HomeMy WebLinkAboutBrightView EXEMPT Consolidated Financial Statements lBrightView Acquisition Holdings, Inc.
2016 Consolidated Financial Statements
Confidential
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BrightView Acquisition Holdings, Inc.
Index
Independent Auditors’ Report
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Changes in Shareholder’s Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements 7 – 26
Confidential
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of BrightView Acquisition Holdings, Inc.:
We have audited the accompanying consolidated financial statements of BrightView Acquisition Holdings, Inc. and
its subsidiaries (the "Company"), which comprise the consolidated balance sheets as of December 31, 2016 and 2015,
and the related consolidated statements of operations, comprehensive loss, changes in shareholder’s equity, and cash
flows for the years then ended, and the related notes to the consolidated financial statements.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the consolidated fina ncial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair
presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects the
financial position of BrightView Acquisition Holdings, Inc. and its subsidiaries as of December 31, 2016 and 2015,
and the results of their operations and their cash flows for the years then ended in accordance with accounting
principles generally accepted in the United States of America.
March 24, 2017
Deloitte & Touche LLP
7900 Tysons One Place
Suite 800
McLean, VA 22102-5974
USA
Tel: +1 703 251 1000
Fax: +1 703 251 3400
www.deloitte.com
Confidential
2016 2015
Assets
Current assets:
Cash and cash equivalents 67,963$71,997$
Restricted cash 214 258
Accounts receivable, net 298,564 280,846
Unbilled revenue 40,250 30,359
Inventories 31,976 33,009
Prepaid income taxes 23,169 15,721
Other current assets 27,184 30,941
Total current assets 489,320 463,131
Property and equipment, net 247,506 250,222
Intangible assets, net 451,523 583,085
Goodwill 1,667,114 1,667,114
Restricted investments and other assets 35,175 11,010
Total assets 2,890,638$2,974,562$
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable 85,240$68,967$
Long-term debt - current portion 17,545 15,350
Deferred revenue 52,429 60,536
Self-insurance reserves - current portion 38,270 27,289
Accrued expenses and other current liabilities 115,246 117,713
Total current liabilities 308,730 289,855
Long-term debt, net 1,595,855 1,600,815
Deferred tax liabilities 158,465 201,227
Long-term portion of self- insurance reserves 64,338 50,007
Other liabilities 58,044 49,804
Total liabilities 2,185,432 2,191,708
Shareholders' equity:
Class A voting common stock, $.01 par value; 185,000 shares authorized;
180,192 and 183,123 shares, respectively, issued and outstanding 1,802 1,831
Paid-in capital 890,323 915,911
Accumulated deficit (164,060) (111,696)
Accumulated other comprehensive loss (22,859) (23,192)
Total shareholders' equity 705,206 782,854
Total liabilities and shareholders' equity 2,890,638$2,974,562$
BrightView Acquisition Holdings, Inc.
Consolidated Balance Sheets
(in thousands)
December 31,
The accompanying notes are an integral part of the consolidated financial statements.
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2016 2015
Net service revenues 2,185,302$ 2,214,839$
Cost of services provided 1,578,141 1,604,569
Gross profit 607,161 610,270
Selling, general and administrative expense 468,042 452,834
Amortization expense 131,562 139,325
Income from operations 7,557 18,111
Other income 2,236 3,763
Interest expense 94,660 89,591
Loss before income taxes (84,867) (67,717)
Income tax benefit 32,503 27,125
Net loss (52,364)$ (40,592)$
For the Years Ended
December 31,
BrightView Acquisition Holdings, Inc.
Consolidated Statements of Operations
(in thousands)
The accompanying notes are an integral part of the consolidated financial statements.
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2016 2015
Net loss (52,364)$ (40,592)$
Net derivative losses arising during the period,
net of tax benefit of: $2,972 and $7,290, respectively (4,692) (10,441)
Less: Reclassification of derivative losses into net loss,
net of tax benefit of $3,379 and $1,498 respectively 5,025 2,230
Other comprehensive income (loss)333 (8,211)
Comprehensive loss (52,031)$ (48,803)$
BrightView Acquisition Holdings, Inc.
Consolidated Statements of Comprehensive Loss
(in thousands)
For the Years Ended
December 31,
The accompanying notes are an integral part of the consolidated financial statements.
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Accumulated
Other Total
Paid-In Accumulated Comprehensive Shareholders'
Shares Amount Capital Deficit Loss Equity
Balance, January 1, 2015 183,595 1,836$ 915,725$ (71,104)$ (14,981)$ 831,476$
Net loss (40,592) (40,592)
Other comprehensive loss (8,211) (8,211)
Capital contributions and issuance of common stock 34 -
Equity-based compensation 3,854 3,854
Repurchase of common stock and distributions (506) (5) (3,668) (3,673)
Balance, December 31, 2015 183,123 1,831$ 915,911$ (111,696)$ (23,192)$ 782,854$
Net loss (52,364) (52,364)
Other comprehensive income 333 333
Capital contributions and issuance of common stock 266 3 1,913 1,916
Equity-based compensation 2,772 2,772
Repurchase of common stock and distributions (3,197) (32) (30,273) (30,305)
Balance, December 31, 2016 180,192 1,802$ 890,323$ (164,060)$ (22,859)$ 705,206$
BrightView Acquisition Holdings, Inc.
Consolidated Statement of Changes in Shareholders' Equity
(in thousands)
Common Stock
The accompanying notes are an integral part of the consolidated financial statements.
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2016 2015
Cash flows from operating activities:
Net loss (52,364)$ (40,592)$
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 79,255 74,162
Amortization of intangible assets 131,562 139,325
Amortization of deferred charges 9,000 8,698
Amortization of original issue discount 640 615
Deferred taxes (42,762) (55,190)
Equity-based compensation 2,772 3,854
Hedge ineffectiveness and realized (gain) loss 333 (2,336)
Provision for doubtful accounts 6,005 5,353
Gain on disposal of assets (226) (806)
Change in operating assets and liabilities (22,268) (9,664)
Net cash provided by operating activities 111,947 123,419
Cash flows from investing activities:
Purchase of property and equipment (75,609) (71,270)
Decrease in restricted cash 44 61
Issuance of notes receivable (696) (334)
Collection of notes receivable 429 548
Contributions to long term investments 2,021 -
Withdrawals of long term investments (1,688) -
Proceeds from sale of property and equipment 5,964 5,551
Net cash used in investing activities (69,535) (65,444)
Cash flows from financing activities:
Repayments of capital lease obligation (3,533) (5,273)
Repayments of term loans (14,600) (15,900)
Repurchase of common stock and distributions (30,229) (3,673)
Proceeds from issuance of comon stock 1,916 -
Net cash used in financing activities (46,446) (24,846)
Net change in cash and cash equivalents (4,034) 33,129
Cash and cash equivalents, beginning of period 71,997 38,868
Cash and cash equivalents, end of period 67,963$ 71,997$
For the Years Ended
December 31,
BrightView Acquisition Holdings, Inc.
