Income Taxes

12 Months Ended

Oct. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Geographic Sources of Income from Continuing Operations Before Income Taxes

	Years Ended October 31,
(in millions)	2021		2020		2019
United States	$	152.8	$	45.2	$	137.1
Foreign	27.0		8.1		23.1
Income from continuing operations before income taxes	$	179.8	$	53.3	$	160.2

Components of Income Tax (Provision) Benefit

	Years Ended October 31,
(in millions)	2021		2020		2019
Current:
Federal	$	(66.3)	$	(59.3)	$	(6.4)
State	(27.4)		(28.6)		(10.7)
Foreign	(7.8)		(1.7)		(5.9)
Deferred:
Federal	34.9		23.2		(8.5)
State	13.2		12.5		(1.6)
Foreign	(0.1)		0.9		0.4
Income tax provision	$	(53.5)	$	(53.1)	$	(32.7)

Reconciliation of the U.S. Statutory Tax Rate to Annual Effective Tax Rate

	Years Ended October 31,
	2021		2020		2019
U.S. statutory rate	21.0	%	21.0	%	21.0	%
State and local income taxes, net of federal tax benefit	6.8		(0.6)		5.9
Federal and state tax credits	(2.6)		(4.7)		(3.9)
Impact of foreign operations	0.3		1.3		(1.0)
Changes in uncertain tax positions	1.5		(2.0)		(0.8)
Incremental tax benefit from share-based compensation awards	(0.4)		(1.6)		(0.7)
Energy efficiency incentives	(0.7)		(3.8)		—
Impact from goodwill impairment	—		81.7		—
Transition tax on foreign earnings	—		—		(1.1)
Remeasurement of U.S. deferred taxes	—		—		(0.3)
Nondeductible expenses	2.9		4.4		2.1
Other, net	1.0		3.9		(0.8)
Effective tax rate	29.8	%	99.6	%	20.4	%

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“Tax Act”) was enacted into law. Among other provisions, it reduced the federal corporate income tax rate from 35% to 21% and required companies to pay a one-time transition tax on the deemed repatriation of indefinitely reinvested earnings of international subsidiaries. Our U.S. statutory federal tax rate for fiscal 2019 and future years was reduced to 21%. Other provisions under the Tax Act became effective for us in fiscal 2019, including limitations on deductibility of interest and executive compensation, as well as a new minimum tax on Global Intangible Low-Taxed Income (“GILTI”), which we have elected to account for as a period cost. While U.S. federal tax expense has been recognized as a result of the Tax Act, no deferred tax liabilities with respect to federal and state income taxes or foreign withholding taxes have been recognized.

During 2021 and 2020, we had effective tax rates of 29.8% and 99.6%, respectively, resulting in a provision for tax of $53.5 million and $53.1 million, respectively. Our effective tax rate for 2021 was impacted by the following discrete items: a $3.0 million provision for nondeductible transaction costs; a $2.6 million provision for change in tax reserves; a $1.4 million provision for true-ups; and a $1.2 million benefit for energy efficiency incentives. Our effective tax rate for 2020 was also impacted by the following discrete items: a $5.7 million benefit from true-ups; a $2.3 million provision related to WOTC; a $2.1 million benefit from energy efficiency incentives; and a $1.1 million benefit from change of tax reserves. The effective tax rate for the year ended October 31, 2020, excluding a nondeductible impairment loss of $163.8 million, was 24.4%.

In response to the Pandemic, Congress enacted the CARES Act on March 27, 2020. The CARES Act provides various tax provisions, including payroll tax provisions, which we have evaluated for applicability. Through December 31, 2020, we deferred approximately $132 million of payroll tax, which the CARES Act requires to be remitted in equal parts by December 31, 2021, and December 31, 2022. The CARES Act did not have a material impact on our income tax provision.

