately $86 million and $79 million in the years ended December 31, 2023 and 2022, respectively. In 2022, our Board of Directors authorized a stock repurchase program ("SRP"), authorizing the purchase of up to an aggregate of $250 million of common stock through February 2024.
The increase in cash flows provided by operating activities is primarily due to an increase in net income in the period. This increase is partially offset by working capital needs associated with the various services we provide.
The increase in cash flows provided by operating activities is primarily due to an increase in net income in the period. This increase in cash provided by operating activities is also driven by lower working capital needs associated with the various services we provide.
Principal payments on the 2021 Term Loan are due in quarterly installments on the last day of each fiscal quarter, unless prepayments are made, for a total annual amount equal to 1.00% of the initial aggregate principal amount of the 2021 Term Loan. The 2021 Term Loan matures on January 3, 2029.
Principal payments on the 2021 Term Loan will be made in quarterly installments on the last day of each fiscal quarter, for a total annual amount equal to 1.00% of the initial aggregate principal amount of the 2021 Term Loan. The 2021 Term Loan matures on January 3, 2029.
Results of Operations The following is a discussion of our financial condition and results of operations for the years ended December 31, 2022 and 2021. The following financial information has been extracted from our audited consolidated financial statements included in this Annual Report.
R ESULTS OF O PERATIONS The following is a discussion of our financial condition and results of operations for the years ended December 31, 2023 and 2022. The following financial information has been extracted from our audited consolidated financial statements included in this Annual Report.
Subcontractor labor is recognized as the work is performed. 33 Gross profit Our gross profit is influenced by direct labor, materials, and subcontract costs. Our profit margins are also influenced by raw material costs, contract mix, weather, and proper coordination with contract providers. Labor intensive contracts usually drive higher margins than those contracts that include material, subcontract, and equipment costs.
Gross profit Our gross profit is influenced by direct labor, materials, and subcontract costs. Our profit margins are also influenced by raw material costs, contract mix, weather, and proper coordination with contract providers. Labor intensive contracts usually drive higher margins than those contracts that include material, subcontract, and equipment costs.
ITEM 7. M ANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion and year-to-year comparisons of APG’s financial condition and results of operations for the years ended December 31, 2022 and 2021.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion and year-to-year comparisons of APG’s financial condition and results of operations for the years ended December 31, 2023 and 2022.
Issuance of Series B Preferred Stock On January 3, 2022, concurrent with the closing of the Chubb Acquisition, we issued and sold 800,000 shares of our Series B Preferred Stock, par value $0.0001 per share, for an aggregate purchase price of $800 million, pursuant to securities purchase agreements entered into on July 26, 2021 with certain investors.
Issuance of Series B Preferred Stock During 2022, we issued and sold 800,000 shares of our 5.5% Series B Redeemable Convertible Preferred Stock, par value $0.0001 per share (the "Series B Preferred Stock"), for an aggregate purchase price of $800 million, pursuant to securities purchase agreements entered into on July 26, 2021 with certain investors.
General and administrative expenses consist primarily of compensation and associated costs for executive management, personnel, facility leases, administrative expenses associated with accounting, finance, legal, information systems, leadership development, human resources, and risk management and overhead associated with these functions. General and administrative expenses also include outside professional fees and other corporate expenses.
General and administrative expenses consist primarily of compensation and associated costs for executive management, personnel, facility leases, impairment, administrative expenses associated with accounting, finance, legal, information systems, leadership development, human resources, and risk management and overhead associated with these functions.
Interest expense, net Interest expense was $125 million and $60 million for the years ended December 31, 2022 and 2021, respectively.
Interest expense, net Interest expense was $145 million and $125 million for the years ended December 31, 2023 and 2022, respectively.
We believe this non-U.S. GAAP measure provides meaningful information and helps investors understand our core selling, general, and administrative expenses excluding acquisition-related amortization expense to better enable investors to understand our financial results and assess our prospects for future performance.
GAAP measure provides meaningful information and helps investors understand our core selling, general, and administrative expenses excluding acquisition-related amortization expense and impairment charges to better enable investors to understand our financial results and assess our prospects for future performance.
The following tables present reconciliations of SG&A expenses to SG&A expenses (excluding amortization) for the periods indicated: Years Ended December 31, ($ in millions) 2022 2021 Reported SG&A expenses $ 1,552 $ 803 Adjustments to reconcile to SG&A expenses to SG&A expenses (excluding amortization) Amortization expense (197 ) (122 ) SG&A expenses (excluding amortization) $ 1,355 $ 681 38 EBITDA Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is the measure of profitability used by management to manage its segments and, accordingly, in its segment reporting.
The following tables present reconciliations of SG&A expenses to SG&A expenses (excluding amortization and impairment) for the periods indicated: Years Ended December 31, ($ in millions) 2023 2022 Reported SG&A expenses $ 1,581 $ 1,552 Adjustments to reconcile to SG&A expenses to SG&A expenses (excluding amortization and impairment) Amortization expense (197) (197) Impairment of goodwill, intangibles, and other assets (12) — SG&A expenses (excluding amortization and impairment) $ 1,372 $ 1,355 EBITDA Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is the measure of profitability used by management to manage its segments and, accordingly, in its segment reporting.
