A N N U A L
R E P O R T
20
2 1
Dear Fellow Shareholders,
It is remarkable that we have completed Fiscal Year 2021 yet so much
of our day-to-day is still consumed by the COVID pandemic and its
immense challenges. Despite that, the BrightView team has amazed me
every day with their resilience and fortitude. I could not be prouder of
every single one of our 20,000 team members who have continued
to serve our clients with excellence. BrightView is built on an 80-
year legacy of providing best-in-class landscape services and, just
as our predecessor companies persevered through multiple macro-
economic disruptions while continuing to deliver significant value to
our customers, so will BrightView.
We continue to experience pandemic business impacts specifically
related to labor, inflation and material costs but the fundamentals of
our business and industry remain strong. To summarize our 2021
performance, total revenue for the company was a record $2.55 billion.
Maintenance Segment revenue was $1.98 billion with our expansion
driven by continued growth in our contract-based business as well as a
rebound in ancillary services penetration. In the Development Segment
we experienced pandemic related obstacles resulting in revenue of
$574.9 million. Total Company Adjusted EBITDA increased to $302.3
million and Adjusted EPS increased approximately 32% to $1.20 per
share, a record for the company. Our consistent and predictable free
cash flow generation continues to be robust, and we generated $96.7
million of free cash flow during the fiscal year.
The results of our Strong-on-Strong acquisition strategy continue
to benefit our revenue growth, and, with an attractive $600 million
pipeline, acquisitions will continue to be a reliable and sustainable
source of growth. Our business is cash generative with low capital
intensity, allowing us to consolidate the marketplace in an efficient and
disciplined manner that we have shown to be repeatable. For Fiscal
2022 we have identified target MSAs that present us with plentiful
accretive opportunities to expand in new and existing high growth
housing markets.
Our sales enablement technologies continue to be a differentiator
and have contributed to support growth and improved customer
retention and satisfaction.
•
•
BrightView Connect and HOA Connect are proprietary
technologies that allow our customers to review the status of
submitted service requests, expedite response time and track
progress
Quality Site Assessment is critical to delivering quality services in
the field. It allows our account teams to walk alongside customers,
collect and markup visual feedback, note service priorities and
identify additional ancillary opportunities
Both technology platforms will see 2.0 versions launched in Fiscal 2022,
allowing for an enhanced customer experience.
In addition to technological enhancements, we continue to grow and
invest in our sales organization. To drive the success of these expanded
sales teams, we remain focused on digital marketing resulting in
increased lead generation and growth in our opportunity pipeline. Most
importantly, as a direct result of our Omni-Channel approach to digital
marketing, expanded sales teams and sales enablement technologies,
our sales opportunity pipeline increased 41% year-over-year.
We continue to be leaders in Environmental, Social and Corporate
Governance (ESG). BrightView’s commitment to the core principles
of ESG is a source of pride for every member of our team. Notable,
among these efforts are:
• We want to thank retiring board member Shamit Grover and MSD
Partners for their long-time partnership and we welcome Ryder
System, Inc. executive, Frank Lopez, to the BrightView Board of
Directors
• We are no longer controlled for NYSE purposes, we have a majority
independent Board, and every member of each board committee
is considered independent
•
• We provide diversity education and training and have established
two employee resource groups to promote
inclusion and
engagement - GROW, an internal advocacy program for women,
and BRAVO, a recruitment and community engagement program
for veterans
Our injury rate is significantly below the industry average and we
have worked over 41 million man-hours, within our network of
more than 280 branches
BrightView University has trained more than 1,400 team members.
A comprehensive code of conduct is regularly reviewed and
certified by team members
70% of our employee population is ethnic minority
The BrightView Fund for Social Justice supports organizations
and initiatives that promote equality and inclusion in our local
communities
•
•
•
• We are reducing emissions by supplementing our fleet with electric
vehicles and transforming our mowers and 2 cycle equipment to
sustainable power. We are also implementing alternative and solar
energy solutions in our real estate and proactively and purposefully
planting thousands of trees every year
• We plan on issuing a formal sustainability report during calendar
2022 and expect to be approximately 75% carbon neutral by 2030
and 100% by 2035
Fiscal year 2021 was an extraordinary year by any measure and what our
team accomplished in the face of a pandemic is simply amazing. I would
also like to personally thank every member of our dedicated teams. To
all our gardeners, account managers, business developers and branch
leadership, thank you. Also, thank you to all BrightView customers and
partners for your resiliency and commitment during a challenging time.
While we always have more work to do and more progress to make, as
we begin 2022, we feel we are uniquely positioned to succeed in a very
challenging environment. We look forward to what BrightView might
become and are confident in our ability to generate significant value for
all shareholders. Thank you for your continued support of BrightView.
Stay safe and be well.
Kind regards,
Andrew Masterman
President and Chief Executive Officer
Adjusted EBITDA and Adjusted Net Income are non-GAAP measures. Refer to the “Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Financial Measures” sections
of this 10-K for more information.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(cid:1409)(cid:1409) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2021
OR
(cid:1407) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission File Number 001-38579
BrightView Holdings, Inc.
(Exact name of Registrant as specified in its Charter)
Delaware
( State or other jurisdiction of
incorporation or organization)
980 Jolly Road
Blue Bell, Pennsylvania
(Address of principal executive offices)
46-4190788
(I.R.S. Employer
Identification No.)
19422
(Zip Code)
Registrant’s telephone number, including area code: (484) 567-7204
Title of Each Class
Common Stock, Par Value $0.01 Per Share
Securities registered pursuant to Section 12(b) of the Act:
Trading
Symbol
BV
Name of exchange on which registered
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:1407) No (cid:1409)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:1407) No (cid:1409)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes (cid:1409) No (cid:1407)
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes (cid:1409) No (cid:1407)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer
Non-accelerated filer
Emerging growth company
(cid:1407)
(cid:1407)
(cid:1407)
Accelerated filer
Smaller reporting company
(cid:1409)
(cid:1407)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:1407)
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
(cid:1409)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:1407) No (cid:1409)
As of March 31, 2021, the last day of the Registrant’s most recently completed second quarter, the aggregate value of the registrant’s common stock held by non-
affiliates was approximately $687.4 million, based on the number of shares held by non-affiliates as of March 31, 2021 and the closing price of the registrant’s common
stock on the New York Stock Exchange on that date.
The number of shares of Registrant’s Common Stock outstanding as of October 31, 2021 was 105,200,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Definitive Proxy Statement relating to the Annual Meeting of Stockholders, scheduled to be held on March 8, 2022, are incorporated by
reference into Part III of this Report.
ii
Page
7
17
30
30
30
31
32
33
33
49
49
50
50
50
50
51
51
51
51
51
52
52
57
Table of Contents
Business
PART I
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
PART II
Removed and Reserved
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Item 8.
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
PART IV
Item 15. Exhibits, Financial Statement Schedules
Item 16.
Form 10-K Summary
Signatures
iii
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Form 10-K”) contains “forward-looking statements” within the meaning of the safe
harbor provision of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended
(the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to
the “safe harbor” created by those sections. All statements, other than statements of historical facts included in this Form 10-K, including
statements concerning our plans, objectives, goals, beliefs, business strategies, future events, business conditions, results of operations,
financial position, business outlook, business trends and other information, may be forward-looking statements.
Words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “estimates,” or “anticipates,” and
variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are
not historical facts, or guarantees of future performance and are based upon our current expectations, beliefs, estimates and projections,
and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs,
and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that
management’s expectations, beliefs and projections will result or be achieved and actual results may vary materially from what is
expressed in or indicated by the forward-looking statements.
There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our
actual results to differ materially from the forward-looking statements contained in this Form 10-K. Such risks, uncertainties and other
important factors that could cause actual results to differ include, among others, the risks, uncertainties and factors set forth under the
heading “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
and elsewhere in this Form 10-K. New risk factors and uncertainties may emerge from time to time, and it is not possible for management
to predict all risk factors and uncertainties. Some of the key factors that could cause actual results to differ from our expectations include
those described below under “Summary of Risk Factors.”
We caution you that the risks, uncertainties, and other factors referenced above may not contain all of the risks, uncertainties and
other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits, or developments that
we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way
expected. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or
circumstances, any change in assumptions, beliefs or expectations or any change in circumstances upon which any such forward-looking
statements are based, except as required by law.
Summary of Risk Factors
The following is a summary of the principal risks that could materially adversely affect our business, financial condition, results
of operations and cash flows. You should read this summary together with the more detailed description of each risk contained below.
Risks Related to Our Business
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Our business is affected by general business, financial market and economic conditions.
The COVID-19 pandemic has impacted and will likely continue to impact our business.
Our industry and the markets in which we operate are highly competitive and increased competitive pressures could reduce
our share of the markets we serve.
Our business success depends on our ability to preserve long-term customer relationships.
(cid:120) We may be adversely affected if customers reduce their outsourcing.
(cid:120)
Due to our operation across the United States, our operations may be materially adversely affected by inconsistent practices.
(cid:120) We may not successfully implement our business strategies, including achieving our growth objectives.
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Future acquisitions or other strategic transactions could negatively impact our business.
Seasonality affects the demand for our services and our results of operations and cash flows.
Our operations are impacted by weather conditions and climate change.
Increases in raw material costs, fuel prices, wages and other operating costs, and changes in our ability to source adequate
supplies and materials in a timely manner, could adversely impact our business.
If we are unable to accurately estimate the overall risks, requirements or costs when we bid on or negotiate contracts that
are awarded to us, we may achieve lower than anticipated profits.
Our landscape development services have been, and may be, adversely impacted by fluctuations or declines in the new
commercial construction sector, as well as in spending on repair and upgrade activities.
iv
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Our results of operations for our snow removal services depend primarily on the level, timing and location of snowfall.
Our success depends on our executive management and other key personnel.
Our future success depends on our ability to attract, retain and maintain positive relations with workers.
Our business could be adversely affected by improper verification of employment eligibility.
Our use of subcontractors to perform work under certain customer contracts exposes us to liability and financial risk.
A significant portion of our assets consists of goodwill and other intangible assets, the value of which may be reduced if we
determine that additional assets are impaired.
If we fail to comply with legal or regulatory requirements, we could become subject to lawsuits, investigations and other
restrictions on our operations.
Compliance with environmental, health and safety laws and regulations, as well as the risk of potential litigation, could
result in significant costs.
Adverse judgments or settlements resulting from proceedings relating to our business operations could materially adversely
affect our business.
Our employees use dangerous equipment, and an increase in accidents resulting from the use of such equipment could
negatively affect our reputation, results of operations and financial position.
Any failure, inadequacy, interruption, security failure or breach of our information technology systems could harm our
ability to effectively operate our business.
(cid:120) We may not be able to adequately protect our intellectual property, which could harm the value of our brand and adversely
affect our business.
Risks Related to Our Indebtedness
(cid:120)
(cid:120)
Our substantial indebtedness could adversely affect our financial condition.
Our debt agreements contain restrictions that limit our flexibility in operating our business.
(cid:120) We may be unable to generate sufficient cash flow to satisfy our significant debt obligations.