Consolidated Statement of Cash Flows
(in thousands)
The accompanying notes are an integral part of the consolidated financial statements.
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BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
1.Business
BrightView Acquisition Holdings, Inc. (“BrightView” or the “Company”) provides landscape maintenance and
enhancements, landscape development, snow removal and other landscape related services for commercial
customers throughout the United States. Landscape maintenance services are generally provided under cancelable
contracts ranging from 1 to 5 years to a diverse set of customers with one or more sites, including regional and
national commercial, retail, and industrial property owners, corporations, residential communities, schools and
universities, hotels, hospitals, golf courses and governmental agencies. Landscape enhancements are generally
provided as additional services to contract customers as annual improvements, small redesign work or other one-
time events that are outside the scope of the base maintenance contract. Landscape maintenance and enhancement
services generally include grass mowing, planting and care of flower beds, tree and shrub pruning, bed edging,
controlling weeds and pests, fertilizing, and planting of grass, shrubs and trees. In addition to landscape maintenance
and enhancements, BrightView provides large scale landscape development services to clients, including
architecture, design, and installation. In many markets, BrightView also provides snow removal and ice melting
services to landscape customers as well as some snow-only customers. BrightView provides other landscape and
ancillary services in specialty areas, including golf course maintenance, tree care, nursery and a landscape franchise
business. The Company was previously named Brickman Acquisition Holdings, Inc. The BrightView brand name
and logo were announced in 2014 and the applicable updates to legal entity and tax filing names were completed as
of April 12, 2016. The process to change all other brand related aspects of the business began during 2015 and will
continue throughout 2017 as the Company rebrands its vehicle fleet, office locations, company websites, team
member uniforms, and various documents and forms.
The Company is a wholly-owned subsidiary of BrightView Parent L.P. (“Parent”), an affiliate of Kohlberg Kravis
Roberts & Co. L.P. (“KKR”). The Parent and Company were formed through a series of transactions to acquire the
Company on December 18, 2013 (“Acquisition”).
2.Summary of Significant Accounting Policies
Basis of Presentation
These consolidated financial statements have been prepared by the Company in accordance with accounting
principles generally accepted in the United States of America (“GAAP”) and include the accounts of the
Company and its wholly-owned subsidiaries which are directly or indirectly owned by the Company. All inter-
company transactions and account balances have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
period. On an ongoing basis, management reviews its estimates, including those related to allowances for doubtful
accounts, revenue recognition, self-insurance reserves, estimates related to the Company’s assessment of goodwill
for impairment, useful lives for depreciation and amortization, realizability of deferred tax assets, and litigation
based on currently available information. Changes in facts and circumstances may result in revised estimates and
actual results may differ from estimates.
Cash and Cash Equivalents
Cash and cash equivalents include deposits in banks and money market funds with maturities of less than three
months at the time of deposit or investment.
Accounts Receivable
Trade accounts receivables are recorded at the invoiced amount and do not bear interest. The Company reserves for
all accounts that are deemed to be uncollectible and reviews its allowance for doubtful accounts regularly. The
allowance is based on the age of receivables and a specific identification of receivables considered at risk (See Note
4).
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BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
Retainage receivables represent amounts that are billed or billable to our customers, but are retained by the customer
until completion of the project or as otherwise specified in the contract. Retainge percentages typically range from
5-10% of the total contract value.
Inventories
Inventories consist primarily of trees, landscape and irrigation materials and snow removal products and are valued
at the lower of cost (first in, first out) or market. When market values are below the Company’s costs, the Company
records an expense to increase cost of services provided. No significant expenses were recorded to write down
inventory for the years ended December 31, 2016 and 2015, respectively.
Property and Equipment
Property and equipment is recorded at cost, including the cost of internal labor for software for internal use, less
accumulated depreciation, except for those assets acquired through a business combination, in which case they have
been stated at estimated fair value as of the date of the business combination. Costs of major additions and
improvements are capitalized. Costs of replacements, or maintenance and repairs that do not improve or extend the
life of the related assets are expensed as incurred.Depreciation is computed using the straight line method over the
estimated useful lives of the assets (2 to 40 years).
Leases
The Company leases office space, branch locations, vehicles, and operating equipment. Lease agreements are
evaluated to determine whether they are capital or operating leases. When substantially all of the risks and benefits
of property ownership have been transferred to the Company, the lease then qualifies as a capital lease.
Capital leases are capitalized at the lower of net present value of the total amount of rent payable under the leasing
agreement (excluding finance charges) or the fair market value of the leased asset. Capital lease assets are
depreciated on a straight-line basis, over a period consistent with the Company's normal depreciation policy for
property and equipment, but not exceeding the lease term. Interest charges are expensed over the period of the lease
in relation to the carrying value of the capital lease obligation.
Deferred Charges
Deferred charges, consisting of fees and other expenses associated with borrowings are amortized over the terms of
the related borrowings using the effective interest rate method (See Note 7). Deferred charges are presented in the
balance sheet as a direct reduction from the carrying amount of the related borrowings. Amortization of deferred
charges in the amounts of $9,000 and $8,698 for the years ended December 31, 2016 and 2015, respectively, have
been included in interest expense in the accompanying Consolidated Statements of Operations.
Goodwill and Other Intangible Assets
Goodwill represents the excess of cost over fair value of net assets of businesses acquired. Goodwill is not
amortized, but instead is tested for impairment at least annually. The Goodwill impairment standard provides
entities with the option to perform a qualitative assessment to determine whether the two-step impairment testing is
necessary. The two-step impairment test is required only if the Company concludes that it is more likely than not
that a reporting unit’s fair value is less than its carrying amount. Otherwise, no further impairment testing is
required. The two steps are as follows: First, the Company determines the fair value of the reporting units and
compares it to its carrying amount. Second, if the carrying amount of a reporting unit exceeds its fair value, the
goodwill of that reporting unit is potentially impaired, and the Company would then be required to measure and
record an impairment loss equal to the excess of the carrying amount of the reporting unit's goodwill over its implied
fair value. The Company estimates fair value using the best information available, including market information and
discounted cash flow projections. If the test indicates that goodwill has become impaired, the Company would
record a charge to earnings in the accompanying Consolidated Statement of Operations during the period in which
the impairment is determined. The Company performs its annual impairment test as of November 30th each year.
In 2016 and 2015, the Company completed its annual assessment of goodwill at the reporting unit level, and
determined that there has been no impairment of goodwill.
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Level 1 Quoted prices in active markets for identical assets or liabilities that are accessible at the
measurement dates.
Level 2 Significant observable inputs that are used by market participants in pricing the asset or
liability based on market data obtained from independent sources.
Level 3 Significant unobservable inputs we believe market participants would use in pricing the asset
or liability based on the best information available.
BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
Definite-lived intangible assets consist of acquired customer contracts and relationships, trademarks and internally
developed software. These assets are amortized over their estimated useful lives, generally for periods ranging from
3 to 21 years. The company continually evaluates the reasonableness of the useful lives of these assets.