Non-GAAP Financial Measures We supplement our reporting of consolidated financial information determined in accordance with U.S. GAAP with SG&A expenses (excluding amortization) and EBITDA (defined below), which are non-U.S. GAAP financial measures. We use these non-U.S.
N ON -G AAP F INANCIAL M EASURES We supplement our reporting of consolidated financial information determined in accordance with U.S. GAAP with SG&A expenses (excluding amortization and impairment) and EBITDA (defined below), which are non-U.S. GAAP financial measures. We use these non-U.S.
On January 3, 2022, we issued and sold 800,000 shares of our Series B Preferred Stock for an aggregate purchase price of $800 million and entered into an amendment to our Credit Agreement.
During 2022, we issued and sold 800,000 shares of our Series B Preferred Stock (defined below) for an aggregate purchase price of $800 million and entered into the Second Amendment to our Credit Agreement.
Economic, Industry and Market Factors We closely monitor the effects of general changes in economic and market conditions on our customers. General economic and market conditions can negatively affect demand for our customers’ products and services, which can affect their planned capital and maintenance budgets in certain end markets. Market, regulatory, and industry factors could affect demand for our services.
General economic and market conditions can negatively affect demand for our customers’ products and services, which can affect their planned capital and maintenance budgets in certain end markets. Market, regulatory, and industry factors could affect demand for our services.
Our SG&A expenses excluding amortization for year ended December 31, 2022 were $1,355 million, or 20.7% of net revenues, compared to $681 million, or 17.3% of net revenues, for the same period of 2021 primarily due to the factors discussed above. See the discussion and reconciliation of our non-U.S. GAAP financial measures below.
Our SG&A expenses excluding amortization and impairment for the year ended December 31, 2023 was $1,372 million, or 19.8% of net revenues, compared to $1,355 million or 20.7% of net revenues for 2022, primarily due to the factors discussed above. See the discussion and reconciliation of our non-U.S. GAAP financial measures below.
The 4.125% Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by us and certain subsidiaries. The 4.125% Senior Notes will mature on July 15, 2029, unless redeemed earlier, and bear interest at a rate of 4.125% per year until maturity, payable semi-annually in arrears.
The 4.125% Senior Notes will mature on July 15, 2029, unless redeemed earlier, and bear interest at a rate of 4.125% per year until maturity, payable semi-annually in arrears.
As of December 31, 2022, we had $337 million aggregate principal amount of 4.125% Senior Notes outstanding. 41 We completed a private offering of $300 million aggregate principal amount of 4.750% Senior Notes due 2029 issued under an indenture dated October 21, 2021, as supplemented by a supplemental indenture dated January 3, 2022.
As of December 31, 2023, we had $337 million aggregate principal amount of 4.125% Senior Notes outstanding. 42 Table of Contents On October 21, 2021, a wholly-owned subsidiary of the Company completed a private offering of $300 million aggregate principal amount of 4.750% Senior Notes due 2029 (the “4.750% Senior Notes”) issued under an indenture dated October 21, 2021, as supplemented by a supplemental indenture dated January 3, 2022.
The following table presents a reconciliation of net income to EBITDA for the periods indicated: Years Ended December 31, ($ in millions) 2022 2021 Reported net income $ 73 $ 47 Adjustments to reconcile net income to EBITDA: Interest expense, net 125 60 Income tax provision 20 32 Depreciation 77 75 Amortization 227 127 EBITDA $ 522 $ 341 Liquidity and Capital Resources Overview Our primary sources of liquidity are cash flows from the operating activities of our consolidated subsidiaries, available cash and cash equivalents, our access to our $500 million five-year senior secured revolving credit facility (the “Revolving Credit Facility”), and the proceeds from debt offerings.
The following table presents a reconciliation of net income to EBITDA for the periods indicated: Years Ended December 31, ($ in millions) 2023 2022 Reported net income $ 153 $ 73 Adjustments to reconcile net income to EBITDA: Interest expense, net 145 125 Income tax provision 79 20 Depreciation 79 77 Amortization 224 227 EBITDA $ 680 $ 522 39 Table of Contents L IQUIDITY AND C APITAL R ESOURCES Overview Our primary sources of liquidity are cash flows from the operating activities of our consolidated subsidiaries, available cash and cash equivalents, our access to our $500 million five-year senior secured revolving credit facility (the “Revolving Credit Facility”), and the proceeds from debt offerings.
The increase in cash provided by financing activities was primarily due to $1,104 million of proceeds from the issuance of the 2021 Term Loan and other debt, and $797 million of proceeds from the issuance of Series B Preferred Stock.
For the year ended December 31, 2022, cash provided by financing activities was higher due to $1,104 million of proceeds from the issuance of the 2021 Term Loan and other debt, and $797 million of proceeds from the issuance of Series B Preferred Stock.
The interest rate applicable to the 2021 Term Loan is, at our option, either (a) a base rate plus an applicable margin equal to 1.75% or (b) a Eurocurrency rate (adjusted for statutory reserves) plus an applicable margin equal to 2.75%.