(cid:120) We and our subsidiaries may still be able to incur substantially more debt, including off-balance sheet financing, contractual
obligations and general and commercial liabilities.
(cid:120)
(cid:120)
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt obligations to increase
significantly.
If the financial institutions that are part of the syndicate of our Revolving Credit Facility fail to extend credit under our
facility or reduce the borrowing base under our Revolving Credit Facility, our liquidity and results of operations may be
adversely affected.
(cid:120) We will be exposed to risks related to counterparty credit worthiness or non-performance of the derivative financial
instruments we utilize.
Risks Related Ownership of Our Common Stock
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Future sales, or the perception of future sales, by us or our existing stockholders, could cause the market price for our
common stock to decline.
KKR BrightView Aggregator L.P. and MSD Partners have the ability to exert significant influence over us and their interests
may conflict with ours or yours in the future.
Anti-takeover provisions in our organizational documents could delay or prevent a change of control.
Our Board of Directors is authorized to issue and designate shares of our preferred stock in additional series without
stockholder approval.
Our certificate of incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware
and the federal district courts of the United States of America will be the sole and exclusive forums for certain stockholder
litigation matters.
v
General Risk Factors
(cid:120)
(cid:120)
(cid:120)
Natural disasters, terrorist attacks and other external events could adversely affect our business.
Our stock price may change significantly, and you may not be able to resell shares of our common stock at or above the
price you paid or at all, and you could lose all or part of your investment as a result.
If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, our
stock price and trading volume could decline.
(cid:120) Maintaining the requirements of being a public company may strain our resources, divert management’s attention and affect
our ability to attract and retain qualified Board members.
(cid:120)
Failure to comply with requirements to maintain effective internal controls could have a material adverse effect on our
business and stock price.
vi
Item 1. Business
PART I
BrightView Holdings, Inc. is a holding company that conducts substantially all of its activity through its direct, wholly-owned
operating subsidiary, BrightView Landscapes, LLC (“BrightView”) and its consolidated subsidiaries. The holding company and
BrightView are collectively referred to on Form 10-K (the “Annual Report”) as “we,” “us,” “our,” “ourselves,” “Company,” or
“BrightView.” The Company was formed through a series of transactions entered into by Kohlberg Kravis Roberts & Co. Inc. (“KKR”)
to acquire the Company on December 18, 2013 (“the KKR Acquisition”). KKR and affiliates of MSD Partners, L.P. (“MSD Partners”),
collectively referred to herein as the “Sponsors,” controlled a majority of the voting power of the Company’s common stock through
May 13, 2021. On May 14, 2021, in accordance with the terms of the Stockholders Agreement, MSD Partners notified the Company of
its election to terminate (i) its right to nominate a director pursuant to Section 2.1(a) of the Stockholders Agreement and (ii) the voting
agreement pursuant to Section 2.1(j) of the Stockholders Agreement, effective immediately. As a result, the Company no longer qualifies
as a “controlled company” within the meaning of the corporate governance standards of the New York Stock Exchange (“NYSE”).
Our Company
We are the largest provider of commercial landscaping services in the United States, with revenues approximately 7 times those
of our next largest commercial landscaping competitor. We provide commercial landscaping services, ranging from landscape
maintenance and enhancements to tree care and landscape development. We operate through a differentiated and integrated national
service model which systematically delivers services at the local level by combining our network of over 280 branches with a qualified
service partner network. Our branch delivery model underpins our position as a single-source end-to-end landscaping solution provider
to our diverse customer base at the national, regional and local levels, which we believe represents a significant competitive advantage.
We believe our commercial customer base understands the financial and reputational risk associated with inadequate landscape
maintenance and considers our services to be essential and non-discretionary.
We operate through two segments: Maintenance Services and Development Services. Our maintenance services are primarily
self-performed through our national branch network and are route-based in nature. Our development services are comprised of
sophisticated design, coordination and installation of landscapes at some of the most recognizable corporate, athletic and university
complexes and showcase highly visible work that is paramount to our customers’ perception of our brand as a market leader.
As the number one player in the highly attractive and growing $74 billion commercial landscape maintenance and snow removal
market, we believe our size and scale present several compelling value propositions for our customers, and allow us to offer a single-
source landscaping services solution to a diverse group of commercial customers across all 50 U.S. states. We serve a broad range of
end market verticals, including corporate and commercial properties, Homeowners Associations (HOAs), public parks, hotels and
resorts, hospitals and other healthcare facilities, educational institutions, restaurants and retail, and golf courses, among others. We are
also the Official Field Consultant for Major League Baseball. Our diverse customer base includes approximately 9,000 office parks and
corporate campuses, 8,000 residential communities, and 550 educational institutions. We believe that due to our unmatched geographic
scale and breadth of service offerings, we are the only commercial landscaping services provider able to service clients whose
geographically disperse locations require a broad range of landscaping services delivered consistently and with high quality. Our top
ten customers accounted for approximately 15% of our fiscal 2021 revenues, with no single customer accounting for more than 3% of
our fiscal 2021 revenues.
7
Our business model is characterized by stable, recurring revenues, a scalable operating model, strong operating margins, limited
capital expenditures and low working capital requirements that together generate significant Free Cash Flow. For the year ended
September 30, 2021, we generated net service revenues of $2,553.6 million, net income of $46.3 million and Adjusted EBITDA of
$302.3 million, with a net income margin of 1.8% and an Adjusted EBITDA margin of 11.8%.
Our Operating Segments
We deliver our broad range of services through two operating segments: Maintenance Services and Development Services. We
serve a geographically diverse set of customers through our strategically located network of branches in 32 U.S. states and, through our
qualified service partner network, we are able to efficiently provide nationwide coverage in all 50 U.S. states, as illustrated below.
Our Maintenance Services segment delivers a full suite of recurring commercial landscaping services ranging from mowing,
gardening, mulching and snow removal, to more horticulturally advanced services, such as water management, irrigation maintenance,
tree care, golf course maintenance and specialty turf maintenance. Our maintenance services customers include Fortune 500 corporate
campuses and commercial properties, HOAs, public parks, leading international hotels and resorts, airport authorities, municipalities,
hospitals and other healthcare facilities, educational institutions, restaurants and retail, and golf courses, among others. The chart below
illustrates the diversity of our Maintenance Services revenues:
8
In addition to contracted maintenance services, we also have a strong track record of providing value-added landscape
enhancements, defined as supplemental, non-contract specified maintenance or improvement services which are typically sold by our
account managers to our maintenance services customers. These landscape enhancements typically have a predictable level of demand
related to our amount of contracted revenue with a customer.
We have a strong maintenance presence in both evergreen and seasonal markets. Evergreen markets are defined as those which
require year-round landscape maintenance. As part of our Maintenance Services growth plan, we are actively targeting evergreen
geographies, such as California, Florida and Texas, where there are a number of secular demographic trends, such as population growth
and business expansion, which represent a compelling growth opportunity.
In our seasonal markets, we are also a leading provider of snow removal services. These route-based snow removal services
provide us with a valuable counter-seasonal source of revenues, allowing us to better utilize our crews and certain equipment during the
winter months. Our capabilities as a rapid-response, reliable service provider further strengthens our relationships with our customers,
all of which have an immediate and critical need for snow removal services. Property managers also enjoy several benefits by using the
same service provider for snow removal and landscape maintenance services, including consistency of service, single-source vendor
efficiency and volume discount savings. This allows us to actively maintain relationships with key customers in seasonal markets year-
round. A portion of our snow removal business is contracted each year under fixed fee servicing arrangements that are subject to
guaranteed minimum payments regardless of the season’s snowfall.
9
The performance of our snow removal services business, however, is correlated with the amount of snowfall, the number of
snowfall events and the nature of those events in a given season. We benchmark our performance against ten- and thirty-year averages,
as annual snowfall amounts modulate around these figures.
(1) Reflects cumulative annual snowfall at locations where BrightView has a presence.
For the year ended September 30, 2021, in Maintenance Services, we generated net service revenues of $1,982.9 million, including
$284.9 million from snow removal services, and Segment Adjusted EBITDA of $299.6 million, with a Segment Adjusted EBITDA
Margin of 15.1%.
Development Services Overview
Through our Development Services segment, we provide landscape architecture and development services for new facilities and
significant redesign projects. Specific services include project design and management services, landscape architecture, landscape
installation, irrigation installation, tree moving and installation, pool and water features and sports field services, among others. These
complex and specialized offerings showcase our technical expertise across a broad range of end market verticals.
We perform our services across the full spectrum of project sizes, with landscape development projects generally ranging from
$100,000 to over $10 million, with an average size of approximately $1.3 million.
Depending on the scope of the work, the contracts can vary in length from 2-3 months to up to 2-3 years. We largely self-perform
our work, and we subcontract certain services where we have strategically decided not to allocate resources, such as fencing, lighting
and parking lot construction. We believe that our capabilities as a single-source landscape development provider represent a point of
comfort for our customers who can be certain that we are managing their landscape development project from inception to completion.
10
In our Development Services business, we are typically hired by general contractors with whom we maintain strong relationships
as a result of our superior technical and project management capabilities. We believe the quality of our work is also well-regarded by
our end-customers, some of whom directly request that their general contractors utilize our services when outsourcing their landscape
development projects. Similar to our maintenance contracts, we leverage our proven cost estimation framework and proactive cost
management tactics to optimize the profitability of the work we perform under fixed rate development contracts.
For the year ended September 30, 2021, in Development Services, we generated net service revenues of $574.9 million and
Segment Adjusted EBITDA of $65.2 million, with a Segment Adjusted EBITDA Margin of 11.3%.
Our History
In 2013, affiliates of KKR acquired our predecessor business, Brickman Holding Group, Inc. In 2014, we acquired ValleyCrest
Holding Co. (“ValleyCrest Acquisition”) and changed our name to BrightView. As a result of the ValleyCrest Acquisition, BrightView
nearly doubled in size and gained national coverage. Our predecessor companies have long histories in the landscaping industry, with
Brickman Holding Group, Inc. founded in 1939 and ValleyCrest Holding Co. founded in 1949.
In 2016, we reconstituted our senior leadership team, including hiring a new chief executive officer and a new chief financial
officer. Our management team refocused our strategy to realign with the fundamental strengths of our business. BrightView has
undergone an organizational transformation recentered around a branch-centric model, empowering leaders at the local and regional
levels, and supporting branch locations with appropriate back office functions and an effective corporate framework.
In July 2018, we completed the initial public offering of our common stock (the “IPO”). Our common stock trades on the New
York Stock Exchange under the symbol “BV”. Our principal executive offices are located at 980 Jolly Road, Suite 300, Blue Bell,
Pennsylvania 19422.
Market Opportunity
Commercial Landscaping Services Industry
The landscape services industry consists of landscape maintenance and development services, as well as a number of related
ancillary services such as tree care and snow removal, for both commercial and residential customers. BrightView operates only within
the commercial sectors of each of the landscape maintenance, landscape development and snow removal industries. In 2021, commercial
landscape maintenance, including snow removal, represents a $74 billion industry that is characterized by a number of attractive market
drivers. The industry benefits from commercial customers’ need to provide consistently accessible and aesthetically-pleasing
environments. Due to the essential and non-discretionary need of these recurring services, the commercial landscape maintenance
services and snow removal services industries have exhibited, and are expected to continue to exhibit, stable and predictable growth.