Long-lived Assets
Property and equipment and definite-lived intangible assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted
future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset
exceeds the fair value.
The Company did not identify any indicators of impairment of its long-lived assets during 2016 or 2015.
Restricted Investments and Other Assets
At December 31, 2016 and 2015, the Company had restricted investments and other assets of $35,175 and $11,010,
respectively. These amounts consist of receivables related to the Company’s self-insurance programs, Rabbi
Trust investments (See Note 11), and capitalized contract acquisition costs that will be amortized over the life
of the contract as a reduction in revenue.
Self-Insurance Reserves
The Company carries general liability, vehicle liability, workers’ compensation, professional liability, directors’ and
officers’ liability, and employee health care insurance policies. In addition, the Company carries umbrella liability
insurance policies to cover claims over the liability limits contained in the primary policies. The Company’s
insurance programs for workers’ compensation, general liability, vehicle liability and employee health care for
certain employees contain self-insured retention amounts. Claims that are not self-insured as well as claims in
excess of the self-insured retention amounts are insured. The Company uses estimates in the determination of the
required reserves. These estimates are based upon calculations performed by third-party actuaries, as well as
examination of historical trends, and industry claims experience.
Other Long-term Liabilities
At December 31, 2016 and 2015, the Company had other liabilities of $58,044 and $49,804, respectively. These
amounts primarily relate to the non-current liability associated with interest rate and fuel hedge arrangements (See
Note 8), capital lease obligations (See Note 10) and deferred compensation related to the Rabbi Trust (See Note 11).
Fair value of Financial Instruments
In evaluating the fair value of financial assets and liabilities, GAAP outlines a valuation framework and creates a
fair value hierarchy that distinguishes between market assumptions based on market data (“observable inputs”) and a
reporting entity’s own assumptions about market data (“unobservable inputs”). Fair value is defined as the price at
which an orderly transaction to sell an asset or transfer a liability would take place between market participants at
the measurement date under current market conditions (that is, an exit price at the measurement date from the
perspective of a market participant that holds the asset or owes the liability).
Fair Value Hierarchy
The following hierarchy for inputs used in measuring fair value should maximize the use of observable inputs and
minimize the use of unobservable inputs by requiring that the most observable inputs be used when available:
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The Company recognizes landscape development contracts using the percentage-of-completion method,
measured by the percentage of cost incurred to date to the estimated total cost for each contract. The full
amount of anticipated losses on contracts is recorded as soon as such losses can be estimated. Changes in job
performance, job conditions, and estimated profitability, including final contract settlements, may result in
revisions to costs and revenue and are recognized in the period in which the revisions are determined.
Snow removal:
Snow removal services are generally provided under time and material or other activity-based contracts. In
certain markets, some snow removal services are provided on a fixed fee basis for the snow season, typically
November through March. Revenue for snow removal services is recognized in the period in which the services
are performed, or expected to be performed in the case of fixed fee arrangements.
Unbilled revenue and deferred revenue, classified respectively as current assets and current liabilities in the
Consolidated Balance Sheets, result from differences between the timing of billings and the recognition of service
revenues.
The Company regularly evaluates the collectability of its accounts receivable and accordingly maintains allowances
for doubtful accounts for estimated losses.
BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
The carrying amounts shown for the Company’s cash and cash equivalents, restricted cash, accounts receivable and
accounts payable approximate fair value due to the short-term maturity of those instruments (See Notes 7 and 8).
The valuation is based on settlements of similar financial instruments all of which are short-term in nature and are
generally settled at or near cost.
Derivative Instruments and Hedging Activities
The Company’s objective in entering into derivative transactions is to manage its exposure to interest rate
movements associated with its variable rate debt and changes in fuel prices. The Company recognizes derivatives as
either assets or liabilities on the balance sheet and measures those instruments at fair value. Since all of the
Company’s derivatives are designated as cash flow hedges, the effective portion of the changes in the fair value of
the derivative is initially reported in other comprehensive loss and subsequently reclassified to interest expense
(interest rate contracts) and cost of services provided (fuel hedge contracts) in the accompanying Consolidated
Statements of Operations when the hedge transaction affects earnings. The ineffective portion of changes in the fair
value of the derivative is recognized directly to interest expense and cost of services provided immediately. The
fair value of the hedges is obtained through independent third-party valuation sources that use conventional
valuation techniques (See Note 8).
Net Service Revenues
The Company principally performs landscape maintenance and enhancements, landscape development, and snow
removal services. Revenue is recognized based upon the service provided and the contract terms and is reported net
of discounts and applicable sales taxes.
Landscape maintenance:
Landscape maintenance services are provided under annual contracts. Revenue is recognized in proportion to
the performance of related services during a given month compared to the estimate of activities to be performed.
Landscape enhancements:
Landscape enhancement services are generally provided under contracts of short duration. Revenue for these
services is generally recognized in the period in which the services are provided.
Landscape development:
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BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
Cost of Services Provided
Cost of services provided represents the cost of labor, subcontractors, materials, vehicle and equipment costs
(including depreciation, fuel and maintenance) and other costs directly associated with revenue generating activities.
These costs are expensed as incurred.
Equity-based Compensation
The Company’s equity based compensation consists of awards of “Profits Interest Units” by the Parent to employees
of the Company (See Note 13). The Company expenses equity based compensation using the estimated fair value as
of the grant date, over the requisite service or performance period applicable to the grant. Estimates of future
forfeitures are made at the date of grant and revised, if necessary in subsequent periods if actual forfeitures differ
from those estimates.
Income Taxes
Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of
assets and liabilities, and are measured by applying enacted tax rates and laws for the taxable years in which those
differences are expected to reverse. Deferred tax assets are evaluated for the estimated future tax effects of
deductible temporary differences and tax operating loss carryovers. A valuation allowance is recorded when it is
more-likely-than-not that a deferred tax asset will not be realized.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
The tax benefits recognized in the financial statements from such a position should be measured based on the largest
benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
Reclassifications
Certain amounts in the prior year consolidated financial statements have been reclassified in order to conform to the
current year’s presentation.
Subsequent to the issuance of the Company’s 2015 consolidated financial statements, management determined
certain operating costs were not properly classified in the accompanying Consolidated Statement of Operations for
the year ended December 31, 2015. These costs were comprised of certain personnel costs and bad debt
expenses. The Company changed the 2015 presentation of these costs by reclassifying $22,731 in net costs from
cost of services provided to selling, general and administrative expense in the accompanying Consolidated
Statement of Operations for the year ended December 31, 2015.