Following the debt repricing transaction, the amended interest rate applicable to the 2021 Term Loan is, at our option, either (a) a base rate plus an applicable margin equal to 1.50% or (b) a Term SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.50% plus a CSA.
As of December 31, 2022, we had $1,051 million of total liquidity, comprising $605 million in cash and cash equivalents and $446 million ($500 million less outstanding letters of credit of approximately $54 million, which reduce availability) of available borrowings under our Revolving Credit Facility.
As of December 31, 2023, we had $974 million of total liquidity, comprising $479 million in cash and cash equivalents and $495 million ($500 million less outstanding letters of credit of approximately $5 million, which reduce availability) of available borrowings under our Revolving Credit Facility.
We believe maintenance and service revenues are generally more predictable through contractual arrangements with typical terms ranging from days to three years, with the majority having short durations and are often recurring due to consistent renewal rates and long-standing customer relationships. Certain Factors and Trends Affecting our Results of Operations Acquisitions On January 3, 2022, we completed the Chubb Acquisition.
We believe maintenance and service revenues are generally more predictable through contractual arrangements with typical terms ranging from days to three years, with the majority having short durations and are often recurring due to consistent renewal rates and long-standing customer relationships.
Year ended December 31, 2021 versus year ended December 31, 2020 For a discussion of our Liquidity and Capital Resources for the fiscal year ended December 31, 2021 compared to the fiscal year ended December 31, 2020, refer to Part I, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 1, 2022. 40 Financing Activities Credit Agreement We have a Credit Agreement by and among APi Group DE, Inc., our wholly-owned subsidiary, as borrower ("APi Group DE"), APG as a guarantor, the subsidiary guarantors from time to time party thereto, the lenders from time to time party thereto, and Citibank N.A., as administrative agent and as collateral agent (the “Credit Agreement”) which provides for: (1) a term loan facility, pursuant to which we incurred the $1,200 million 2019 Term Loan used to fund a part of the cash portion of the purchase price in the APi Acquisition, and a $1,100 million seven-year incremental term loan ("2021 Term Loan") used to fund a portion of the purchase price in the Chubb acquisition, and (2) a $500 million Revolving Credit Facility of which up to $250 million can be used for the issuance of letters of credit.
Financing Activities Credit Agreement We have entered into a Credit Agreement by and among APi Group DE, Inc., our wholly-owned subsidiary, as borrower ("APi Group DE"), APG as a guarantor, the subsidiary guarantors from time to time party thereto, the lenders from time to time party thereto, and Citibank N.A., as administrative agent and as collateral agent (the “Credit Agreement”) which provides for: (1) a term loan facility, pursuant to which we incurred the $1,200 million term loan ("2019 Term Loan") used to fund a part of the cash portion of the purchase price in the APi Acquisition, and the $1,100 million 2021 41 Table of Contents Term Loan used to fund a portion of the purchase price in the Chubb acquisition, and (2) a $500 million Revolving Credit Facility of which up to $250 million can be used for the issuance of letters of credit.
Net income and EBITDA Years Ended December 31, Change ($ in millions) 2022 2021 $ % Net income $ 73 $ 47 $ 26 55.3 % EBITDA (non-GAAP) 522 341 181 53.1 % Net income as a % of net revenues 1.1 % 1.2 % EBITDA as a % of net revenues 8.0 % 8.7 % Net income for the year ended December 31, 2022 was $73 million compared to $47 million for the year ended December 31, 2021, an increase of $26 million.
Net income and EBITDA Years Ended December 31, Change ($ in millions) 2023 2022 $ % Net income $ 153 $ 73 $ 80 109.6 % EBITDA (non-GAAP) 680 522 158 30.3 % Net income as a % of net revenues 2.2 % 1.1 % EBITDA as a % of net revenues 9.8 % 8.0 % Net income for the year ended December 31, 2023 was $153 million compared to $73 million for the year ended December 31, 2022, an increase of $80 million.
Investors are encouraged to review the following reconciliations of these non-U.S. GAAP financial measures to the most comparable U.S. GAAP financial measures and not to rely on any single financial measure to evaluate our business. SG&A expenses (excluding amortization) SG&A expenses (excluding amortization) is a measure of operating costs used by management to manage the business and its segments.
Investors are encouraged to review the following reconciliations of these non-U.S. GAAP financial measures to the most comparable U.S. GAAP financial measures and not to rely on any single financial measure to evaluate our business.
Estimated discount rates were determined using the weighted average cost of capital for each reporting unit at the time of the analysis, taking into consideration the risks inherent within each reporting unit individually.
Estimated discount rates were determined using the weighted average cost of capital for each reporting unit at the time of the analysis, taking into consideration the risks inherent within each reporting unit individually. For the year ended December 31, 2023, we performed our annual goodwill impairment assessment as of October 1, 2023.
Selling, general, and administrative expenses Years Ended December 31, Change ($ in millions) 2022 2021 $ % Selling, general, and administrative expenses $ 1,552 $ 803 $ 749 93.3 % SG&A expenses as a % of net revenues 23.7 % 20.4 % SG&A expenses (excluding amortization) (Non-GAAP) $ 1,355 $ 681 $ 674 99.0 % SG&A expenses (excluding amortization) as a % of net revenues 20.7 % 17.3 % Operating margin 2.5 % 3.5 % Our SG&A expenses were $1,552 million for the year ended December 31, 2022 compared to $803 million for the year ended December 31, 2021, an increase of $749 million.