Highlighting the consistency of this growth, the combined industry is expected to grow at a 1.9% CAGR from 2016 through 2025,
as depicted in the chart below:
Growth in the U.S. Commercial Landscaping and Snow Removal Services Industry (US$ in billions) (1)
(1) Source: IBISWORLD-Landscaping Services in the U.S. (March 2021) IBISWorld—Snowplowing Services in the U.S. (April 2021). Presents
commercial landscaping services and commercial snowplowing services as a share of the overall U.S. market at rates constant with IBISWorld
figures for 2021.
11
In addition to its stable characteristics, the industry is also highly fragmented. Despite being the largest provider of commercial
landscaping services, we currently hold only a 2.7% market share, representing a significant opportunity for future consolidation.
According to the 2021 IBISWorld Report, there are over 600,000 enterprises providing landscape maintenance services in the United
States. Approximately three-quarters of the industry participants are classified as sole proprietors, with a limited set of companies having
the capabilities to deliver sophisticated, large-scale landscaping services or operate regionally or nationally. The chart below illustrates
the segmentation of the landscape maintenance industry and highlights BrightView’s coverage of the non-residential sectors of the
industry:
(1)
(2)
Source: IBISWorld-Landscaping Services in the U.S. (March 2021)
Source: IBISWorld-Snowplowing Services in the U.S. (April 2021)
Steady growth in the commercial property markets has underpinned the commercial landscaping industry’s growth. Unlike
individual residential customers, HOAs and military housing managers possess the same sophistication and expectation of high-quality
services as corporations, and thus are more inclined to outsource landscaping needs to professional, scaled companies.
Key Trends and Industry Drivers
We believe we are well-positioned to capitalize on the following key industry trends that are expected to drive stable and growing
demand for our landscaping services:
(cid:120)
(cid:120)
(cid:120)
Outsourcing. To reduce expenditures and increase operational flexibility, businesses, institutions and governments are
increasingly outsourcing non-core processes, such as landscape maintenance.
Sole-Sourcing. An increasing number of businesses have made an effort to lower costs and improve quality through a
reduction in the number of suppliers or service vendors they hire. Companies have begun to award “sole-source” contracts
to full-service vendors who are able to meet expanded requirements.
Enhanced Quality Demands. Customers are increasingly raising their expectations regarding the quality of the work
performed by their landscape maintenance providers and on the variety of services offered. As demands continue to rise,
market share will accrue to those providers who have the expertise, quality of service and institutional procedures to meet
these enhanced expectations.
12
(cid:120)
(cid:120)
Increased Focus on Corporate Campus Environments. Corporations have increasingly invested in creating a unique and
welcoming atmosphere for employees, clients and tenants by enhancing their corporate campus environments. Irrespective
of whether a headquarters or corporate campus is located in an urban area or suburban area, we believe that companies are
increasingly viewing their exterior landscaping as a competitive differentiator and are making significant investments to
create visually appealing outdoor spaces.
Growth of Private Non-residential Construction. Over the next five years, the overall U.S. landscape maintenance industry
is projected to be supported by rising construction and economic activity. According to the 2021 IBISWorld Report, private
non-residential construction is forecasted to grow at an annualized rate of 2.0% over the five years leading to 2026. We
believe growth in commercial construction promotes growth in commercial landscape maintenance and development
services.
Organization
Our core operating strategy is to systematically deliver our services on a local level. Our organization is designed to allow our
branch-level management teams to focus on identifying revenue opportunities and delivering high quality services to customers, with
the support of a national organization to provide centralized core functions, such as human resources, procurement and other process-
driven management functions.
Our maintenance services model is grounded in our branch network. For example, a representative maintenance services branch
typically serves 50-150 customers across 200-300 sites, generating between $4 million and $14 million in annual revenues. Each branch
is led by a branch manager, who focuses on performance drivers, such as customer satisfaction, crew retention, safety and tactical
procurement. Branch managers are supported by account managers, who focus on managing crew leaders, customer retention and sales
of landscape enhancement services. In addition to our network of branch managers and account managers, our platform is differentiated
by a highly experienced team of operational senior vice presidents and vice presidents, organized regionally, with an average tenure of
15 years. These team members are responsible for leading, teaching and developing branch managers as well as maintaining adherence
to key operational strategies. Our senior operating personnel also foster a culture of engagement and emphasize promotion from within,
which has played a key role in making BrightView the employer of choice within the broader landscape maintenance industry.
Our scale supports centralizing key functions, which enables our branch and account managers to focus their efforts on fostering
deep relationships with customers, delivering excellent service and finding new revenue opportunities. As branches grow and we win
new business, our branch model is easily scalable within an existing, well-developed market-based management structure with
supporting corporate infrastructure.
We supplement our branch network with our qualified service partner network, which is managed by our BrightView Enterprise
Service team, or BES. Through our BES platform, we are able to provide landscape maintenance services in all 50 U.S. states. BES
identifies qualified service providers in areas where we do not have branches, thereby extending our service area. Our qualified service
partner screening process is designed to ensure that each of our service partners has the appropriate technical expertise, equipment and
resources, including insurance coverage, to support the projects we assign to them.
Our Development Services organization is centered around 40 branch locations strategically located in large metropolitan areas
with supportive demographics for growth and real estate development. Certain facilities used by our Development Services segment are
shared or co-located with our Maintenance organization. Our Development Services branch network is supported by three design centers,
as well as centralized support functions similar to our Maintenance Services organization.
13
Human Capital
Employees
As of September 30, 2021, we had a total of approximately 20,500 employees, including seasonal workers, consisting of
approximately 19,800 full-time and approximately 700 part-time employees in our two business segments. The number of part-time
employees varies significantly from time to time during the year due to seasonal and other operating requirements. We generally
experience our highest level of employment during the spring and summer seasons, which correspond with our third and fourth fiscal
quarters. The approximate number of full-time employees by segment, as of September 30, 2021, is as follows: Maintenance Services:
17,000; Development Services: 2,500. In addition, our corporate staff is approximately 300 employees. Approximately 6% of our
employees are covered by collective bargaining agreements. We have not experienced any material interruptions of operations due to
disputes with our employees and consider our relations with our employees to be satisfactory. Historically, we have used, and expect
to continue to use in the future, a U.S. government program that provides H-2B temporary, non-immigrant visas to foreign workers to
help satisfy a portion of our need for seasonal labor in certain markets. We employed approximately 2,100 seasonal workers in 2021,
and approximately 1,100 seasonal workers in 2020, through the H-2B visa program.
Safety
We care about our employees and we believe that our commercial success is linked to a safe and healthy workforce. We strive for
zero injuries and an incident-free workplace and have achieved significant progress towards this goal through risk reduction activities,
safety audits, and more effective safety observation programs. Our care and concern for employee wellbeing is enhanced by the
BrightView Landscapes Foundation, a nonprofit organization used to support employees during periods of personal and financial
stress. Demonstrating our commitment to safety, beginning in March 2020, we mobilized our response to COVID-19 pandemic. In
addition to adhering to or exceeding local government mandates and guidance provided by health authorities, we proactively
implemented quarantine protocols, social distancing policies, working from home arrangements, travel suspensions, frequent and
extensive disinfecting of our workspaces, and provision of personal protective equipment.
Compensation
Our compensation philosophy is designed to offer a compensation program that enables us to attract, motivate, reward and retain
high-caliber employees who are capable of creating and sustaining value for our stockholders over the long-term and to design
compensation and benefit programs that provide a fair and competitive compensation opportunity in order to appropriately reward
employees for their contributions to our success. Among other things, we offer comprehensive health and wellness plans, retirement
savings plans, and the opportunity to earn short-term and long-term incentive awards to eligible employees.
Training
We are committed to developing and unlocking the potential of our people and we make significant investments in training and
professional development. BrightView University, our learning and development platform, underpins the development of leadership
and professional skills.
Diversity, Equity and Inclusion
We are committed to creating and sustaining a diverse workplace that understands and values individual differences across
demographics, experiences and perspectives. We want to ensure that collaborative and respectful business practices in a performance-
based, supportive environment enable every employee to realize his/her/their career ambitions.
Competition
Although the United States landscaping, snow removal and landscape design and development industries have experienced some
consolidation, there is significant competition in all the areas that we serve, and such competition varies across geographies. In our
Maintenance Services segment, most competitors are smaller local and regional firms; however, we also face competition from other
large national firms such as TrueGreen Inc., The Davey Tree Expert Company and Bartlett Tree Experts. In our Development Services
segment, competitors are generally smaller local and regional firms. We believe that the primary competitive factors that affect our
operations are quality, service, experience, breadth of service offerings and price. We believe that our ability to compete effectively is
enhanced by the breadth of our services and the technological tools used by our teams as well as our nationwide reach.
14
Seasonality
Our services, particularly in our Maintenance Services segment, have seasonal variability such as increased mulching, flower
planting and intensive mowing in the spring, leaf removal and cleanup work in the fall, snow removal services in the winter and
potentially minimal mowing during drier summer months. This can drive fluctuations in revenue, costs and cash flows for interim
periods.
We have a significant presence in our evergreen markets, which require landscape maintenance services year round. In our
seasonal markets, which do not have a year-round growing season, the demand for our landscape maintenance services decreases during
the winter months. Typically, our revenues and net income have been higher in the spring and summer seasons, which correspond with
our third and fourth fiscal quarters. The lower level of activity in seasonal markets during our first and second fiscal quarters is partially
offset by revenue from our snow removal services. Such seasonality causes our results of operations to vary from quarter to quarter.
Weather Conditions
Weather may impact the timing of performance of landscape maintenance and enhancement services and progress on development
projects from quarter to quarter. Less predictable weather patterns, including snow events in the winter, hurricane-related cleanup in the
summer and fall, and the effects of abnormally high rainfall or drought in a given market, can impact both our revenues and our costs,
especially from quarter to quarter, but also from year to year in some cases. Extreme weather events such as hurricanes and tropical
storms can result in a positive impact to our business in the form of increased enhancement services revenues related to cleanup and
other services. However, such weather events may also negatively impact our ability to deliver our contracted services, sell and deliver
enhancement services or impact the timing of performance.
In our seasonal markets, the performance of our snow removal services is correlated with the amount of snowfall, the number of
snowfall events and the nature of those events in a given season. We benchmark our performance against ten- and thirty-year averages.
Intellectual Property
We, primarily through our subsidiaries, hold or have rights to use various service marks, trademarks and trade names we use in
the operation of our businesses that we deem particularly important to each of our businesses. As of September 30, 2021, we had marks
that were protected by registration (either by direct registration or by treaty) in the United States.