The reclassification of these costs had no effect on the Company’s previously reported 2015 income from operations
or net loss for the year ended December 31, 2015, or the accompanying Consolidated Balance Sheet, Consolidated
Statement of Changes in Shareholders’ Equity, or Consolidated Statement of Cash Flows as of and for the year
ended December 31, 2015
3. Recent Accounting Pronouncements
Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which was further
updated in March and April 2016. The updated accounting guidance clarifies the principles for recognizing revenue
and provides a single, contract-based revenue recognition model in order to create greater comparability for
financial statement users across industries and jurisdictions. The core principle of the revenue model is that an entity
recognizes revenue to depict the transfer of promised goods or services to clients in an amount that reflect the
consideration to which the entity expects to be entitled in exchange for those goods or services. The updated
accounting guidance is effective for the Company as of January 1, 2019 and may be adopted using either a full
retrospective or modified retrospective approach. The Company is currently evaluating the impact that this guidance
will have on its consolidated financial statements and related disclosures.
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BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
Going Concern
In August 2014, the FASB issued ASU No. 2014-15, Disclosures of Uncertainties About an Entity’s Ability to
Continue as a Going Concern. This guidance requires management to evaluate and disclose whether there are
conditions and events that raise substantial doubt about an entity’s ability to continue as a going concern within one
year after the financial statements are issued, along with an evaluation as to whether management’s plans alleviate
that doubt. The Company adopted the guidance effective December 31, 2016. No disclosure was determined
necessary as of December 31, 2016 as a result of management’s evaluation.
Debt Issuance Costs
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which
changes the presentation of debt issuance costs in financial statements. Under the new ASU, debt issuance costs
related to a note shall be reported in the balance sheet as a direct deduction from the face amount of that note. The
amortization of debt issuance costs is reported as interest expense. ASU No. 2015-03 is effective for fiscal years
beginning after December 15, 2015, and interim periods beginning after December 15, 2016 and would be applied
retrospectively to all prior periods. Early adoption is allowed for all entities for financial statements that have not
been previously issued. In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent
Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. ASU 2015-15 updates the
accounting guidance included in ASU 2015-03 as a result of the September 18, 2015, Emerging Issues Task Force
meeting, in which the Task Force indicated that its staff would not object to an entity deferring and presenting costs
related to revolving debt arrangements as an asset. The Company has adopted this update as of December 31, 2016
(See Note 2). This update was applied on a retrospective basis and has been reclassified and presented in the
accompanying Consolidated Balance Sheet as a direct deduction from the carrying amount of the related long-term
debt, net of discount. The amount reclassified was $50,390 as of December 31, 2015.
Leases
In February 2016, the FASB issued ASU No. 2016-02, Leases. The updated accounting guidance requires lessees to
recognize all leases on their balance sheet as a right-of-use asset and a lease liability with the exception of short-term
leases. For income statement purposes, the criteria for recognition, measurement and presentation of expense is
largely similar to previous guidance, but without the requirement to use bright-line tests in the determination of lease
classification. The updated accounting guidance for a lessor is largely unchanged from previous guidance but has
been updated to align with certain changes to the lessee model and the new revenue recognition standard. The
updated accounting guidance is effective for the Company as of January 1, 2020 and early adoption is permitted.
The updated accounting guidance must be adopted using a modified retrospective approach for leases that exist or
are entered into after the beginning of the earliest comparative period in the financial statements. The Company is
currently evaluating the impact the updated accounting guidance will have on its consolidated financial statements.
Share-Based Compensation
In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation, Improvements to
Employee Share-Based Payment Accounting. The updated accounting guidance was issued as part of the FASB
Simplification Initiative and affects several aspects of accounting for share-based compensation, including income
tax consequences and classification on the statement of cash flows. The updated accounting guidance is effective
for the Company as of January 1, 2018 and early adoption is permitted. The Company is currently evaluating the
impact this guidance will have on its consolidated financial statements.
Intra-Entity Transfers of Assets Other Than Inventory
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets
Other Than Inventory. This guidance requires that an entity recognizes the income tax consequences of an intra-
entity transfer of an asset other than inventory when the transfer occurs. The guidance is effective for the Company
as of December 31, 2019 and early adoption is permitted. The Company is currently evaluating the impact this
guidance will have on its consolidated financial statements.
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BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
4. Accounts Receivable
Accounts receivable of $298,564 and $280,846, is net of allowance for doubtful accounts of $9,740 and $8,347 and
includes amounts of retention on incomplete projects to be completed within one year of $35,546 and $32,146 at
December 31, 2016 and 2015, respectively.
5. Property and Equipment, net
Property and equipment, net consists of the following:
December 31, December 31,
Useful Life 2016 2015
Land -$37,225 $ 37,225
Buildings and leasehold improvements 2-40 yrs.20,231 20,242
Operating equipment 3-7 yrs.164,129 110,448
Transportation vehicles 3-7 yrs.158,929 160,935
Office equipment and software 3-7 yrs.49,675
-1,004
431,193 368,859
183,687
$ 247,506 $ 250,222
587,904 $ - $ 587,904
Trademark 4-12 yrs. 230,900 -230,900
Internally developed software 3 yrs.3,100 -3,100
Total gross intangible assets 821,904 - 821,904
Less: Accumulated amortization (238,819) (131,562) (370,381)
Intangible assets, net $ 583,085 $ (131,562) $ 451,523
Goodwill $ 1,667,114 $ - $ 1,667,114
Amortization expense related to intangible assets was $131,562 and $139,325 for the years ended December 31,
2016 and 2015, respectively.
The following is a summary of the activity during 2015 for intangible assets and goodwill:
Construction in progress includes costs incurred for software and other assets that have not yet been placed in
service. Depreciation expense related to property and equipment was $79,255 and $74,162 for the years ended
December 31, 2016 and 2015, respectively.
Accumulated depreciation related to property and equipment under capital leases was $15,856 and $11,748 at
December 31, 2016 and 2015, respectively.