Selling, general, and administrative expenses The following table presents operating expenses and operating margin (operating income as a percentage of net revenues) for the years ended December 31, 2023 and 2022, respectively: Years Ended December 31, Change ($ in millions) 2023 2022 $ % Selling, general, and administrative expenses $ 1,581 $ 1,552 $ 29 1.9 % SG&A expenses as a % of net revenues 22.8 % 23.7 % Operating margin 5.2 % 2.5 % SG&A expenses (excluding amortization and impairment) (Non-GAAP) $ 1,372 $ 1,355 $ 17 1.3 % SG&A expenses (excluding amortization and impairment) as a % of net revenues (Non-GAAP) 19.8 % 20.7 % Our SG&A expenses for the year ended December 31, 2023, were $1,581 million compared to $1,552 million for the same period in 2022, an increase of $29 million.
EBITDA for the year ended December 31, 2022 was $522 million compared to $341 million for the same period in 2021, an increase of $181 million. The increase in EBITDA was primarily driven by the factors previously discussed. See the discussion and reconciliation of our non-U.S.
EBITDA for the years ended December 31, 2023 and 2022 was $680 million and $522 million, respectively, an increase of $158 million. The increase in EBITDA was primarily driven by the factors previously discussed. See the discussion and reconciliation of our non-U.S. GAAP financial measures below.
Cash Flows The following table summarizes net cash flows with respect to our operating, investing, and financing activities for the periods indicated: Years Ended December 31, ($ in millions) 2022 2021 Net cash provided by operating activities $ 270 $ 182 Net cash used in investing activities (2,901 ) (121 ) Net cash provided by financing activities 1,756 917 Effect of foreign currency exchange rate change on cash, cash equivalents, and restricted cash (9 ) (2 ) Net (decrease) increase in cash, cash equivalents, and restricted cash $ (884 ) $ 976 Cash, cash equivalents, and restricted cash, end of period $ 607 $ 1,491 Net cash provided by operating activities Net cash provided by operating activities was $270 million in the year ended December 31, 2022 compared to $182 million for the same period in 2021.
This stock repurchase program is indefinite, unless otherwise modified or terminated by our Board of Directors at any time in its sole discretion. 40 Table of Contents Cash Flows The following table summarizes net cash flows with respect to our operating, investing, and financing activities for the periods indicated: Years Ended December 31, (in millions) 2023 2022 Net cash provided by operating activities $ 514 $ 270 Net cash used in investing activities (115) (2,901) Net cash (used in) provided by financing activities (532) 1,756 Effect of foreign currency exchange rate change on cash, cash equivalents, and restricted cash 6 (9) Net decrease in cash, cash equivalents, and restricted cash $ (127) $ (884) Cash, cash equivalents, and restricted cash, end of period $ 480 $ 607 Net cash provided by operating activities Net cash provided by operating activities was $514 million in the year ended December 31, 2023 compared to $270 million of cash provided for the same period in 2022.
Gross profit Years Ended December 31, Change ($ in millions) 2022 2021 $ % Gross profit $ 1,714 $ 939 $ 775 82.5 % Gross margin 26.1 % 23.8 % Our gross profit for the year ended December 31, 2022 was $1,714 million compared to $939 million in the year ended December 31, 2021, an increase of $775 million, or 82.5%.
Gross profit Years Ended December 31, Change ($ in millions) 2023 2022 $ % Gross profit $ 1,940 $ 1,714 $ 226 13.2 % Gross margin 28.0 % 26.1 % 35 Table of Contents Our gross profit for the year ended December 31, 2023 was $1,940 million compared to $1,714 million in the year ended December 31, 2022, an increase of $226 million, or 13.2%.
Specialty Services EBITDA as a percentage of net revenues for the years ended December 31, 2022 and 2021 was 10.1% and 10.7%, respectively, due to the factors discussed above.
The increase was primarily the result of disciplined project and customer selection during the year ended December 31, 2023 compared to the same period in 2022. Specialty Services EBITDA as a percentage of net revenues for the years ended December 31, 2023 and 2022 was 10.4% and 10.1%, respectively, due to the factors discussed above.
Safety Services Safety Services net revenues for the year ended December 31, 2022 were $4,575 million compared to $2,080 million during the same period in the prior year. The increase was primarily attributable to acquisitions completed in the past twelve months. The increase was also driven by increased inspection, service, and monitoring revenue within our Life Safety businesses.
Safety Services Safety Services net revenues for the year ended December 31, 2023 were $4,871 million compared to $4,575 million during the same period in the prior year. The increase was driven by increased inspection, service, and monitoring revenue. This increase was also due to continued strength in our end markets and strategic pricing improvements.