Regulatory Overview
We are subject to various federal, state and local laws and regulations, compliance with which increases our operating costs, limits
or restricts the services provided by our operating segments or the methods by which our operating segments offer, sell and fulfill those
services or conduct their respective businesses, or subjects us to the possibility of regulatory actions or proceedings. Noncompliance
with these laws and regulations can subject us to fines or various forms of civil or criminal prosecution, any of which could have a
material adverse effect on our reputation, business, financial position, results of operations and cash flows.
These federal, state and local laws and regulations include laws relating to wage and hour, immigration, permitting and licensing,
workers’ safety, tax, healthcare reforms, collective bargaining and other labor matters, environmental, federal motor carrier safety,
employee benefits and privacy and customer data security. We must also meet certain requirements of federal and state transportation
agencies, including requirements of the U.S. Department of Transportation and Federal Motor Carrier Safety Administration, with
respect to certain types of vehicles in our fleets. We are also regulated by federal, state and local laws, ordinances and regulations which
are enforced by Departments of Agriculture, environmental regulatory agencies and similar government entities.
Employee and Immigration Matters
We are subject to various federal, state and local laws and regulations governing our relationship with and other matters pertaining
to our employees, including regulations relating to wage and hour, health insurance, working conditions, safety, citizenship or work
authorization and related requirements, insurance and workers’ compensation, anti-discrimination, collective bargaining and other labor
matters.
We are also subject to the regulations of U.S. Immigration and Customs Enforcement (“ICE”), and we are audited from time to
time by ICE for compliance with work authorization requirements. In addition, some states in which we operate have adopted
immigration employment protection laws. Even if we operate in strict compliance with ICE and state requirements, some of our
employees may not meet federal work eligibility or residency requirements, despite our efforts and without our knowledge, which could
lead to a disruption in our work force.
15
Environmental Matters
Our businesses are subject to various federal, state and local laws and regulations regarding environmental, health and safety
matters, including the Comprehensive Environmental Response, Compensation and Liability Act, the Federal Insecticide, Fungicide
and Rodenticide Act, the Resource Conservation and Recovery Act, the Clean Air Act, the Emergency Planning and Community Right-
to-Know Act, the Oil Pollution Act and the Clean Water Act, each as amended. Among other things, these laws and regulations regulate
the emission or discharge of materials into the environment, govern the use, storage, treatment, disposal, handling and management of
hazardous substances and wastes and the registration, use, notification and labeling of pesticides, herbicides and fertilizers, and protect
the health and safety of our employees. These laws also impose liability for the costs of investigating and remediating, and damages
resulting from, present and past releases of hazardous substances, including releases by us or prior owners or operators, at sites we
currently own, lease or operate, customer sites or third-party sites to which we sent wastes. During fiscal 2021, there were no material
capital expenditures for environmental control facilities.
Information Technology
We have invested in technology designed to accelerate business performance, enhancing our ability to support standard processes
while retaining local and regional flexibility. We believe these investments position BrightView at the forefront of technology within
the commercial landscaping industry, enabling us to drive operational efficiencies throughout the business. Our IT systems allow us to
provide a high level of convenience and service to our customers, representing a competitive advantage that is difficult to replicate for
less technologically sophisticated competitors. As an example, our proprietary platform, BrightView Connect, allows customers to
submit service requests and landscape pictures directly to their account manager and field team, ensuring that specific service needs are
accurately delivered in a timely and efficient manner. Similarly, our mobile quality site assessment application, which is designed for
account managers to capture and annotate customer feedback, provides us with the ability to “walk the site” with our customers, confirm
our understanding of their needs and highlight future enhancement opportunities.
We have also made significant investments in our internal IT infrastructure, such as migrating to a consolidated enterprise resource
planning system and enabling shared services for accounts payable, accounts receivable and payroll. Additionally, we have implemented
an electronic time capture system, or ETC, for our crew leaders and supervisors in the field. ETC not only provides accurate information
for compliance and payroll purposes, but also enables our leadership with granular, analytical insights into job costing and crew
productivity.
In 2019 we invested in a Customer Relationship Management, or CRM, system for our account managers in the Maintenance
Services segment. Among other benefits, the CRM system is accessible on mobile devices and enables account managers to spend more
time with their customers, enhancing the quality of those relationships and supporting long-term customer retention.
Sales and Marketing
Our sales and marketing efforts are focused on both developing new customers and increasing penetration at existing customers.
We primarily sell our services to businesses, commercial property managers, general contractors and landscape architects through our
professionally trained core sales force. We have a field-based sales approach driven by our growing team of more than 170 business
developers that are focused on winning new customers at a local level. We also have a separate 21-member sales team that is focused
on targeting and capturing high-value, high-margin opportunities, including national accounts. Within our Maintenance Services
segment, every customer relationship is maintained by one of our more than 700+ branch-level account managers, who are responsible
for ensuring customer satisfaction, tracking service levels, promoting enhancement services and driving contract renewals. We believe
our decentralized approach to customer acquisition and management facilitates a high-level of customer service as local managers are
empowered and incentivized to better serve customers and grow their respective businesses.
Our marketing department is also integral to our strategy and helps drive business growth, retention and brand awareness through
marketing and communications efforts, including promotional materials, marketing programs, and advertising; digital marketing,
including search engine optimization and website development; and trade shows and company-wide public relations activities. Our field
marketing teams focus at the branch level to make our corporate marketing strategies more localized. Given the local nature of our
operations, we believe that a sizeable amount of our new sales are also driven by customer referrals which stem from our strong
reputation, depth of customer relationships and quality of work.
Fleet
Our highly visible fleet of approximately 16,000 trucks and trailers foster the strong brand equity associated with BrightView. We
manage our fleet with a dedicated centralized team, as well as regional equipment managers, who together focus on compliance,
maintenance, asset utilization and procurement. We believe we have the largest fleet of vehicles in the commercial landscape
maintenance industry.
Sourcing and Suppliers
16
Our size and broad national network make us an attractive partner for many industry-leading manufacturers and suppliers, which
has allowed us to maintain strong, long-term relationships with our supply base.
We source our equipment, supplies and other related materials and products from a range of suppliers, including landscaping
equipment companies, suppliers of fertilizer, seed, chemicals and other agricultural products, irrigation equipment manufacturers, and
a variety of suppliers who specialize in nursery goods, outdoor lighting, hardscapes and other landscaping products.
We generally procure our products through purchase orders rather than under long-term contracts with firm commitments. We
work to develop strong relationships with a select group of suppliers that we target based on a number of factors, including brand and
market recognition, price, quality, product support and service, service levels, delivery terms and their strategic positioning.
Where You Can Find More Information
We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange
Commission (“SEC”). Our SEC filings are available to the public over the internet at the SEC’s website at https://www.sec.gov. Our
SEC filings are also available on our website at https://www.brightview.com as soon as reasonably practicable after they are filed with
or furnished to the SEC.
information
From time to time, we may use our website as a distribution channel of material company information. Financial and other
important
through and posted on our website at
https://investor.brightview.com. In addition, you may automatically receive email alerts and other information about us when you enroll
your email address by visiting the Email Alerts section at https://investor.brightview.com. Our website and the information contained
on or connected to that site are not incorporated into this Annual Report on Form 10-K.
regarding our company
routinely accessible
is
Item 1A. Risk Factors
You should carefully consider the following risk factors as well as the other information included in this Form 10-K, including
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements
and related notes thereto. Any of the following risks could materially and adversely affect our business, financial condition, or results
of operations. The selected risks described below, however, are not the only risks facing us. Additional risks and uncertainties not
currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial
condition, or results of operations.
Risks Related to Our Business
Our business is affected by general business, financial market and economic conditions, which could adversely affect our financial
position, results of operations and cash flows.
Our business and results of operations are significantly affected by general business, financial market and economic conditions.
General business, financial market and economic conditions that could impact the level of activity in the commercial landscape services
industry include the level of commercial construction activity, the condition of the real estate markets where we operate, interest rate
fluctuations, inflation, unemployment and wage levels, changes and uncertainties related to government fiscal and tax policies including
change in tax rates, duties, tariffs, or other restrictions, capital spending, bankruptcies, volatility in both the debt and equity capital
markets, liquidity of the global financial markets, the availability and cost of credit, investor and consumer confidence, global economic
growth, local, state and federal government regulation, the cost and availability of our supplies and equipment and the strength of
regional and local economies in which we operate. New or increased tariffs may impact the costs of some of our supplies and equipment.
The degree of our exposure is dependent on (among other things) the type of goods, rates imposed and timing of the tariffs. These factors
could also negatively impact the timing or the ultimate collection of accounts receivable, which would adversely impact our business,
financial position, results of operations and cash flows.
During an economic downturn, our customers may decrease their spending on landscape services by seeking to reduce
expenditures for landscape services, in particular enhancement services, engaging a lower cost service provider or performing landscape
maintenance themselves rather than outsourcing to third parties like us or generally reducing the size and complexity of their new
landscaping development projects.
The COVID-19 pandemic has impacted and will likely continue to impact our business, financial condition and results of operations.
A pandemic outbreak of a novel strain of coronavirus (COVID-19) and efforts to mitigate the health impact of the pandemic have
profoundly and adversely affected economic activity. National, state and local governments have taken actions to mitigate the impact of
the COVID-19 pandemic in a variety of ways, including by declaring states of emergency, issuing stay-at-home orders and ordering
certain businesses to close or limit their operations. Although our Maintenance and Development operations are considered essential
services, there are some jurisdictions that have periodically limited or halted our operations or the operations of the general contractors
with which we work. Resurgences in the COVID-19 pandemic, including breakthrough infections among the fully vaccinated
population, the adoption and effectiveness of vaccines, and the impacts of COVID-19 variants may lead governments to reinstitute
restrictions and social distancing measures. Amended or future governmental orders or other restrictions may limit or prohibit our
17
Maintenance or Development operations in certain locations in the future. Further or re-implemented limitations could have a material
adverse impact on our business, financial condition and results of operations.
In addition to limitations on our operations as a result of governmental orders or restrictions, the COVID-19 pandemic has caused
and will likely continue to cause disruptions to our business and operations as a result of social distancing measures, restrictions on or
consumer reluctance to travel and labor shortages as a result of illness and possible delays in H2-B visa processing in connection with
government orders and regulations related to immigration. In addition, the COVID-19 pandemic has caused and may continue to cause
disruptions in the business and operations of the general contractors with which we work and our suppliers. We may be unable to timely
obtain the supplies we need to provide our services, which could have a material adverse impact on our ability to operate our business.
As a result, we may lose business opportunities, have reduced revenues or have difficulty collecting payments from clients, which could
have a material adverse impact on our business, financial condition and results of operation. The COVID-19 pandemic has resulted in
reduced demand for our ancillary services which has, as a result, led to a decline in ancillary revenues. We expect ancillary revenues to
continue to be adversely impacted by the pandemic. As a result of federal or other mandates that require employees to be vaccinated or
be tested regularly, we may experience increased costs related to COVID-19 testing, or may experience attrition in relation to employees
who do not wish to comply with the requirements of the mandate.