6. Intangible Assets and Goodwill
The following is a summary of the activity during 2016 for intangible assets and goodwill:
Useful life
January 1,
2016
Activity
during the
year
December 31,
2016
Identifiable intangible sssets
Customer contracts and relationships 9-21 yrs. $
118,637
Property and equipment, net
37,389
Construction in progress 2,620
Property and equipment
Less: Accumulated depreciation
13
Confidential
BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
Useful life
January 1,
2015
Activity
during the
year
December 31,
2015
Identifiable intangible assets
Customer contracts and relationships 9-21 yrs. $ 587,904 $ - $ 587,904
Trademark 4-12 yrs. 230,900 -230,900
Internally developed software 3 yrs.3,100 -3,100
Total gross intangible assets 821,904 - 821,904
Less: Accumulated amortization (99,494) (139,325) (238,819)
Intangible assets, net $ 722,410 $ (139,325) $ 583,085
Goodwill $ 1,667,114 $ - $ 1,667,114
$ 1,431,745
Second Lien term loan, due 2021, bearing interest at a rate of
7.5%, net of unamortized original issue discount of $810 and
$940 at December 31, 2016 and 2015, respectively (excluding
the effect of the hedges)
234,190 234,060
Installment loan payable, due 2016, at an imputed interest rate of
9.25% - 750
Installment loan payable, due 2017, at an annual interest rate of
2.0% 2,945 -
Debt issuance costs, net (41,390) (50,390)
Total debt 1,613,400 1,616,165
Less: Current portion of debt 17,545 15,350
Long-term debt $ 1,595,855 $ 1,600,815
7. Long-term debt
Long-term debt consists of the following:
December 31, 2016 December 31, 2015
First Lien term loan, due 2020, bearing interest at a rate of 4.0%,
net of unamortized original issue discount of $2,170 and $2,680
at December 31, 2016 and 2015, respectively (excluding the
effect of the hedges)
$ 1,417,655
The weighted average amortization period for the intangibles is 12.4 years. Amortization expense is anticipated to
be as follows in future years:
2017 $ 124,090
2018 85,592
2019 47,282
2020 39,374
2021
2022 and thereafter
32,463
122,722
$ 451,523
14
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BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
First Lien credit facility term loan due 2020
In connection with the Acquisition, the Company and a group of financial institutions entered into a Credit
Agreement (the “Credit Agreement”) dated December 18, 2013. The Credit Agreement consists of a seven year
$735,000 term loan (“First Lien Term Loan”) and a five year $110,000 revolving credit facility (“Facility”). An
original issue discount of $3,675 was incurred when the notes were issued and is being amortized using the effective
interest method over the life of the debt resulting in an effective yield of 4.0%. All amounts outstanding under the
Credit Agreement are collateralized by substantially all of the assets of the Company.
In addition to scheduled payments, the Company is obligated to pay a percentage of excess cash flow, as defined in
the Credit Agreement, as accelerated principal payments. The percentage varies with the ratio of the Company’s
debt to its cash flow as determined at year-end and is payable within ten business days of the delivery of the annual
audited financial statements. The excess cash flow calculation did not result in any accelerated payment due in 2017
or 2016.
The Credit Agreement restricts the Company’s ability to, among other things, incur additional indebtedness, create
liens, enter into acquisitions, dispose of assets, enter into consolidations and mergers, and make distributions to its
Parent without the approval of the lenders. The Credit Agreement imposes financial covenants upon the Company
with respect to leverage and interest coverage under certain circumstances. The Credit Agreement contains
provisions permitting the bank to accelerate the repayment of the outstanding debt under this agreement upon the
occurrence of an Event of Default, as defined, including a material adverse change in the financial condition of the
Company since the date of issuance of the Credit Agreement. The Credit Agreement also requires delivery of
audited financial statements within 105 days of the end of the year ended December 31, 2016.
The interest rate on the First Lien Term Loan is initially set at 3.0% over the prime rate of interest or is established
for periods of up to six months at 3.0% over LIBOR at the Company’s option with a LIBOR floor of 1.0% (“the
LIBOR floor”). The weighted average interest rate on the First Lien Term Loan was 4.0% for 2016 and 2015,
respectively. The First Lien Term Loan is due in quarterly installments of 0.25% of the principal balance less
payments made under the aforementioned excess cash flow provision.
Revolving credit facility
The Company has $210,000 of available borrowing capacity under the Facility and had no outstanding balance as of
December 31, 2016 and 2015, respectively. There is a quarterly commitment fee equal to either ½ of 1% or 3/8 of
1% of the unused balance of the Facility depending on the Company’s leverage ratio. The interest rate on the credit
facility was 3.0% for 2016 and 2015, respectively.
Second Lien credit facility term loan due 2021
In connection with the Acquisition, Brickman and a group of financial institutions entered into a Credit Agreement
(the “Second Lien Credit Agreement”) dated December 18, 2013. The Second Lien Credit Agreement consists of an
eight year $235,000 term loan (“Second Lien Term Loan”). An original issue discount of $1,175 was incurred
when the notes were issued and is being amortized using the effective interest method over the life of the debt
resulting in an effective yield of 7.5%. All amounts outstanding under the Second Lien Credit Agreement are
collateralized by substantially all of the assets of the Company.
The interest rate on the Second Lien Term Loan is initially set at 5.5% over the prime rate of interest, with a 2.0%
floor, or is established for periods of up to six months at 6.5% over LIBOR at the Company’s option with a LIBOR
floor of 1.0%. The weighted average interest rate on the Second Lien Term Loan was 7.5% for 2016 and 2015,
respectively.
The Second Lien Credit Agreement contains a Cross-Default Provision related to the First Lien Credit Agreement.
The Second Lien Credit Agreement also requires delivery of audited financial statements within 105 days of the end
of the year ended December 31, 2016. The following are the scheduled maturities of long term debt, which do not
include any estimated excess cash flow payments:
15
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BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
2017 $ 17,545
2018 14,600
2019 14,600
2020 1,376,025
2021 235,000
2022 and thereafter -
Total long term debt $ 1,657,770
Less: Current maturities (17,545)
Less: Original issue discount (2,980)
Long term debt $ 1,637,245
Less: Debt issuance costs (41,390)
Total long term debt, net $ 1,595,855
Accrued expenses/current liabilities:
Interest rate swaps $ 1,366 $ - $ 1,366 $ -
Other liabilities:
Interest rate swaps 37,882 - 37,882 -
Obligation to Rabbi Trust 9,060 9,060 - -
Total Liabilities $ 48,308 $ 9,060 $ 39,248 $ -
Using market bid prices for its debt, the Company has estimated the fair value of its debt to be approximately
$1,658,268 and $1,598,006 as of December 31, 2016 and 2015, respectively.
8. Financial Instruments Measured at Fair Value
The following table summarizes the financial assets and liabilities measured at fair value on a recurring basis as of
December 31, 2016 and December 31, 2015 (See Note 2):
As of December 31, 2016
Carrying Value Level 1 Level 2 Level 3
Other assets:
Investments held by Rabbi Trust $ 9,060 $ 9,060 $ - $ -
Fuel hedges 193 -193 -
Total Assets $ 9,253 $ 9,060 $ 193 $ -
16
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BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
As of December 31, 2015
Carrying Value Level 1 Level 2 Level 3
Other assets:
Investments held by Rabbi Trust $ 8,067 $ 8,067 $ - $ -
Total Assets $ 8,067 $ 8,067 $ - $ -
Accrued expenses/current liabilities:
Interest rate swaps $ 4,144 $ - $ 4,144 $ -
Fuel hedges 5,965 - 5,965 -
Other liabilities
Interest rate swaps 31,697 - 31,697 -
Fuel hedges 1,091 - 1,091 -
Obligation to Rabbi Trust 8,067 8,067 - -
Total Liabilities $ 50,964 $ 8,067 $ 42,897 $ -
Investments held by Rabbi Trust
The Company has exposures to variability in interest rates associated with both its First Lien Credit Agreement and
Second Lien Credit Agreement. As such, the Company has entered into interest rate swaps to help manage interest
rate exposure by economically converting a portion of its variable-rate debt to fixed-rate debt effective for the
The Company’s objective in entering into derivative transactions is to manage its exposure to interest rate
movements associated with its variable rate debt and changes in fuel prices. The Company recognizes derivatives as
either assets or liabilities on the balance sheet and measures those instruments at fair value. The fair values of the
derivative financial instruments are determined using widely accepted valuation techniques including discounted
cash flow analysis based on the expected cash flows of each derivative. Although the Company has determined that
the significant inputs, such as interest yield curve and discount rate, used to value its derivatives fall within Level 2
of the fair value hierarchy, the credit valuation adjustments associated with the Company's counterparties and its
own credit risk utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default
by itself and its counterparties. However, as of December 31, 2016, the Company has assessed the significance of
the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined
that the credit valuation adjustments were not significant to the overall valuation of its derivatives. As a result, the
Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value
hierarchy.