The 2021 Term Loan is subject to the same mandatory prepayment provisions as the 2019 Term Loan. The interest rate applicable to the 2019 Term Loan is, at our option, either (a) a base rate plus an applicable margin equal to 1.50% or (b) a Eurocurrency rate (adjusted for statutory reserves) plus an applicable margin equal to 2.50%.
Following the debt repricing transaction, the amended interest rate applicable to the 2019 Term Loan is, at our option, either (a) a base rate plus an applicable margin equal to 1.25% or (b) a Term SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.25% plus a credit spread adjustment ("CSA").
Years Ended December 31, Change ($ in millions) 2022 2021 $ % Net revenues $ 6,558 $ 3,940 $ 2,618 66.4 % Cost of revenues 4,844 3,001 1,843 61.4 % Gross profit 1,714 939 775 82.5 % Selling, general, and administrative expenses 1,552 803 749 93.3 % Operating income 162 136 26 19.1 % Interest expense, net 125 60 65 108.3 % (Gain) loss on extinguishment of debt, net (5 ) 9 (14 ) (155.6 )% Non-service pension benefit (42 ) — (42 ) NM Investment income and other, net (9 ) (12 ) 3 (25.0 )% Other expense, net 69 57 12 21.1 % Income before income taxes 93 79 14 17.7 % Income tax provision 20 32 (12 ) (37.5 )% Net income $ 73 $ 47 $ 26 55.3 % 34 Year ended December 31, 2022 versus year ended December 31, 2021 Net revenues Net revenues for the year ended December 31, 2022 were $6,558 million compared to $3,940 million for the year ended December 31, 2021, an increase of $2,618 million or 66.4%.
Years Ended December 31, Change ($ in millions) 2023 2022 $ % Net revenues $ 6,928 $ 6,558 $ 370 5.6 % Cost of revenues 4,988 4,844 144 3.0 % Gross profit 1,940 1,714 226 13.2 % Selling, general, and administrative expenses 1,581 1,552 29 1.9 % Operating income 359 162 197 121.6 % Interest expense, net 145 125 20 16.0 % Loss (gain) on extinguishment of debt, net 7 (5) (12) NM Non-service pension benefit (12) (42) (30) (71.4 %) Investment income and other, net (13) (9) 4 44.4 % Other expense, net 127 69 58 84.1 % Income before income taxes 232 93 139 149.5 % Income tax provision 79 20 59 295.0 % Net income $ 153 $ 73 $ 80 109.6 % NM = Not meaningful Year ended December 31, 2023 versus year ended December 31, 2022 Net revenues Net revenues for the year ended December 31, 2023 were $6,928 million compared to $6,558 million for the year ended December 31, 2022, an increase of $370 million or 5.6%.
Description of Key Line Items Net revenues Net revenues are generated from the sale of various types of contracted services, fabrication, and distribution.
D ESCRIPTION OF K EY L INE I TEMS Net revenues Net revenues are generated from the sale of various types of contracted services, fabrication, and distribution.
Our first lien net leverage ratio as of December 31, 2022 was 2.25:1.00. As of December 31, 2022, we had $1,127 million and $1,085 million of indebtedness outstanding on the 2019 Term Loan and 2021 Term Loan, respectively.
Our first lien net leverage ratio as of December 31, 2023 was 1.54:1.00. During 2023, we repaid an aggregate amount of $375 million and $100 million to the 2019 Term Loan and 2021 Term Loan, respectively.
Net cash provided by financing activities Net cash provided by financing activities was $1,756 million and $917 million in the years ended December 31, 2022 and 2021, respectively.
Net cash (used in) provided by financing activities Net cash used in financing activities was $532 million for the year ended December 31, 2023 compared to $1,756 million provided by financing activities for the same period in 2022.
During the year ended December 31, 2022, we repurchased 2,505,723 shares of common stock for approximately $44 million under this stock repurchase program, leaving approximately $206 million of authorized repurchases.
During the twelve months ended December 31, 2023 and 2022, we repurchased 1,626,493 and 2,505,723 shares of common stock for approximately $41 million and $44 million, respectively. As of December 31, 2023, we had approximately $165 million of authorized repurchases remaining under the SRP.
Safety Services EBITDA as a percentage of net revenues was 10.8% and 13.8% for the years ended December 31, 2022 and 2021, respectively. The change was primarily driven by the factors discussed above. Specialty Services Specialty Services net revenues for the years ended December 31, 2022 and 2021 were $2,030 million and $1,907 million respectively.
The increase was also driven by lower acquisition and integration related expenses incurred for the year ended December 31, 2023 compared to 2022. Safety Services EBITDA as a percentage of net revenues was 12.5% and 10.8% for the years ended December 31, 2023 and 2022, respectively. This increase was primarily related to the factors discussed above.
We had no amounts outstanding under the Revolving Credit Facility, under which $446 million was available after giving effect to $54 million of outstanding letters of credit, which reduces availability. On January 6, 2023, we repaid an aggregate amount of $200 million, $100 million to both the 2019 Term Loan and 2021 Term Loan.
As a result, as of December 31, 2023, the 2019 Term Loan and the 2021 Term Loan have remaining principal amounts of $330 million and $1,407 million, respectively. We had no amounts outstanding under the Revolving Credit Facility, under which $495 million was available after giving effect to $5 million of outstanding letters of credit, which reduces availability.
