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BrightView Acquisition Holdings, Inc.
<br />Notes to the Consolidated Financial Statements
<br />For the Years Ended December 31, 2016 and 2015
<br />(in thousands)
<br />13. Equity-Based Compensation
<br />The Company has a Management Equity Incentive Plan (“the Plan”) under which the Parent may award up to
<br />23,145 Class B Profits Interest Units (“B Units”) to employees of the Company. The units generally vest over a five
<br />year vesting period with 50% of vesting contingent on certain performance criteria of the Company. The Company
<br />expenses equity based compensation using the estimated fair value as of the grant date, over the requisite service or
<br />performance period applicable to the grant. Estimates of future forfeitures are made at the date of grant and revised,
<br />if necessary, in subsequent periods if actual forfeitures differ from those estimates.
<br />The following table summarizes the activity for the Plan for the year ended December 31:
<br />Units
<br />2016 2015
<br />Outstanding at January 1, 17,119 17,333
<br />There were 6,651 B Units available for future grants under the Plan at December 31, 2016. The fair value of each B
<br />Unit is determined using an option pricing model at the grant date. The Company recognized $2,772 and $3,854 in
<br />equity-based compensation expense for the years ended December 31, 2016 and 2015, respectively. The resulting
<br />charge increased additional paid in capital by the same amount. Total unrecognized compensation cost related to B
<br />Units was $20,460 and $13,853 as of December 31, 2016 and 2015, respectively, which is expected to be recognized
<br />over a weighted average period of 3.2 years.
<br />The Parent redeems vested B Units at their then fair market value primarily upon termination of management
<br />employees, at which time the employee also forfeits any unvested B Units. The Company made distributions for
<br />vested B units of $7,355 and $410 during 2016 and 2015, respectively.
<br />14. Commitments and Contingencies
<br />Risk Management
<br />The Company’s reserve for unpaid and incurred but not reported claims under these programs at December 31, 2016
<br />was $102,608, of which $38,270 is classified in current liabilities and $64,338 is classified in non-current liabilities
<br />in the accompanying Consolidated Balance Sheets. At December 31, 2016, the Company’s reserve includes $24,513
<br />related to claims recoverable from third party insurance carriers. Corresponding assets of $4,228 and $20,285 are
<br />included as other current assets and restricted investments and other assets, respectively, at December 31, 2016. The
<br />Company’s reserve for unpaid and incurred but not reported claims under these programs at December 31, 2015 was
<br />$77,296, of which $27,289 is classified in current liabilities and $50,007 is classified in non-current liabilities in the
<br />accompanying Consolidated Balance Sheets. While the ultimate amount of these claims is dependent on future
<br />developments, in management’s opinion, recorded reserves are adequate to cover these claims.
<br />Litigation Contingency
<br />From time to time, the Company is subject to legal proceedings and claims in the ordinary course of its business,
<br />principally claims made alleging injuries (including auto and general liability matters as well as workers
<br />compensation and property casualty claims). Such claims, even if lacking merit, can result in expenditure of
<br />significant financial and managerial resources. In the ordinary course of its business, the Company is also subject to
<br />claims involving current and/or former employees and disputes involving regulatory and commercial matters.
<br />Although the process of resolving claims through litigation and other means is inherently uncertain, the Company is
<br />not aware of any legal proceedings or claims that it believes will have, individually or in the aggregate, a material
<br />effect on the Company, its financial condition, results of operations or cash flows. For all legal matters, an
<br />estimated liability is established in accordance with the loss contingencies accounting guidance. This reserve is
<br />included in accrued expenses and other current liabilities in the accompanying Consolidated Balance Sheets.
<br />Granted 10,867 1,136
<br />Less: Redeemed units 3,563 208
<br />Less: Forfeited units 7,934 1,142
<br />Outstanding at December 31, 16,489 17,119
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<br />Confidential
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