Hedging Activities
As of December 31, 2016, the Company’s outstanding derivatives qualify as cash flow hedges in accordance with
the Derivatives and Hedging topic of the Codification. The Company assesses whether derivatives used in hedging
transactions are “highly effective” in offsetting changes in the cash flow of the hedged forecasted transactions.
Regression analysis is used for the hedge relationships and high effectiveness is achieved when a statistically valid
relationship reflects a high degree of offset and correlation between the fair values of the derivative and the hedged
forecasted transaction. The effective portion of the changes in the fair value of the derivative is initially reported in
other comprehensive loss and subsequently reclassified to Interest expense (interest rate contracts) and Cost of
services provided (fuel hedge contracts) in the accompanying Consolidated Statements of Operations when the
hedged item affects earnings. The ineffective portion of changes in the fair value of the derivative is recognized
directly to interest expense and cost of services provided in the period incurred. If it is determined that a derivative is
not highly effective as a hedge, or if the hedged forecasted transaction is no longer probable of occurring, then the
amount recognized in accumulated other comprehensive loss is released to earnings. Cash flows from the derivatives
are classified in the same category as the cash flows from the underlying hedged transaction.
Interest-Rate Swaps
The fair value of the investments held in the Rabbi Trust is based on the quoted market prices of the underlying
mutual fund investments. These investments are based on the participants’ selected investments, which represent
the underlying liabilities to the participants in the non-qualified deferred compensation plan.
Derivatives
17
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BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
periods March 18, 2016 through December 31, 2020. The notional amount of interest rate contracts was $2,850,000
at December 31, 2016 and December 31, 2015. The net deferred losses on the interest rate swaps as of December 31,
2016 of $7,342, net of taxes, are expected to be recognized in interest expense over the next 12 months.
The effects on the consolidated financial statements of the interest-rate swaps which were designated as cash flow
hedges were as follows (in thousands):
For the Year Ended December 31,
2016 2015
(Loss) income recognized in other comprehensive loss -
effective portion
(8,331) (12,951)
(Loss) income recognized in interest expense - ineffective
portion
-(24)
Loss reclassified from accumulated other compressive loss
into interest expense
(4,947) -
Fuel Swap Contracts
(Loss) income recognized in costs of services provided -
ineffective portion
301 (301)
Loss reclassified from accumulated other compressive loss
into cost of services provided
(3,767) (3,728)
9. Income Taxes
Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of
assets and liabilities, and are measured by applying enacted tax rates and laws for the taxable years in which those
differences are expected to reverse. Deferred tax assets are evaluated for the estimated future tax effects of
deductible temporary differences and tax operating loss carryovers. A valuation allowance is recorded when it is
more-likely-than-not that a deferred tax asset will not be realized.
The Company operates a large fleet of vehicles and mowers and has entered into gasoline and diesel hedge contracts
in an effort to reduce its exposure to volatility in the fuel markets. As of December 31, 2016 the Company had two
outstanding fuel contracts covering the periods January 1, 2017 through December 31, 2017 with notional amounts
of 4,228 gallons. As of December 31, 2015 the Company had twelve outstanding fuel contracts covering the
periods January 1, 2016 through December 31, 2017 with notional amounts of 16,471 gallons. The net commodity
losses of $119 net of taxes as of December 31, 2016 are expected to be recognized in cost of services provided over
the next 12 months.
The effects on the consolidated financial statements of the fuel swaps which were designated as cash flow hedges
were as follows (in thousands):
For the Year Ended December 31,
2016 2015
(Loss) income recognized in other comprehensive loss -
effective portion
666 (4,780)
18
Confidential
BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
The components of income tax benefit are as follows:
For the year ended December 31,
Current: 2016 2015
Federal $ 8,476 $ 22,169
State 2,083 5,896
Total current 10,559 28,065
Deferred
Federal (38,286) (47,608)
State (4,776) (7,582)
Total deferred (43,062) (55,190)
Total income tax benefit $ (32,503) $ (27,125)
Income tax benefit differs from the amount computed at the federal statutory corporate tax rate as follows:
December 31, 2016
$ (29,456) $ (23,702)
(4,966)
971
938
1,199
(1,527)
338
$$ (27,125)
Interest rate swaps $ 15,702 $ 16,143
Self-insurance reserves 28,278 29,945
Other charges 4,821 5,099
Deferred compensation 3,312 3,208
Deferred rent 307 321
Leases 1,748 1,519
Payroll related accruals 9,447 11,640
Accrued expenses 8,046 7,243
Allowance for doubtful accounts 3,795 3,230
NOL carryforward 1,667 1,099
Other non-current 634 1,482
Total non-current deferred tax assets 77,757 80,929
Valuation allowance (208) (210)
Total deferred tax assets $ 77,549 $ 80,719
December 31, 2015
Federal tax at 35% statutory rate
The components of the Company’s net deferred tax asset and liability accounts resulting from temporary differences
between the tax and financial reporting basis of assets and liabilities are as follows:
December 31, 2016 December 31, 2015
Deferred tax assets:
1,031
Fuel tax credit and other credits
1,349
Provision to return adjustments and deferred tax (2,396)
Non-deductible promotional and entertainment expense
(173)
Other, net 563
Income tax benefit
State tax, net of federal tax benefit (3,797)
Tax effect of:
Equity-based compensation
(32,503)
19
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BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
Deferred tax liabilities:
Intangibles 168,313 214,386
Property and equipment 53,513 52,649
Inventory 7,570 7,380
Deferred income 6,225 5,473
Prepaids 393 1,915
Other non-current - 143
Total non-current deferred tax liabilities 236,014 281,946
Total deferred tax liabilities: $ 158,465 $ 201,227
1,464
The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. The
Company accrued $257 of interest or penalties for the year ended December 31, 2016 and $1 for year ended
December 31, 2015. The Company files income tax returns in the U.S. federal jurisdiction and various state and
local jurisdictions. The Company’s returns are no longer subject to U.S. federal and state tax examination for years
before 2013 and 2012, respectively.
10. Leases
The Company has capital lease obligations for certain management vehicles. The terms of the leases range from 4
to 5 years.