Net cash used in investing activities Net cash used in investing activities was $2,901 million and $121 million in the years ended December 31, 2022 and 2021, respectively.
Net cash used in investing activities Net cash used in investing activities was $115 million and $2,901 million in the years ended December 31, 2023 and 2022, respectively. During 2023, we utilized $83 million for acquisitions, compared to $2,839 million for the Chubb Acquisition for the same period in 2022.
Income tax provision (benefit) The effective tax rate for the year ended December 31, 2022 was 22.0% compared to an effective tax rate of 40.0% for the year ended December 31, 2021.
The increase in investment income was primarily due to an increase in earnings from joint ventures. 36 Table of Contents Income tax provision The effective tax rate for the year ended December 31, 2023 was 33.9% compared to an effective tax rate of 22.0% for the year ended December 31, 2022.
Amortization of intangible assets Amortization expense reflects the charges incurred to amortize our finite-lived identifiable intangible assets, such as customer relationships, which are amortized over their estimated useful lives. There is a portion of amortization expense related to the backlog intangible assets reflected in cost of revenues in the consolidated statements of operations.
General and administrative expenses also include outside professional fees, and other corporate expenses. 34 Table of Contents Amortization of intangible assets Amortization expense reflects the charges incurred to amortize our finite-lived identifiable intangible assets, such as customer relationships, which are amortized over their estimated useful lives.
(Gain) loss on extinguishment of debt, net (Gain) loss on extinguishment of debt, net reflects the difference between the repurchase price and carrying amount of debt at the time of extinguishment.
There is a portion of amortization expense related to the backlog intangible assets reflected in cost of revenues in the consolidated statements of operations. Loss (gain) on extinguishment of debt, net Loss (gain) on extinguishment of debt, net reflects the difference between the repurchase price and carrying amount of debt at the time of extinguishment.
SG&A expenses as a percentage of net revenues were 23.7% during the year ended December 31, 2022 compared to 20.4% for the same period in 2021. The increase in SG&A expenses was primarily driven by additional SG&A expenses contributed by acquisitions completed in the prior twelve months.
SG&A expenses as a percentage of net revenues was 22.8% during the year ended December 31, 2023 compared to 23.7% in 2022.
In connection with the Repurchases, we recognized a net gain on debt extinguishment of $5 million.
During 2022, we repurchased $13 million and $23 million of the outstanding principal amount of the 4.125% Senior Notes and 4.750% Senior Notes, respectively. In connection with these repurchases, we recognized a net gain on debt extinguishment of $5 million.
Under the market approach, fair values were estimated using published market multiples for comparable companies and applying them to revenue and EBITDA.
Under the market approach, fair values were estimated using published market multiples for comparable companies and applying them to revenue and EBITDA. Under the income approach, a discounted cash flow methodology was used considering management estimates, general economic and market conditions, and the impact of planned business and operational strategies.
In total, we estimate that we will recognize approximately $105 million of restructuring costs related to the Chubb restructuring program by the end of fiscal year 2024.
We incurred pre-tax restructuring costs within the Safety Services segment of $37 million and $30 million in connection with the Chubb restructuring program in 2023 and 2022, respectively. In total, we estimate that we will recognize an aggregate of approximately $125 million of restructuring and other costs related to the Chubb restructuring program by the end of fiscal year 2025.
For additional information about our restructuring activity, see Note 5 – “Restructuring" to our consolidated financial statements included in this Annual Report. 32 Resegmentation We have combined the leadership responsibility and full accountability for our Industrial Services and Specialty Services operating segments.
For additional information about our restructuring activity, see Note 6 – “Restructuring" to our consolidated financial statements included in this Annual Report. Acquisitions During 2023, we completed seven acquisitions.
As a result, the 2019 Term Loan and the 2021 Term Loan have remaining principal amounts of $1,027 million and $985 million, respectively. Senior Notes We completed a private offering of $350 million aggregate principal amount of 4.125% Senior Notes due 2029, issued under an indenture, dated June 22, 2021.
Senior Notes On June 22, 2021, APi Group DE completed a private offering of $350 million aggregate principal amount of 4.125% Senior Notes due 2029 (the “4.125% Senior Notes”), issued under an indenture, dated June 22, 2021. The 4.125% Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by us and certain subsidiaries.
Investment income and other, net Investment income and other, net was $9 million and $12 million for the years ended December 31, 2022 and 2021, respectively. The decline in investment income and other, net was primarily due to $2 million in income in 2021 from COVID-19 relief programs at Canadian subsidiaries.
Investment income and other, net Investment income and other, net was $13 million and $9 million for the years ended December 31, 2023 and 2022, respectively.
The proceeds from this offering totaled approximately $446 million, net of related expenses. We used the net proceeds from this offering for general corporate purposes, which includes items such as other business opportunities, capital expenditures, and working capital. We expect to continue to be able to access the capital markets through equity and debt offerings for liquidity purposes as needed.
We expect to continue to be able to access the capital markets through equity and debt offerings for liquidity purposes as needed.