Components of Deferred Tax Assets and Liabilities

	As of October 31,
(in millions)	2021		2020
Deferred tax assets attributable to:
Self-insurance claims (net of recoverables)	$	92.0	$	74.7
Deferred and other compensation	34.4		28.6
Accounts receivable allowances	8.2		8.8
Settlement liabilities	44.2		5.0
Other accruals	6.6		1.5
Other comprehensive income	1.3		2.7
State taxes	0.7		1.4
State net operating loss carryforwards	4.0		5.9
Tax credits	2.9		3.7
Unrecognized tax benefits	3.3		3.2
Deferred payroll taxes	35.1		26.9
Operating lease liabilities	33.5		38.2
Gross deferred tax assets	266.2		200.6
Valuation allowance	(2.2)		(4.1)
Total deferred tax assets	264.0		196.5
Deferred tax liabilities attributable to:
Property, plant and equipment	(4.1)		(1.2)
Goodwill and other acquired intangibles	(222.2)		(159.4)
Right-of-use assets	(33.8)		(38.2)
Tax accounting method change	(15.8)		—
Other	(10.6)		(8.5)
Total deferred tax liabilities	(286.5)		(207.3)
Net deferred tax liabilities	$	(22.5)	$	(10.8)

Net Operating Loss Carryforwards and Credits

State net operating loss carryforwards totaling $74.2 million at October 31, 2021, are being carried forward in several state jurisdictions where we are permitted to use net operating losses from prior periods to reduce future taxable income. These losses will expire between 2022 and 2041. Federal net operating loss carryforwards were fully utilized during 2020. Federal and state tax credit carryforwards totaling $3.4 million are available to reduce future cash taxes and will expire between 2022 and 2041.

The valuation allowance represents the amount of tax benefits related to state net operating loss carryforwards that are not likely to be realized. We believe the remaining deferred tax assets are more likely than not to be realizable based on estimates of future taxable income.

Changes to the Valuation Allowance

	Years Ended October 31,
(in millions)	2021		2020		2019
Valuation allowance at beginning of year	$	4.1	$	8.4	$	12.0
Other, net	(1.9)		(4.3)		(3.6)
Valuation allowance at end of year	$	2.2	$	4.1	$	8.4

Unrecognized Tax Benefits

At October 31, 2021, 2020, and 2019, there were $30.4 million, $35.5 million, and $35.3 million, respectively, of unrecognized tax benefits that if recognized in the future would impact our effective tax rate. We estimate that a decrease in unrecognized tax benefits of up to approximately $8.3 million is reasonably possible over the next 12 months due to lapses of applicable statutes of limitations. At October 31, 2021 and 2020, accrued interest and penalties were $1.6 million and $1.5 million, respectively. For interest and penalties, we recognized an expense of $0.1 million and $0.4 million in 2021 and 2020, respectively, and a benefit of $0.2 million in 2019.

Reconciliation of Total Unrecognized Tax Benefits

	Years Ended October 31,
(in millions)	2021		2020		2019
Balance at beginning of year	$	35.5	$	35.3	$	35.8
Additions for tax positions related to the current year	3.7		2.1		—
Additions for tax positions related to prior years	0.3		1.6		3.6
Reductions for tax positions related to prior years	(5.3)		—		—
Reductions for lapse of statute of limitations	(2.5)		(3.0)		(3.9)
Settlements	(1.3)		(0.5)		(0.3)
Balance at end of year	$	30.4	$	35.5	$	35.3

Jurisdictions

We conduct business in all 50 states, significantly in California, Texas, and New York, as well as in various foreign jurisdictions. Our most significant income tax jurisdiction is the United States. Due to expired statutes and closed audits, our federal income tax returns for years prior to fiscal 2018 are no longer subject to examination by the U.S. Internal Revenue Service. Generally, for the majority of state and foreign jurisdictions where we do business, periods prior to fiscal 2018 are no longer subject to examination. We are currently being examined by the IRS and tax authorities of California, New York City, and Montana.