The COVID-19 pandemic has also resulted in material adverse national and global economic conditions that have impacted, and
will continue to impact, our business. Such conditions may result in an economic recession or prolonged economic downturn, which
could result in a material loss of business for the duration of the downturn. Actions taken to mitigate the pandemic and resulting
economic conditions are likely to materially adversely impact our business, financial condition, results of operations and cash
flows. Although we took certain actions to ensure the continuity of our business and operations, we may need to take additional actions
to ensure the continuity of our business, including use of a hiring freeze, furloughing or laying off employees and taking other actions
to limit expenditures. We have drawn on borrowing facilities and may need to further extend borrowings and indebtedness in order to
obtain additional liquidity. The COVID-19 pandemic caused severe disruption and volatility in the financial markets. Depending on the
extent and duration of the COVID-19 pandemic, the price of our common stock on the NYSE experienced and may continue to
experience declines and volatility which may negatively impact our ability to raise capital through the equity markets if necessary to
increase our liquidity.
In addition to the risks specifically described above, the impact of COVID-19 is likely to implicate and exacerbate certain risks,
including those related to our customers, demand for our services, reliance on workers, suppliers, our indebtedness, and potential
additional impairment of our goodwill and other intangible assets.
Our industry and the markets in which we operate are highly competitive and increased competitive pressures could reduce our share
of the markets we serve and adversely affect our business, financial position, results of operations and cash flows.
We operate in markets with relatively few large competitors, but barriers to entry in the landscape services industry are generally
low, which has led to highly competitive markets consisting of entities ranging from small or local operators to large regional businesses,
as well as potential customers that choose not to outsource their landscape maintenance services. Any of our competitors may foresee
the course of market development more accurately than we do, provide superior service, have the ability to deliver similar services at a
lower cost, develop stronger relationships with our customers and other consumers in the landscape services industry, adapt more quickly
to evolving customer requirements, devote greater resources to the promotion and sale of their services or access financing on more
favorable terms than we can obtain. In addition, while regional competitors may be smaller than we are, some of these businesses may
have a greater presence than we do in a particular market. As a result of any of these factors, we may not be able to compete successfully
with our competitors, which could have an adverse effect on our business, financial position, results of operations and cash flows.
Our customers consider the quality and differentiation of the services we provide, our customer service and price when deciding
whether to use our services. As we have worked to establish ourselves as leading, high-quality providers of landscape maintenance and
development services, we compete predominantly on the basis of high levels of service and strong relationships. We may not be able to,
or may choose not to, compete with certain competitors on the basis of price and accordingly, some of our customers may switch to
lower cost services providers or perform such services themselves. If we are unable to compete effectively with our existing competitors
or new competitors enter the markets in which we operate, or our current customers stop outsourcing their landscape maintenance
services, our financial position, results of operations and cash flows may be materially and adversely affected.
In addition, our former employees may start landscape services businesses similar to ours and compete directly with us. While we
customarily sign non-competition agreements, which typically continue for one year following the termination of employment, with
certain of our employees, such agreements do not fully protect us against competition from former employees and may not be enforceable
depending on local law and the surrounding circumstances. Consequently, we cannot predict with certainty whether, if challenged, a
court will enforce any particular non-competition agreement. Any increased competition from businesses started by former employees
may reduce our market share and adversely affect our business, financial position, results of operations and cash flows.
Our business success depends on our ability to preserve long-term customer relationships.
Our success depends on our ability to retain our current customers, renew our existing customer contracts and obtain new business.
Our ability to do so generally depends on a variety of factors, including the quality, price and responsiveness of our services, as well as
18
our ability to market these services effectively and differentiate ourselves from our competitors. We largely seek to differentiate
ourselves from our competitors on the basis of high levels of service, breadth of service offerings and strong relationships and may not
be able to, or may choose not to, compete with certain competitors on the basis of price. There can be no assurance that we will be able
to obtain new business, renew existing customer contracts at the same or higher levels of pricing or that our current customers will not
cease operations, elect to self-operate or terminate contracts with us. In our Maintenance Services segment, we primarily provide services
pursuant to agreements that are cancelable by either party upon 30-days’ notice. Consequently, our customers can unilaterally terminate
all services pursuant to the terms of our service agreements, without penalty.
We may be adversely affected if customers reduce their outsourcing.
Our business and growth strategies benefit from the continuation of a current trend toward outsourcing services. Customers will
outsource if they perceive that outsourcing may provide quality services at a lower overall cost and permit them to focus on their core
business activities. We cannot be certain that this trend will continue or that customers that have outsourced functions will not decide to
perform these functions themselves. If a significant number of our existing customers reduced their outsourcing and elected to perform
the services themselves, such loss of customers could have a material adverse impact on our business, financial position, results of
operations and cash flows.
Because we operate our business through dispersed locations across the United States, our operations may be materially adversely
affected by inconsistent practices and the operating results of individual branches may vary.
We operate our business through a network of dispersed locations throughout the United States, supported by corporate executives
and certain centralized services in our headquarters, with local branch management retaining responsibility for day-to-day operations.
Our operating structure could make it difficult for us to coordinate procedures across our operations in a timely manner or at all, and
certain of our branches may require significant oversight and coordination from headquarters to support their growth. In addition, the
operating results of an individual branch may differ from that of another branch for a variety of reasons, including market size,
management practices, competitive landscape, regulatory requirements and local economic conditions. Inconsistent or incomplete
implementation of corporate strategy and policies at the local level could materially and adversely affect our business, financial position,
results of operations and cash flows.
We may not successfully implement our business strategies, including achieving our growth objectives.
We may not be able to fully implement our business strategies or realize, in whole or in part within the expected time frames, the
anticipated benefits of our various growth or other initiatives. Our various business strategies and initiatives, including our growth,
operational and management initiatives, are subject to business, economic and competitive uncertainties and contingencies, many of
which are beyond our control. The execution of our business strategy and our financial performance will continue to depend in significant
part on our executive management team and other key management personnel, our ability to identify and complete suitable acquisitions
and our executive management team’s ability to execute new operational initiatives. In addition, we may incur certain costs as we pursue
our growth, operational and management initiatives, and we may not meet anticipated implementation timetables or stay within budgeted
costs. As these initiatives are undertaken, we may not fully achieve our expected efficiency improvements or growth rates, or these
initiatives could adversely impact our customer retention, supplier relationships or operations. Also, our business strategies may change
from time to time in light of our ability to implement our business initiatives, competitive pressures, economic uncertainties or
developments, or other factors.
Future acquisitions or other strategic transactions could negatively impact our reputation, business, financial position, results of
operations and cash flows.
We have acquired businesses in the past and expect to continue to acquire businesses or assets in the future. However, there can
be no assurance that we will be able to identify and complete suitable acquisitions. For example, due to the highly fragmented nature of
our industry, it may be difficult for us to identify potential targets with revenues sufficient to justify taking on the risks associated with
pursuing their acquisition. The failure to identify suitable acquisitions and successfully integrate these acquired businesses may limit
our ability to expand our operations and could have an adverse effect on our business, financial position and results of operations.
In addition, acquired businesses may not perform in accordance with expectations, and our business judgments concerning the
value, strengths and weaknesses of acquired businesses may not prove to be correct. We may also be unable to achieve expected
improvements or achievements in businesses that we acquire. The process of integrating an acquired business may create unforeseen
difficulties and expenses, including the diversion of resources away from our operations; the inability to retain employees, customers
and suppliers; difficulties implementing our strategy at the acquired business; the assumption of actual or contingent liabilities (including
those relating to the environment); failure to effectively and timely adopt and adhere to our internal control processes, accounting
systems and other policies; write-offs or impairment charges relating to goodwill and other intangible assets; unanticipated liabilities
relating to acquired businesses; and potential expenses associated with litigation with sellers of such businesses.
If management is not able to effectively manage the integration process, or if any significant business activities are interrupted as
a result of the integration process, we may not be able to realize anticipated benefits and revenue opportunities resulting from acquisitions
and our business could suffer. Although we conduct due diligence investigations prior to each acquisition, there can be no assurance
that we will discover or adequately protect against all material liabilities of an acquired business for which we may be responsible as a
successor owner or operator.
19
In connection with our acquisitions, we generally require that key management and former principals of the businesses we acquire
enter into non-competition agreements in our favor. Enforceability of these non-competition agreements varies from state to state, and
may depend on the relevant facts and circumstances. Consequently, we cannot predict with certainty whether, if challenged, a court will
enforce any particular non-competition agreement. Increased competition could materially and adversely affect our business, financial
position, results of operations and cash flows.
Seasonality affects the demand for our services and our results of operations and cash flows.
The demand for our services and our results of operations are affected by the seasonal nature of our landscape maintenance
services in certain regions. In geographies that do not have a year-round growing season, the demand for our landscape maintenance
services decreases during the winter months. Typically, our revenues and net income have been higher in the spring and summer seasons,
which correspond with our third and fourth fiscal quarters. The lower level of activity in seasonal markets during our first and second
fiscal quarters is partially offset by revenue from our snow removal services. In our Development Services segment, we typically
experience lower activity levels during the winter months. Such seasonality causes our results of operations to vary from quarter to
quarter. Due to the seasonal nature of the services we provide, we also experience seasonality in our employment and working capital
needs. Our employment and working capital needs generally correspond with the increased demand for our services in the spring and
summer months and employment levels and operating costs are generally at their highest during such months. Consequently, our results
of operations and financial position can vary from year-to-year, as well as from quarter-to-quarter. If we are unable to effectively manage
the seasonality and year-to-year variability, our results of operations, financial position and cash flow may be adversely affected.
Our operations are impacted by weather conditions and climate change.
We perform landscape services, the demand for which is affected by weather conditions, including impacts from climate change,
droughts, severe storms and significant rain or snowfall, all of which may impact the timing and frequency of the performance of our
services, or our ability to perform the services at all. For example, severe weather conditions, such as excessive heat or cold, may result
in maintenance services being omitted for part of a season or beginning or ending earlier than anticipated, which could result in lost
revenues or require additional services to be performed for which we may not receive corresponding incremental revenues. Variability
in the frequency of which we must perform our services can affect the margins we realize on a given contract.
Certain extreme weather events, such as hurricanes and tropical storms, can result in increased enhancement revenues related to
cleanup and other services. However, such weather events may also impact our ability to deliver our contracted services or cause damage
to our facilities or equipment. These weather events can also result in higher fuel costs, higher labor costs and shortages of raw materials
and products. As a result, a perceived earnings benefits related to extreme weather events may be moderated. Droughts could cause
shortage in the water supply and governments may impose limitations on water usage, which may change customer demand for
landscape maintenance and irrigation services. There is a risk that demand for our services will change in ways that we are unable to
predict.
Climate change may increase in the frequency, duration and severity of extreme weather events and make weather patterns change
or more difficult to predict. Such changes may impede our ability to provide services or make it difficult for us to anticipate customer
demand. We have made certain commitments to mitigate against climate change, but it may take us longer than expected to meet these
commitments, or we may not meet them at all.
Increases in raw material costs, fuel prices, wages and other operating costs, and changes in our ability to source adequate supplies
and materials in a timely manner, could adversely impact our business, financial position, results of operations and cash flows.
