INCOME TAXES

12 Months Ended

Oct. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Geographic Sources of Income from Continuing Operations Before Income Taxes

	Years Ended October 31,
(in millions)	2022		2021		2020
United States	$	278.5	$	152.8	$	45.2
Foreign	31.5		27.0		8.1
Income from continuing operations before income taxes	$	310.0	$	179.8	$	53.3

Components of Income Tax (Provision) Benefit

	Years Ended October 31,
(in millions)	2022		2021		2020
Current:
Federal	$	3.5	$	(66.3)	$	(59.3)
State	(6.0)		(27.4)		(28.6)
Foreign	(9.4)		(7.8)		(1.7)
Deferred:
Federal	(46.1)		34.9		23.2
State	(22.1)		13.2		12.5
Foreign	0.5		(0.1)		0.9
Income tax provision	$	(79.6)	$	(53.5)	$	(53.1)

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

	Years Ended October 31,
	2022		2021		2020
U.S. statutory rate	21.0	%	21.0	%	21.0	%
State and local income taxes, net of federal tax benefit	7.7		6.8		(0.6)
Federal and state tax credits	(1.5)		(2.6)		(4.7)
Impact of foreign operations	(0.1)		0.3		1.3
Changes in uncertain tax positions	(2.5)		1.5		(2.0)
Incremental tax benefit from share-based compensation awards	(0.5)		(0.4)		(1.6)
Energy efficiency incentives	(0.3)		(0.7)		(3.8)
Impact from goodwill impairment	—		—		81.7
Nondeductible expenses	1.7		2.9		4.4
Other, net	0.2		1.0		3.9
Effective tax rate	25.7	%	29.8	%	99.6	%

During 2022 and 2021, we had effective tax rates of 25.7% and 29.8%, respectively, resulting in a provision for tax of $79.6 million and $53.5 million, respectively. Our effective tax rate for 2022 was impacted by the following items: a $8.1 million benefit for uncertain tax positions with expiring statutes; a $1.4 million benefit for share-based compensation; and a $1.3 million provision for true-ups. Our effective tax rate for 2021 was also impacted by the following 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.

In response to the pandemic, Congress enacted the CARES Act in March 2020. The CARES Act provides various tax provisions, including payroll tax provisions. Through December 31, 2020, we deferred approximately $132 million of payroll tax. The deferred payroll tax has been remitted in full: $66 million was paid in December 2021 and the remaining $66 million was paid in December 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)	2022		2021
Deferred tax assets attributable to:
Self-insurance claims (net of recoverables)	$	96.1	$	92.0
Deferred and other compensation	33.0		34.4
Accounts receivable allowances	5.8		8.2
Settlement liabilities	10.4		44.2
Other accruals	4.8		6.6
Other comprehensive income	—		1.3
State taxes	1.2		0.7
State net operating loss carryforwards	3.2		4.0
Tax credits	3.1		2.9
Unrecognized tax benefits	3.3		3.3
Deferred payroll taxes	18.1		35.1
Operating lease liabilities	31.0		33.5
Gross deferred tax assets	210.0		266.2
Valuation allowance	(1.6)		(2.2)
Total deferred tax assets	208.4		264.0
Deferred tax liabilities attributable to:
Property, plant and equipment	(5.4)		(4.1)
Goodwill and other acquired intangibles	(222.9)		(222.2)
Right-of-use assets	(31.9)		(33.8)
Tax accounting method change	(17.1)		(15.8)
Other comprehensive Income	(9.0)		—
Other	(11.8)		(10.6)
Total deferred tax liabilities	(298.1)		(286.5)
Net deferred tax liabilities	$	(89.7)	$	(22.5)

Net Operating Loss Carryforwards and Credits

State net operating loss carryforwards totaling $55.6 million at October 31, 2022, 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 2023 and 2042. Federal net operating loss carryforwards were fully utilized during 2021. Federal and state tax credit carryforwards totaling $3.7 million are available to reduce future cash taxes and will expire between 2023 and 2042.

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)	2022		2021		2020
Valuation allowance at beginning of year	$	2.2	$	4.1	$	8.4
Other, net	(0.6)		(1.9)		(4.3)
Valuation allowance at end of year	$	1.6	$	2.2	$	4.1

Unrecognized Tax Benefits

At October 31, 2022, 2021, and 2020, there were $22.0 million, $30.4 million, and $35.5 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 $1.8 million is reasonably possible over the next 12 months due to lapses of applicable statutes of limitations. At October 31, 2022 and 2021, accrued interest and penalties were $0.7 million and $1.6 million, respectively. For interest and penalties, we recognized a $0.9 million benefit, a $0.1 million expense, and a $0.4 million benefit in 2022, 2021, and 2020, respectively.

Reconciliation of Total Unrecognized Tax Benefits

	Years Ended October 31,
(in millions)	2022		2021		2020
Balance at beginning of year	$	30.4	$	35.5	$	35.3
Additions for tax positions related to the current year	—		3.7		2.1
Additions for tax positions related to prior years	0.3		0.3		1.6
Reductions for tax positions related to prior years	(1.5)		(5.3)		—
Reductions for lapse of statute of limitations	(7.2)		(2.5)		(3.0)
Settlements	—		(1.3)		(0.5)
Balance at end of year	$	22.0	$	30.4	$	35.5

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 2019 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 2019 are no longer subject to examination. We are currently being examined by the tax authorities of California, New York City, Montana, and Massachusetts.