The Company has state income tax net operating losses (“NOL”) of $87,981 which expire in tax years from 2019
through 2036. The Company has recorded a valuation allowance against the state NOL deferred tax asset in which it
does not believe to be more-likely-than-not realizable in the future in the amount of $208 as of December 31, 2016
and $210 as of December 31, 2015. The Company believes that the remaining balance of the state income tax NOL
to be more-likely-than-not realizable in future periods.
The Company has a liability of $1,749 for uncertain tax positions. There will be an impact to the Company's
effective rate to the extent the unrecognized tax benefits are ultimately recognized. The Company does not expect to
recognize any of the unrecognized tax benefit in the next year.
The following table represents a reconciliation of the Company’s total unrecognized tax benefits balances for the
year ended December 31:
Increases (decreases) as a result of tax positions taken in a prior period 192 -
Increases (decreases) as a result of tax positions taken during the
current period 93 -
End of period $
2016 2015
Beginning of period $ 1,464 $ 1,464 1,464
1,749 $
20
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BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
Future minimum lease payments under capital lease obligations as of December 31, 2016 are as follows:
Future minimum lease payments:
Year ending December 31:
2017 $ 3,768
2018 3,348
2019 3,023
2020
2021
2,269
595
Total 13,003
Less: Executory costs 163
Net minimum lease payments 12,840
Less: Amount representing interest 748
Present value of net minimum lease payments 12,092
Less: Current portion 3,403
Long-term portion of capital lease obligations $ 8,689
73,517
11. Employee Benefit Plans
401(k) Plan
The Company has voluntary, defined contribution, qualified retirement plans covering approximately 80% of its
employees. The Company’s contributions were $5,347 and $3,171 for the years ended December 31, 2016 and
2015, respectively. For fiscal year 2015, depending on whether the participant is legacy Brickman or ValleyCrest,
the Company’s contribution was equal to 50% of participant voluntary contributions not in excess of 5% of
participant compensation or 25% of participant voluntary contributions not in excess of 6% of participant
compensation, respectively. During the year ended December 31, 2016, the Company merged 401(k) plans, and for
all eligible participants, the Company contributes 50% of the amount invested by the participant up to the first 5% of
the participant's compensation. The Company’s contributions are included in Selling, general and administrative
expense in the accompanying Consolidated Statements of Operations.
Deferred Compensation Plan
A non-qualified deferred compensation plan is available to certain executives. Under the plan, participants may
elect to defer up to 70% of their compensation. The Company invests the deferrals in participant-selected
diversified investments that are held in a Rabbi Trust and which are classified with other assets. Compensation
expense is recorded in selling, general and administrative expense in the Company’s accompanying Consolidated
2018 15,879
2019 13,055
2020 9,395
2021 5,806
Thereafter 9,605
Total $
Operating Leases
The Company is committed under various operating leases for buildings and equipment with terms ranging from
month-to-month to ten years. Most of the leases contain customary renewal options and escalation clauses. Lease
expense was $35,770 and $34,178 for the years ended December 31, 2016 and 2015, respectively, and is included in
cost of services provided and selling, general and administrative expense in the accompanying Statements of
Operations.
Minimum annual lease payments under non-cancelable, operating leases are as follows:
2017 $ 19,777
21
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BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
Statements of Operations based on the change in the deferred compensation obligation related to earnings credited to
participants as well as changes in the fair value of diversified investments. The net increase/(decrease) in
compensation expense recorded in selling, general and administrative expense for the years ended December 31,
2016 and 2015 was $660 and $(50), respectively.
The diversified investments held in the trust were $9,060 and $8,067 as of December 31, 2016 and 2015,
respectively, and are recorded at their fair value, based on quoted market prices. These investments are considered
trading securities and therefore the changes in the fair value of the diversified assets are included in other income
and expenses, net in the accompanying Consolidated Statements of Operations. The Company recorded an
investment gain for the year ended December 31, 2016 of $660 and an investment loss of $50 for the year ended
December 31, 2015.
Multi-employer Pension Plans
Certain designated craftsmen employed by one of the Company’s subsidiaries are participants in multi-employer
collective bargaining agreements, which represent approximately 7.1% and 6.8% of the Company’s labor force at
December 31, 2016 and December 31, 2015 respectively. These agreements provide defined benefit pension plans
for these employees. Contributions to such plans are determined in accordance with the provisions of negotiated
labor contracts and are generally based on the number of hours worked. The Company contributed approximately
$4,843 and $3,465 to these plans for the year ended December 31, 2016 and December 31, 2015, respectively.
These contributions are recorded in Cost of services provided in the accompanying Consolidated Statements of
Operations.
Risks of participating in a multi-employer plan differs from single-employer plans for the following reasons: (1)
assets contributed to a multi-employer plan by one employer may be used to provide benefits to employees of other
participating employers; (2) if a participating employer stops contributing to the plan, the unfunded obligations of
the plan may be borne by the remaining participating employers; and (3) if a participating employer stops
participating, it may be required to pay those plans an amount based on the unfunded status of the plan, referred to
as the withdrawal liability. The Company has no intention of withdrawing from any multi-employer plans or taking
any other action that could result in an effective termination or reportable event for any of the plans.
Each multi-employer plan in which the Company participates has a certified zone status as currently defined by the
Pension Protection Act of 2006. The zone status is based on information provided to the Company and other
participating employers by each plan and is certified by the plan’s actuary. The following are descriptions of the
zone status types based on criteria established under the Internal Revenue Code (IRC):
•“Red” Zone – Plan has been determined to be in “critical status” and is generally less than 65% funded. A
rehabilitation plan, as required under the IRC, must be adopted by plans in the “red” zone. Plan
participants may be responsible for the payment of surcharges, in addition to the contribution rate specified
in the applicable collective bargaining agreement, for a plan in “critical status”, in accordance with the
requirements of the IRC.
•“Yellow” Zone – Plan has been determined to be in “endangered status” and is generally less than 80%
funded. A funding improvement plan, as required under the IRC, must be adopted.
•“Green” Zone – Plan has been determined to be neither in “critical status” nor in “endangered status”, and
is generally at least 80% funded.
22
Confidential
12. Capital Structure
All of the Company’s common stock is held by the Parent in direct proportion to ownership units (“Class A Units”)
held by investors in the Parent. The Parent issues Class A Units to investors, including certain management
employees. During 2016, the Parent issued 266 new Class A units. Since the Parent is a holding company, it relies
on the Company to satisfy the Parent’s obligations for any equity units called for redemption. The Parent redeems
vested units at their then fair market value primarily upon the termination of management employees. When the
Parent’s units are redeemed, the Company repurchases the associated common stock and makes a distribution to the
Parent in order to fund the redemption. There were $22,874 and $3,263 to fund redemptions of Parent units during
the years ended December 31, 2016 and 2015, respectively.
BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
All plans the Company participates in are either in the “green” zone or, for those funds in the “yellow” zone, have
developed appropriate funding improvement plans, as required under the IRC. The following table summarizes the
status of all plans in which the Company participates, as well as the contributions made to each plan:
Employer
Identification
Number/Plan Zone 2016 2015
Pension Plan Legal Name Number Status Contributions Contributions
Construction Industry and Laborers Joint
Pension Fund 88-0135695-001 Yellow $ 129 $ 78
Construction Laborers Pension Trust Fund
for Southern California 43-6159056-001 Green 705 347
Excavators Union Local 731 Pension Fund 13-1809825-002 Green 263 192
International Union of Operating Engineers
Local 4 Pension Plan 04-6013863-001 Green 202 232
Laborers Pension Trust Fund for Northern
California 94-6277608-001 Yellow 788 704
Massachusetts Bricklayers and Mason
Pension Fund 04-6128039-001 Yellow 223 243
Massachusetts Laborers Pension Fund 04-6128289-001 Green 796 808
Plumbers and Pipefitters National Pension
Fund 51-6108443-001 Green 755 527
San Diego County Construction Laborers’
Pension Trust Fund 95-6090541-001 Green 675 227
All Other Funds 307 107
Total Pension Plan Contributions $ 4,843 $ 3,465
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BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
13. Equity-Based Compensation
The Company has a Management Equity Incentive Plan (“the Plan”) under which the Parent may award up to
23,145 Class B Profits Interest Units (“B Units”) to employees of the Company. The units generally vest over a five
year vesting period with 50% of vesting contingent on certain performance criteria of the Company. The Company
expenses equity based compensation using the estimated fair value as of the grant date, over the requisite service or
performance period applicable to the grant. Estimates of future forfeitures are made at the date of grant and revised,
if necessary, in subsequent periods if actual forfeitures differ from those estimates.
The following table summarizes the activity for the Plan for the year ended December 31:
Units
2016 2015
Outstanding at January 1, 17,119 17,333
There were 6,651 B Units available for future grants under the Plan at December 31, 2016. The fair value of each B
Unit is determined using an option pricing model at the grant date. The Company recognized $2,772 and $3,854 in
equity-based compensation expense for the years ended December 31, 2016 and 2015, respectively. The resulting
charge increased additional paid in capital by the same amount. Total unrecognized compensation cost related to B
Units was $20,460 and $13,853 as of December 31, 2016 and 2015, respectively, which is expected to be recognized
over a weighted average period of 3.2 years.
The Parent redeems vested B Units at their then fair market value primarily upon termination of management
employees, at which time the employee also forfeits any unvested B Units. The Company made distributions for
vested B units of $7,355 and $410 during 2016 and 2015, respectively.
14. Commitments and Contingencies
Risk Management
The Company’s reserve for unpaid and incurred but not reported claims under these programs at December 31, 2016
was $102,608, of which $38,270 is classified in current liabilities and $64,338 is classified in non-current liabilities
in the accompanying Consolidated Balance Sheets. At December 31, 2016, the Company’s reserve includes $24,513
related to claims recoverable from third party insurance carriers. Corresponding assets of $4,228 and $20,285 are
included as other current assets and restricted investments and other assets, respectively, at December 31, 2016. The
Company’s reserve for unpaid and incurred but not reported claims under these programs at December 31, 2015 was
$77,296, of which $27,289 is classified in current liabilities and $50,007 is classified in non-current liabilities in the
accompanying Consolidated Balance Sheets. While the ultimate amount of these claims is dependent on future
developments, in management’s opinion, recorded reserves are adequate to cover these claims.
Litigation Contingency
From time to time, the Company is subject to legal proceedings and claims in the ordinary course of its business,
principally claims made alleging injuries (including auto and general liability matters as well as workers
compensation and property casualty claims). Such claims, even if lacking merit, can result in expenditure of
significant financial and managerial resources. In the ordinary course of its business, the Company is also subject to
claims involving current and/or former employees and disputes involving regulatory and commercial matters.
Although the process of resolving claims through litigation and other means is inherently uncertain, the Company is
not aware of any legal proceedings or claims that it believes will have, individually or in the aggregate, a material
effect on the Company, its financial condition, results of operations or cash flows. For all legal matters, an
estimated liability is established in accordance with the loss contingencies accounting guidance. This reserve is
included in accrued expenses and other current liabilities in the accompanying Consolidated Balance Sheets.
Granted 10,867 1,136
Less: Redeemed units 3,563 208
Less: Forfeited units 7,934 1,142
Outstanding at December 31, 16,489 17,119
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Confidential
December 31, 2016 December 31, 2015
Cash paid for income taxes $ 18,667 $
$ 86,370 $ 80,223
$ 6,555 $
$ 521 $ 1,277
$
$ (23,723) $(37,135)
Unbilled and deferred revenue (17,997) 5,296
Inventories 1,033 (187)
Other current and non-current assets (20,589) (1,183)
Prepaid income taxes (7,448) 13,472
Accounts payable 16,273 (2,132)
Accrued expenses and other liabilities 30,183 12,205
Total $ (22,268) $ (9,664)
BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
15. Related Party Transactions
The Company has a management services agreement with KKR and MSD Capital a Parent unit holder. Under the
terms of the agreement, KKR and MSD Capital provide management consulting and financial services to the
Company in exchange for an annual advisory fee in an amount equal to 1% of prior year Adjusted EBITDA, as
defined in the Company’s Credit Agreement. Fees associated with this agreement for the years ended December 31,
2016 and 2015 were $2,716 and $2,129, respectively. Additionally, the Company incurred $400 and $737 of
advisory and professional fees to KKR related to certain integration activities for the years ended December 31,
2016 and 2015, respectively. All of these fees are included in Selling, general and administrative expense in the
accompanying Consolidated Statements of Operations.
16. Supplemental Cash Flow Information
14,068
Cash paid for interest
Noncash investing activities:
Equipment acquired under capital lease obligations 6,875
Unrealized loss on investments held in Rabbi Trust
Increase in liabilities due to unrealized losses on
interest rate swaps
Noncash financing activities:
$ 8,331
12,975
Changes in operating assets and liabilities are as follows:
Accounts receivable, net
December 31, 2015 December 31, 2016 December 31, 2016
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Confidential
BrightView Acquisition Holdings, Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
(in thousands)
17. Supplemental Balance Sheet Information
Accrued expenses and other current liabilities in the accompanying Consolidated Balance Sheets consists of the
following as of:
December 31,
2016
December 31,
2015
Payroll related accruals $ 44,823 $ 47,955
Accrued operating expenses 52,206 45,418
Litigation and other contingencies 7,300 5,402
Sales and other taxes 4,574 3,020
Derivative liabilities 1,172 10,109
Capital leases 3,403 2,803
Accrued interest 1,768 3,006
Total $ 115,246 $ 117,713
financial statements are issued. The Company evaluated events through March 24, 2017 and concluded that no
subsequent events occurred during the period.
18. Subsequent Events
Subsequent events are events or transactions that occur after the balance sheet date but before the consolidated
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Confidential