If two or more components are deemed economically similar, those components are aggregated into one reporting unit when performing the annual goodwill impairment test. 44 We perform our annual goodwill impairment assessment on October 1 each fiscal year, or more frequently if events or circumstances arise which indicate that goodwill may be impaired.
We perform our annual goodwill impairment assessment on October 1 each fiscal year, or more frequently if events or circumstances arise which indicate that goodwill may be impaired. Accounting standards for testing goodwill for impairment require the application of either a qualitative or quantitative assessment to analyze whether or not goodwill has been impaired.
Additionally, the COVID-19 pandemic has impacted the availability of skilled labor resources, particularly in our international businesses, interrupting our ability to perform our services and execute our jobs. In addition, fluctuations in foreign currencies may have an impact on our financial position and results of operations.
In addition, fluctuations in foreign currencies may have an impact on our financial position and results of operations.
The increase in net revenues was primarily attributable to revenues contributed by acquisitions completed within the Safety Services segment during the past twelve months. The increase in net revenues was also due to growth in inspection, service, and monitoring revenue, and our ability to pass through inflationary increases in costs through project pricing.
The increase in net revenues was attributable to the Safety Services and Specialty Services segments and was primarily driven by growth in inspection, service, and monitoring revenue.
Non-service pension benefit The non-service pension benefit was $42 million for the year ended December 31, 2022 solely due to the acquisition of pension plans as part of the Chubb Acquisition during the year ended December 31, 2022.
Non-service pension benefit The non-service pension benefit was $12 million and $42 million for the years ended December 31, 2023 and 2022, respectively. The change was due to higher interest costs as a result of higher discount rates in 2023 compared to 2022.
The increase was primarily attributable to increased activity in the specialty contracting, infrastructure, utility, and fabrication markets during the year ended December 31, 2022 compared to the same period in the prior year.
Specialty Services Specialty Services net revenues for the years ended December 31, 2023 and 2022 were $2,079 million and $2,030 million respectively. The increase was primarily due to strong growth in the service business during the year ended December 31, 2023 compared to the same period in the prior year.
These increases in revenues were partially offset by increased acquisition and integration related expenses, increased interest costs associated with newly issued term loan debt, and increased amortization expense of $100 million. Net income as a percentage of net revenues for the years ended December 31, 2022 and 2021 was 1.1% and 1.2%, respectively.
Net income as a percentage of net revenues for the years ended December 31, 2023 and 2022 was 2.2% and 1.1%, respectively.
Gross margin for the year ended December 31, 2022 was 26.1%, an increase of 230 basis points compared to the prior year, primarily due to acquisitions completed within the Safety Services segment during the past twelve months.
Gross margin for the year ended December 31, 2023 was 28.0%, an increase of 190 basis points compared to the prior year, primarily due to disciplined project and customer selection, pricing improvements in our Safety Services segment, and an improved mix of inspection, service, and monitoring revenue, which generates higher margins.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

15 edited+1 added−4 removed7 unchanged
Biggest changeThe 2021 Term Loan balance will bear interest at 7.38% per annum based on one-month LIBOR plus 275 basis points, but the rate will fluctuate as LIBOR fluctuates. As of December 31, 2022, excluding letters of credit outstanding of $54 million, we had no amounts of outstanding revolving loans under our Credit Agreement.
Biggest changeAs of December 31, 2023, excluding letters of credit outstanding of $5 million, we had no amounts of outstanding revolving loans under our Credit Agreement. A one percentage point increase in the average interest rate on our floating rate debt at December 31, 2023 would increase future interest expense by approximately $6 million per year.
Prolonged periods of low oil and gas prices may result in projects being delayed or cancelled and in a low oil and gas price environment, certain of our businesses could become less profitable or incur losses. 48
Prolonged periods of low oil and gas prices may result in projects being delayed or cancelled and in a low oil and gas price environment, certain of our businesses could become less profitable or incur losses. 48 Table of Contents
Additionally, some of our fixed price contracts do not allow us to adjust prices and, as a result, increases in material costs could reduce profitability with respect to projects in progress. Significant declines in market prices for oil and gas and other fuel sources may also impact our operations.
Additionally, some of our fixed price contracts do not allow us to adjust prices and, as a result, increases in material costs could reduce profitability with respect to projects in progress. 47 Table of Contents Significant declines in market prices for oil and gas and other fuel sources may also impact our operations.
See also “Revenue Recognition from Contracts with Customers” under Critical Accounting Policies within Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
See also “Revenue Recognition from Contracts with Customers” under Critical Accounting Estimates within Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
These foreign currency transaction gains and losses, including hedging impacts, are classified in investment income and other, net, in the consolidated statements of operations and were a (loss) gain of ($2) million, ($3) million and $12 million for the years ended December 31, 2022, 2021 and 2020, respectively.
These foreign currency transaction gains and losses, including hedging impacts, are classified in investment income and other, net, in the consolidated statements of operations and were a gain (loss) of $1 million, $(2) million and $(3) million for the years ended December 31, 2023, 2022 and 2021, respectively.
Such transactions were not material to our operations during the year ended December 31, 2022.
Such transactions were not material to our operations during the year ended December 31, 2023.