Our financial performance may be adversely affected by increases in our operating expenses, such as fuel, fertilizer, chemicals,
road salt, mulch, wages and salaries, employee benefits, health care, subcontractor costs, vehicle, facilities and equipment leases,
insurance and regulatory compliance costs, all of which may be subject to inflationary pressures. While we seek to manage price and
availability risks related to raw materials, such as fuel, fertilizer, chemicals, road salt and mulch, through procurement strategies, these
efforts may not be successful and we may experience adverse impacts due to rising prices of such products. In addition, we closely
monitor wage, salary and benefit costs in an effort to remain competitive in our markets. Attracting and maintaining a high quality
workforce is a priority for our business, and if wage, salary or benefit costs increase, including as a result of minimum wage legislation,
our operating costs will increase as they have in the past. We cannot predict the extent to which we may experience future increases in
operating expenses as well as various regulatory compliance costs. To the extent such costs increase, we may be prevented, in whole or
in part, from passing these cost increases through to our existing and prospective customers, which could have a material adverse impact
on our business, financial position, results of operations and cash flows.
Our ability to offer a wide variety of services to our customers is dependent upon our ability to obtain adequate supplies, materials
and products from manufacturers, distributors and other suppliers. Any disruption or shortage in our sources of supply due to
unanticipated increased demand or disruptions in production or delivery of products such as fertilizer, chemicals, road salt and mulch,
could result in a loss of revenues, reduced margins and damage to our relationships with customers. In addition, we source certain
materials and products we use in our business from a limited number of suppliers. If our suppliers experience difficulties or disruptions
in their operations or if we lose any significant supplier, we may experience increased supply costs or may experience delays in
establishing replacement supply sources that meet our quality and control standards. The loss of, or a substantial decrease in the
20
availability of, supplies and products from our suppliers or the loss of key supplier arrangements could adversely impact our business,
financial position, results of operations and cash flows.
If we are unable to accurately estimate the overall risks, requirements or costs when we bid on or negotiate contracts that are
ultimately awarded to us, we may achieve lower than anticipated profits or incur contract losses.
A significant portion of our contracts are subject to competitive bidding and/or are negotiated on a fixed- or capped-fee basis for
the services covered. Such contracts generally require that the total amount of work, or a specified portion thereof, be performed for a
single price irrespective of our actual costs. If our cost estimates for a contract are inaccurate, or if we do not execute the contract within
our cost estimates, then cost overruns may cause the contract not to be as profitable as we expected or could cause us to incur losses.
Our landscape development services have been, and in the future may be, adversely impacted by fluctuations or declines in the new
commercial construction sector, as well as in spending on repair and upgrade activities. Such variability in this part of our business
could result in lower revenues and reduced cash flows and profitability.
With respect to our Development Services segment, a significant portion of our revenues are derived from development activities
associated with new commercial real estate development, including hospitality and leisure, which has experienced periodic declines,
some of which have been severe, including recent and sustained declines associated with the COVID-19 pandemic. The strength of these
markets depends on, among other things, housing starts, local occupancy rates, demand for commercial space, non-residential
construction spending activity, business investment and general economic conditions, which are a function of many factors beyond our
control, including interest rates, employment levels, availability of credit, consumer spending, consumer confidence and capital
spending. During a downturn in the commercial real estate development industry, customers may decrease their spending on landscape
development services by generally reducing the size and complexity of their new landscaping development projects. Additionally, when
interest rates rise, there may be a decrease in the spending activities of our current and potential Development Services
customers. Fluctuations in commercial real estate development markets could have an adverse effect on our business, financial position,
results of operations or cash flows.
Our results of operations for our snow removal services depend primarily on the level, timing and location of snowfall. As a result,
a decline in frequency or total amounts of snowfall in multiple regions for an extended time could cause our results of operations to
decline and adversely affect our ability to generate cash flow.
As a provider of snow removal services, our revenues are impacted by the frequency, amount, timing and location of snowfall in
the regions in which we offer our services. A high number of snowfalls in a given season generally has a positive effect on the results
of our operations. However, snowfall in the months of March, April, October and/or November could have a potentially adverse effect
on ordinary course maintenance landscape services typically performed during those periods. A low level or lack of snowfall in any
given year in any of the snow-belt regions in North America (primarily the Midwest, Mid-Atlantic and Northeast regions of the United
States) or a sustained period of reduced snowfall events in one or more of the geographic regions in which we operate will likely cause
revenues from our snow removal services to decline in such year, which in turn may adversely affect our revenues, results of operations
and cash flow. In the past ten- and thirty-year periods, the regions that we service have averaged 3,187 inches and 3,350 inches of annual
snowfall, respectively. However, there can be no assurance that these regions will receive seasonal snowfalls near their historical average
in the future. Variability in the frequency and timing of snowfalls creates challenges associated with budgeting and forecasting for the
Maintenance Services segment. Additionally, the effects of climate change may impact the frequency and total amounts of future
snowfall, which could have a material adverse effect on our revenues, results of operations and cash flow.
Our success depends on our executive management and other key personnel.
Our future success depends to a significant degree on the skills, experience and efforts of our executive management and other
key personnel and their ability to provide us with uninterrupted leadership and direction. The failure to retain our executive officers and
other key personnel or a failure to provide adequate succession plans could have an adverse impact. The availability of highly qualified
talent is limited, and the competition for talent is robust. A failure to efficiently or effectively replace executive management members
or other key personnel and to attract, retain and develop new qualified personnel could have an adverse effect on our operations and
implementation of our strategic plan.
Our future success depends on our ability to attract, retain and maintain positive relations with trained workers.
Our future success and financial performance depend substantially on our ability to attract, train and retain hourly and field
workers, as well as trained workers, including account, branch and regional management personnel. The landscape services industry is
labor intensive, and industry participants, including us, experience high turnover rates among hourly workers and competition for
qualified supervisory personnel. In addition, we, like many landscape service providers who conduct a portion of their operations in
seasonal climates, employ a portion of our field personnel for only part of the year.
We have historically relied on the H-2B visa program to bring workers to the United States on a seasonal basis. We employed
approximately 2,100 seasonal workers in 2021 and approximately 1,100 seasonal workers in 2020, through the H-2B visa program. If
21
we are unable to hire sufficient numbers of seasonal workers, through the H-2B program or otherwise, we may experience a labor
shortage. In the event of a labor shortage, whether related to seasonal or permanent staff, we could experience difficulty in delivering
our services in a high-quality or timely manner and could experience increased recruiting, training and wage costs in order to attract and
retain employees, which would result in higher operating costs and reduced profitability.
As of September 30, 2021, we had approximately 20,500 employees, approximately 6.0% of which are represented by a union
pursuant to collective bargaining agreements. If a significant number of our employees were to attempt to unionize, and/or successfully
unionized, including in the wake of any future legislation that makes it easier for employees to unionize, our business could be negatively
affected. Any inability by us to negotiate collective bargaining arrangements could result in strikes or other work stoppages disrupting
our operations, and new union contracts could increase operating and labor costs. If these labor organizing activities were successful, it
could further increase labor costs, decrease operating efficiency and productivity in the future, or otherwise disrupt or negatively impact
our operations. Moreover, certain of the collective bargaining agreements we participate in require periodic contributions to
multiemployer defined benefit pension plans. Our required contributions to these plans could increase because of a shrinking
contribution base as a result of the insolvency or withdrawal of other companies that currently contribute to these plans, the inability or
failure of withdrawing companies to pay their withdrawal liability, low interest rates, lower than expected returns on pension fund assets
or other funding deficiencies. Additionally, in the event we were to withdraw from some or all of these plans as a result of our exiting
certain markets or otherwise, and the relevant plans are underfunded, we may become subject to a withdrawal liability. The amount of
these required contributions may be material.
Our business could be adversely affected by a failure to properly verify the employment eligibility of our employees.
We use the U.S. government’s “E-Verify” program to verify employment eligibility for all new employees throughout our
company. However, use of E-Verify does not guarantee that we will successfully identify all applicants who are ineligible for
employment. Although we use E-Verify and require all new employees to provide us with government-specified documentation
evidencing their employment eligibility, some of our employees may, without our knowledge, be unauthorized workers. The
employment of unauthorized workers may subject us to fines or penalties, and adverse publicity that negatively impacts our reputation
and may make it more difficult to hire and keep qualified employees. We are subject to regulations of U.S. Immigration and Customs
Enforcement, or ICE, and we are audited from time to time by ICE for compliance with work authentication requirements. While we
believe we are in compliance with applicable laws and regulations, if we are found not to be in compliance as a result of any audits, we
may be subject to fines or other remedial actions. See “Business—Regulatory Overview—Employee and Immigration Matters.”
Termination of a significant number of employees in specific markets or across our company due to work authorization or other
regulatory issues would disrupt our operations, and could also cause adverse publicity and temporary increases in our labor costs as we
train new employees. We could also become subject to fines, penalties and other costs related to claims that we did not fully comply
with all recordkeeping obligations of federal and state immigration compliance laws. Our reputation and financial performance may be
materially harmed as a result of any of these factors. Furthermore, immigration laws have been an area of considerable political focus
in recent years, and the U.S. Congress and the Executive Branch of the U.S. government from time to time consider or implement
changes to federal immigration laws, regulations or enforcement programs. Further changes in immigration or work authorization laws
may increase our obligations for compliance and oversight, which could subject us to additional costs and potential liability and make
our hiring process more cumbersome, or reduce the availability of potential employees.
Our use of subcontractors to perform work under certain customer contracts exposes us to liability and financial risk.
In our Development Services segment and through our qualified service partner network in our Maintenance Services segment,
we use subcontractors to perform work in situations in which we are not able to self-perform such work. If we are unable to hire qualified
subcontractors, our ability to successfully complete a project or perform services could be impaired. If we are not able to locate qualified
third-party subcontractors or the amount we are required to pay for subcontractors exceeds what we have estimated, we could incur
losses or realize lower than expected margins. We may not have direct control over our subcontractors, and although we have in place
controls and programs to monitor the work of our subcontractors, there can be no assurance that these programs will have the desired
effect. The actual or alleged failure to perform or negligence of a subcontractor may damage our reputation or expose us to liability,
which could impact our results of operations. Furthermore, if our subcontractors are unable to cover the cost of damages or physical
injuries caused by their actions, whether through insurance or otherwise, we may be held liable for such costs.
22
A significant portion of our assets consists of goodwill and other intangible assets, the value of which may be reduced if we determine
that additional assets are impaired.
On December 18, 2013, an affiliate of KKR indirectly acquired a controlling interest in our company and on June 30, 2014, we
acquired ValleyCrest Holding Co. As a result of the KKR and ValleyCrest acquisitions, we applied the acquisition method of accounting.
Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the
tangible and identifiable intangible assets acquired, liabilities assumed and any non-controlling interest. Intangible assets, including
goodwill, are assigned to our segments based upon their fair value at the time of acquisition. In accordance with accounting principles
generally accepted in the United States of America (“GAAP”), goodwill and indefinite lived intangible assets are evaluated for
impairment annually, or more frequently if circumstances indicate impairment may have occurred. As of September 30, 2021, the net
carrying value of goodwill and other intangible assets, net, represented $2,148.4 million, or 66.4% of our total assets. A future impairment,
if any, could have a material adverse effect to our financial position or results of operations. See Note 7 “Intangible Assets, Goodwill, Acquisitions
and Divestitures” to our audited consolidated financial statements included in Part II. Item 8 of this Form 10-K for additional information
related to impairment testing for goodwill and other intangible assets and the associated charges taken.
If we fail to comply with requirements imposed by applicable law or other governmental regulations, we could become subject to
lawsuits, investigations and other liabilities and restrictions on our operations that could significantly and adversely affect our
business.
We are subject to governmental regulation at the federal, state, and local levels in many areas of our business, such as employment
laws, wage and hour laws, discrimination laws, immigration laws, human health and safety laws, transportation laws, environmental
laws, false claims or whistleblower statutes, disadvantaged business enterprise statutes, tax codes, antitrust and competition laws,
intellectual property laws, governmentally funded entitlement programs and cost and accounting principles, the Foreign Corrupt
Practices Act, other anti-corruption laws, lobbying laws, motor carrier safety laws and data privacy and security laws. We may be subject
to review, audit or inquiry by applicable regulators from time to time.
While we attempt to comply with all applicable laws and regulations, there can be no assurance that we are in full compliance
with all applicable laws and regulations or interpretations of these laws and regulations at all times or that we will be able to comply
with any future laws, regulations or interpretations of these laws and regulations. If we fail to comply with applicable laws and
regulations, including those referred to above, we may be subject to investigations, criminal sanctions or civil remedies, including fines,
penalties, damages, reimbursement, injunctions, seizures or disgorgements of the ability to operate our motor vehicles. The cost of
compliance or the consequences of non-compliance could have a material adverse effect on our business and results of operations. In
addition, government agencies may make changes in the regulatory frameworks within which we operate that may require either the
corporation as a whole or individual businesses to incur substantial increases in costs in order to comply with such laws and regulations.
Compliance with environmental, health and safety laws and regulations, including laws pertaining to the use of pesticides, herbicides
and fertilizers, or liabilities thereunder, as well as the risk of potential litigation, could result in significant costs that adversely impact
our reputation, business, financial position, results of operations and cash flows.
We are subject to a variety of federal, state and local laws and regulations relating to environmental, health and safety matters. In
particular, in the United States, products containing pesticides generally must be registered with the U.S. Environmental Protection
Agency, or EPA, and similar state agencies before they can be sold or applied. The pesticides we use are manufactured by independent
third parties and are evaluated by the EPA as part of its ongoing exposure risk assessment and may be subject to similar evaluation by
similar state agencies. The EPA, or similar state agencies, may decide that a pesticide we use will be limited or will not be re-registered
for use in the United States. We cannot predict the outcome or the severity of the effect of the EPA’s, or a similar state agency’s,
continuing evaluations. The failure to obtain or the cancellation of any such registration, or the partial or complete ban of such pesticides,
could have an adverse effect on our business, the severity of which would depend on the products involved, whether other products
could be substituted and whether our competitors were similarly affected.
The use of certain pesticides, herbicides and fertilizer products is also regulated by various federal, state and local environmental
and public health and safety agencies. These regulations may require that only certified or professional users apply the product or that
certain products only be used on certain types of locations. These laws may also require users to post notices on properties at which
products have been or will be applied, notification to individuals in the vicinity that products will be applied in the future, or labeling of
certain products or may restrict or ban the use of certain products. We can give no assurance that we can prevent violations of these or
other regulations from occurring. Even if we are able to comply with all such regulations and obtain all necessary registrations
and licenses, we cannot assure you that the pesticides, herbicides, fertilizers or other products we apply, or the manner in which we
apply them, will not be alleged to cause injury to the environment, to people or to animals, or that such products will not be restricted
or banned in certain circumstances. For example, we could be named in or subject to personal injury claims stemming from alleged
environmental torts, similar to those that have been brought against certain manufacturers of herbicides. The costs of compliance,
consequences of non-compliance, remediation costs and liabilities, unfavorable public perceptions of such products or products liability
lawsuits could have a material adverse effect on our reputation, business, financial position, results of operations and cash flows.
23
In addition, federal, state and local agencies regulate the use, storage, treatment, disposal, handling and management of hazardous
substances and wastes, emissions or discharges from our facilities or vehicles and the investigation and clean-up of contaminated sites,
including our sites, customer sites and third-party sites to which we send wastes. We could incur significant costs and liabilities,
including investigation and clean-up costs, fines, penalties and civil or criminal sanctions for non-compliance and claims by third parties
for property and natural resource damage and personal injury under these laws and regulations. If there is a significant change in the
facts or circumstances surrounding the assumptions upon which we operate, or if we are found to violate, or be liable under, applicable
environmental and public health and safety laws and regulations, it could have a material adverse effect on future environmental capital
expenditures and other environmental expenses and on our reputation, business, financial position, results of operations and cash flows.
In addition, potentially significant expenditures could be required to comply with environmental laws and regulations, including
requirements that may be adopted or imposed in the future.
Adverse litigation judgments or settlements resulting from legal proceedings relating to our business operations could materially
adversely affect our business, financial position and results of operations.
From time to time, we are subject to allegations, and may be party to legal claims and regulatory proceedings, relating to our
business operations. Such allegations, claims or proceedings may, for example, relate to personal injury, property damage, general
liability claims relating to properties where we perform services, vehicle accidents involving our vehicles and our employees, regulatory
issues, contract disputes or employment matters and may include class actions. See Part I. Item 3 “Legal Proceedings”. Such allegations,
claims and proceedings have been and may be brought by third parties, including our customers, employees, governmental or regulatory
bodies or competitors. Defending against these and other such claims and proceedings is costly and time consuming and may divert
management’s attention and personnel resources from our normal business operations, and the outcome of many of these claims and
proceedings cannot be predicted. If any of these claims or proceedings were to be determined adversely to us, a judgment, a fine or a
settlement involving a payment of a material sum of money were to occur, or injunctive relief were issued against us, our business,
financial position and results of operations could be materially adversely affected.
Currently, we carry a broad range of insurance for the protection of our assets and operations. However, such insurance may not
fully cover all material expenses related to potential allegations, claims and proceedings, or any adverse judgments, fines or settlements
resulting therefrom, as such insurance programs are often subject to significant deductibles or self-insured retentions or may not cover
certain types of claims. In addition, we self-insure with respect to certain types of claims. To the extent we are subject to a higher
frequency of claims, are subject to more serious claims or insurance coverage is not available, our liquidity, financial position and results
of operations could be materially adversely affected.
We are also responsible for our legal expenses relating to such claims. We reserve currently for anticipated losses and related
expenses. We periodically evaluate and adjust our claims reserves to reflect trends in our own experience as well as industry trends.
However, ultimate results may differ from our estimates, which could result in losses over our reserved amounts.
Some of the equipment that our employees use is dangerous, and an increase in accidents resulting from the use of such equipment
could negatively affect our reputation, results of operations and financial position.
Many of the services that we provide pose the risk of serious personal injury to our employees. Our employees regularly use
dangerous equipment, such as lawn mowers, edgers and other power equipment. As a result, there is a significant risk of work-related
injury and workers’ compensation claims. To the extent that we experience a material increase in the frequency or severity of accidents
or workers’ compensation claims, or unfavorable developments on existing claims or fail to comply with worker health and safety
regulations, our operating results and financial position could be materially and adversely affected. In addition, the perception that our
workplace is unsafe may damage our reputation among current and potential employees, which may impact our ability to recruit and
retain employees, which may adversely affect our business and results of operations.
Any failure, inadequacy, interruption, security failure or breach of our information technology systems, whether owned by us or
outsourced or managed by third parties, could harm our ability to effectively operate our business and could have a material adverse
effect on our business, financial position and results of operations.
We are dependent on certain centralized automated information technology systems and networks to manage and support a variety
of business processes and activities. Our ability to effectively manage our business and coordinate the sourcing of supplies, materials
and products and our services depends significantly on the reliability and capacity of these systems and networks. Such systems and
networks are subject to damage or interruption from power outages, telecommunications problems, data corruption, software errors,
network failures, security breaches, ransomware attacks, acts of war or terrorist attacks, fire, flood and natural disasters. Our servers or
cloud-based systems could be affected by physical or electronic break-ins, and computer viruses or similar disruptions may occur. A
system outage may also cause the loss of important data or disrupt our operations. Our existing safety systems, data backup, access
protection, user management, disaster recovery and information technology emergency planning may not be sufficient to prevent or
minimize the effect of data loss or long-term network outages.
We may periodically upgrade our existing information technology systems with the assistance of third party vendors, and the costs
to upgrade such systems may be significant. Costs and potential problems and interruptions associated with the implementation of new
24
or upgraded systems and technology or with maintenance or adequate support of existing systems could disrupt or reduce the efficiency
of our operations. If we cannot meet our information technology staffing needs, we may not be able to fulfill our technology initiatives
while continuing to provide maintenance on existing systems. We could be required to make significant capital expenditures to remediate
any such failure, malfunction or breach with our information technology systems or networks. Any material disruption or slowdown of
our systems, including those caused by our failure to successfully upgrade our systems, and our inability to convert to alternate systems
in an efficient and timely manner could have a material adverse effect on our business, financial position and results of operations.
We rely on commercially available systems, software, tools and monitoring to provide security for processing, transmitting and
storing confidential information of our customers, employees and third parties. Unlawful or unauthorized activities by third parties, and
failures in systems, software, encryption technology, or other tools may facilitate or result in a compromise or breach of these systems.
We are subject to risks caused by data breaches and operational disruptions, particularly through cyber-attack, cyber-intrusion or
ransomware attacks, including by computer hackers, foreign governments and cyber terrorists. Any unauthorized disclosure of
confidential information could damage our reputation, interrupt our operations and could result in a violation of applicable laws,
regulations, industry standards or agreements and potentially subject us to costs, penalties and liabilities The occurrence of any of these
events could have a material adverse impact on our reputation, business, financial position, results of operations and cash flow. Although
we maintain insurance coverage for various cybersecurity risks, there can be no guarantee that all costs incurred will be fully insured.
We may not be able to adequately protect our intellectual property, which could harm the value of our brand and adversely affect
our business.
Our ability to implement our business plan successfully depends in part on our ability to further build brand recognition using our
trademarks, service marks and other proprietary intellectual property, including our name and logos. While it is our policy to protect
and defend vigorously our intellectual property, we cannot predict whether such actions will be adequate to prevent infringement or
misappropriation of these rights. Although we believe that we have sufficient rights to all of our trademarks, service marks and other
intellectual property rights, we may face claims of infringement that could interfere with our business or our ability to market and
promote our brands. If we are unable to successfully defend against such claims, we may be prevented from using our intellectual
property rights in the future and may be liable for damages.
Although we make a significant effort to avoid infringing known proprietary rights of third parties, we may be subject to claims
of infringement by third parties. Responding to and defending such claims, regardless of their merit, can be costly and time-consuming,
and we may not prevail. Depending on the resolution of such claims, we may be barred from using a specific mark or other rights, may
be required to enter into licensing arrangements from the third party claiming infringement or may become liable for significant damages.