Our exposure to fluctuations in foreign currency exchange rates has increased as a result of the Chubb Acquisition and may continue to increase in the future if we continue to expand our operations outside of the U.S.
Our exposure to fluctuations in foreign currency exchange rates has increased as a result of our international presence and may continue to increase in the future if we continue to expand our operations outside of the U.S.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk As of December 31, 2022, our outstanding variable interest rate debt was primarily related to our 2019 Term Loan and our 2021 Term Loan. As of December 31, 2022, we had $1,127 million outstanding on the 2019 Term Loan, and $1,085 million outstanding on the 2021 Term Loan.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk As of December 31, 2023, our outstanding variable interest rate debt was primarily related to our 2019 Term Loan and our 2021 Term Loan. As of December 31, 2023, we had $330 million outstanding on the 2019 Term Loan, and $1,407 million outstanding on the 2021 Term Loan.
Foreign currency translation (losses) gains totaled approximately ($164) million, ($11) million and $9 million for the years ended December 31, 2022, 2021, and 2020, respectively.
Foreign currency translation gains (losses) totaled approximately $61 million, $(164) million and $(11) million for the years ended December 31, 2023, 2022, and 2021, respectively.
In order to manage foreign currency risk related to transactions in foreign currencies and the Chubb business intercompany financing structure, we entered into cross-currency swaps to manage the foreign currency risk of certain intercompany loans.
In order to manage foreign currency risk related to transactions in foreign currencies and the intercompany financing structure, we entered into cross-currency swaps to manage the foreign currency risk of certain intercompany loans. We also use foreign currency contracts as a way to mitigate foreign currency exposure.
Therefore, management believes it takes appropriate action to manage market and other risks, but there is no assurance management will be able to reasonably identify all risks with respect to the collectability of these assets.
We continually monitor the creditworthiness of our customers and maintain ongoing discussions with customers regarding contract status with respect to change orders and billing terms. Therefore, management believes it takes appropriate action to manage market and other risks, but there is no assurance management will be able to reasonably identify all risks with respect to the collectability of these assets.
This expense will be offset by the amortization through October 2024 of the remaining gain of $29 million recognized from the termination of the previously outstanding $720 million notional amount interest rate swap resulting in an effective rate on the $720 million of notional value of the 2019 Term Loan of 3.97%.
In addition, interest expense will be offset by the amortization through October 2024 of the remaining gain of $14 million recognized from the termination of the previously outstanding $720 million notional amount interest rate swap.
To mitigate increases in variable interest rates, we have a four-year interest rate swap with respect to $720 million of notional value of the 2019 Term Loan, exchanging one-month LIBOR for a rate of 3.64% per annum.
To mitigate increases in variable interest rates, we have a $720 million interest 46 Table of Contents rate swap, exchanging one-month SOFR for a rate of 3.59% per annum and a $400 million interest rate swap exchanging one-month SOFR for a rate of 3.41% per annum.
The discontinuation of the one-month LIBOR after 2023 and the replacement with the Secured Overnight Financing Rate may adversely impact interest rates and our interest expense could increase. Foreign Currency Risk Our operations are in over 20 countries globally. Revenues generated from foreign operations represented approximately 38% of our consolidated net revenues for the year ended December 31, 2022.
Foreign Currency Risk We have operations are in over 20 countries globally. Revenues generated from foreign operations represented approximately 37% of our consolidated net revenues for the year ended December 31, 2023.
We also occasionally use foreign currency contracts as a way to mitigate foreign currency exposure. 47 Other Market Risk We are also exposed to market risks impacting our customer base due to the potential related impact on accounts receivable or contract assets on uncompleted contracts.
Other Market Risk We are also exposed to market risks impacting our customer base due to the potential related impact on accounts receivable or contract assets on uncompleted contracts. The amounts recorded may be at risk if our customers’ ability to pay these obligations is negatively impacted by economic conditions.
Removed
The remaining floating $407 million of our 2019 Term Loan balance will bear interest at 7.13% per annum based on one-month LIBOR plus 250 basis points. Effective in January 2023, we will have 5-year interest rate swaps exchanging one-month LIBOR for a rate an average fixed rate of 3.46%.
Added
After the repricing transaction, the remaining floating rate portfolio will bear interest based on one-month SOFR plus CSA plus 225 basis points (for the 2019 Term Loan) or one-month SOFR plus CSA plus 250 basis points (for the 2021 Term Loan).
Removed
A 100-basis point increase in the applicable interest rates under our credit facilities (including the unhedged portion of our 2019 Term Loan debt) would have increased our interest expense by approximately $21 million for the year ended December 31, 2022.
Removed
While we cannot predict our ability to refinance existing debt or the impact interest rate movements will have on our existing debt, we continue to evaluate our financial position on an ongoing basis. The ICE Benchmark Administration intends to cease the publication of U.S. dollar LIBOR for all tenors (excluding one-week and two-month) on June 30, 2023.
Removed
The amounts recorded may be at risk if our customers’ ability to pay these obligations is negatively impacted by economic conditions. We continually monitor the creditworthiness of our customers and maintain ongoing discussions with customers regarding contract status with respect to change orders and billing terms.

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