If any of the foregoing occurs, our ability to compete could be affected or our business, financial position and results of operations may
be adversely affected.
Risks Related to Our Indebtedness
Our substantial indebtedness could have important adverse consequences and adversely affect our financial condition.
We have a significant amount of indebtedness. As of September 30, 2021, we had total indebtedness of $1,141.0 million, and we
had availability under the Revolving Credit Facility and the Receivables Financing Agreement of $207.7 million and $75.0 million,
respectively. See Note 9 “Long-term Debt” to our audited consolidated financial statements included elsewhere in this Form 10-K.
Our level of debt could have important consequences, including making it more difficult for us to satisfy our obligations with
respect to our debt, limiting our ability to obtain additional financing to fund future working capital, capital expenditures, investments
or acquisitions, or other general corporate requirements, requiring a substantial portion of our cash flows to be dedicated to debt service
payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures,
investments or acquisitions and other general corporate purposes, increasing our vulnerability to adverse changes in general economic,
industry and competitive conditions, exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings
under the Credit Agreement, are at variable rates of interest, limiting our flexibility in planning for and reacting to changes in the
industries in which we compete, placing us at a disadvantage compared to other, less leveraged competitors, increasing our cost of
borrowing and hampering our ability to execute on our growth strategy.
25
Our debt agreements contain restrictions that limit our flexibility in operating our business.
The Credit Agreement imposes significant operating and financial restrictions. These covenants may limit our ability and the
ability of our subsidiaries to, among other things, incur additional indebtedness; create or incur liens; engage in certain fundamental
changes, including mergers or consolidations; sell or transfer assets; pay dividends and distributions on our subsidiaries’ capital stock;
make acquisitions, investments, loans or advances; prepay or repurchase certain indebtedness; engage in certain transactions with
affiliates; and enter into negative pledge clauses and clauses restricting subsidiary distributions.
The Credit Agreement also contains certain customary affirmative covenants and events of default, including a change of control.
The Credit Agreement also contains a financial maintenance requirement with respect to the Revolving Credit Facility, prohibiting us
from exceeding a certain first lien secured leverage ratio under certain circumstances. As a result of these covenants and restrictions, we
are limited in how we conduct our business, and we may be unable to raise additional debt or equity financing to compete effectively or
to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive
covenants. We cannot guarantee that we will be able to maintain compliance with these covenants in the future and, if we fail to do so,
that we will be able to obtain waivers from the lenders and/or amend the covenants.
Our failure to comply with the restrictive covenants described above as well as others contained in our future debt instruments
from time to time could result in an event of default, which, if not cured or waived, could result in our being required to repay these
borrowings before their maturity dates. In addition, any event of default or declaration of acceleration under one debt instrument could
also result in an event of default under one or more of our other debt instruments. If we are unable to repay, refinance or restructure our
indebtedness under our secured debt, the holders of such debt could proceed against the collateral securing that indebtedness. If we are
forced to refinance these borrowings on less favorable terms or if we are unable to repay, refinance or restructure such indebtedness,
our financial condition and results of operations could be adversely affected.
We may be unable to generate sufficient cash flow to satisfy our significant debt service obligations, which could have a material
adverse effect on our business, financial condition and results of operations.
Our ability to make principal and interest payments on and to refinance our indebtedness will depend on our ability to generate
cash in the future and is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our
control. If our business does not generate sufficient cash flow from operations, in the amounts projected or at all, or if future borrowings
are not available to us in amounts sufficient to fund our other liquidity needs, our business, financial condition and results of operations
could be materially adversely affected.
If we cannot generate sufficient cash flow from operations to make scheduled principal and interest payments, we may need to
refinance all or a portion of our indebtedness on or before maturity, sell assets, delay capital expenditures or seek additional equity. The
terms of our existing or future debt agreements may also restrict us from affecting any of these alternatives. Any refinancing of our debt
could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business
operations. Further, changes in the credit and capital markets, including market disruptions and interest rate fluctuations, may increase
the cost of financing, make it more difficult to obtain favorable terms, or restrict our access to these sources of future liquidity. In
addition, any failure to make scheduled payments of interest and principal on our outstanding indebtedness would likely result in a
reduction of our credit rating, which could harm our ability to incur additional indebtedness on commercially reasonable terms or at all.
Our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance or restructure our obligations on
commercially reasonable terms or at all, could have a material adverse effect on our business, financial condition and results of
operations, as well as on our ability to satisfy our obligations in respect of our indebtedness.
Despite our level of indebtedness, we and our subsidiaries may still be able to incur substantially more debt, including off-balance
sheet financing, contractual obligations and general and commercial liabilities. This could further exacerbate the risks to our
financial condition described above.
We and our subsidiaries may be able to incur significant additional indebtedness in the future, including off-balance sheet
financings, contractual obligations and general and commercial liabilities. Although the Credit Agreement contains restrictions on the
incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional
indebtedness incurred in compliance with these restrictions could be substantial. In addition, we can increase the borrowing availability
under the Credit Agreement by up to $303.0 million in the form of additional commitments under the Revolving Credit Facility and/or
incremental term loans plus an additional amount so long as we do not exceed a specified first lien secured leverage ratio. If new debt
is added to our current debt levels, the related risks that we now face could intensify.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase
significantly.
Borrowings under our Credit Agreement and Receivables Financing Agreement are at variable rates of interest and expose us to
interest rate risk. Moreover, borrowings under our Credit Agreement and Receivables Financing Agreement bear interest at a rate per
annum of LIBOR plus a margin. On July 27, 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading
or compelling banks to submit LIBOR rates after 2021. On March 5, 2021, the ICE Benchmark Association (“IBA”) stated that it will
26
cease the publication of all non-U.S. dollar LIBOR and the one-week and two-month U.S. dollar LIBOR settings immediately following
the LIBOR publication on December 31, 2021, with the publication of the remaining U.S. dollar LIBOR settings being discontinued on
June 30, 2023. It is expected that a transition away from the widespread use of LIBOR to alternative rates will occur over the course of
the next several years. Recent proposals for LIBOR reforms may result in the establishment of new methods of calculating LIBOR or
the establishment of one or more alternative benchmark rates. Although our Credit Agreement and Receivables Financing Agreement
provide for application of successor rates based on prevailing market conditions, it is not currently possible to predict the effect of any
establishment of alternative reference rates or any other reforms to LIBOR that may be enacted in the United Kingdom or elsewhere. If
interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed
will remain the same, our ability to refinance some or all of our existing indebtedness may be impacted and our net income and cash
flows, including cash available for servicing our indebtedness, will correspondingly decrease.
If the financial institutions that are part of the syndicate of our Revolving Credit Facility fail to extend credit under our facility or
reduce the borrowing base under our Revolving Credit Facility, our liquidity and results of operations may be adversely affected.
We have access to capital through our Revolving Credit Facility, which is governed by the Credit Agreement. Each financial
institution which is part of the syndicate for our Revolving Credit Facility is responsible on a several, but not joint, basis for providing
a portion of the loans to be made under our facility. If any participant or group of participants with a significant portion of the
commitments in our Revolving Credit Facility fails to satisfy its or their respective obligations to extend credit under the facility and we
are unable to find a replacement for such participant or participants on a timely basis (if at all), our liquidity may be adversely affected.
We utilize derivative financial instruments to reduce our exposure to market risks from changes in interest rates on our variable rate
indebtedness and we will be exposed to risks related to counterparty credit worthiness or non-performance of these instruments.
We have entered into interest rate swap instruments to limit our exposure to changes in variable interest rates. While our hedging
strategy is designed to minimize the impact of increases in interest rates applicable to our variable rate debt, there can be no guarantee
that our hedging strategy will be effective, and we may experience credit-related losses in some circumstances. See Note 10 “Financial
Instruments Measured at Fair Value” to our audited consolidated financial statements included in Part II. Item 8 of this Form 10-K.
Risks Related to Ownership of Our Common Stock
Future sales, or the perception of future sales, by us or our existing stockholders, could cause the market price for our common stock
to decline.
Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales could occur,
could substantially decrease the market price of our common stock. As of September 30, 2021, we had approximately 105.2 million
shares of our common stock outstanding, of which approximately 63.9 million are “restricted securities” within the meaning of Rule
144. While restricted securities generally may be sold in the public market only if they are registered under the Securities Act or are sold
pursuant to an exemption from registration such as Rule 144, substantially all of these restricted securities can be sold without restriction
pursuant to Rule 144 or pursuant with transactions covered by our effective SEC registration statements.
In addition, as of September 30, 2021, we had approximately 8.4 million shares of common stock reserved for future issuance
under our incentive plans and our Employee Stock Purchase Plan.
The market price of our shares of common stock could drop significantly if the holders of these shares sell them or are perceived
by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future
offerings of our shares of common stock or other securities. In the future, we may also issue equity securities in connection with
investments or acquisitions. The number of shares of our common stock issued in connection with an investment or acquisition could
constitute a material portion of our then-outstanding shares of our common stock. Any issuance of additional securities in connection
with investments or acquisitions may result in additional dilution to you.
27
KKR BrightView Aggregator L.P. and MSD Partners have the ability to exert significant influence over us and their interests may
conflict with ours or yours in the future.
As of September 30, 2021, KKR BrightViewAggregator L.P. beneficially own 48.1% of our common stock and MSD Partners
beneficially own 11.2% of our common stock. As a result, they will have substantial influence over the election and removal of our
directors and thereby exert significant influence over our policies and operations, including the appointment of management, future
issuances of our common stock or other securities, payment of dividends, if any, on our common stock, the incurrence or modification
of indebtedness by us, amendment of our certificate of incorporation and bylaws and entering into extraordinary transactions, and their
interests may not in all cases be aligned with your interests. In addition, KKR BrightView Aggregator L.P. and MSD Partners and their
affiliates may have an interest in pursuing acquisitions, divestitures and other transactions that, in their judgment, could enhance their
investment, even though such transactions might involve risks to you. For example, they could cause us to make acquisitions that
increase our indebtedness or cause us to sell revenue-generating assets.
KKR BrightView Aggregator L.P. and MSD Partners and their affiliates are in the business of making investments in companies
and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. Our amended and restated
certificate of incorporation provides that none of KKR BrightView Aggregator L.P. and MSD Partners, any of their affiliates or any
director who is not employed by us (including any non-employee director who serves as one of our officers in both his director and
officer capacities) or his or her affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities
or similar business activities or lines of business in which we operate. The Sponsors and their affiliates also may pursue acquisition
opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us.
In addition, KKR BrightView Aggregator L.P. and MSD Partners and their affiliates are able to significantly influence the outcome
of all matters requiring stockholder approval, including the election of our Board of Directors or acquisitions of our company. This
concentration of voting power could deprive you of an opportunity to receive a premium for your shares of common stock as part of a
sale of our company and ultimately might affect the market price of our common stock.
Anti-takeover provisions in our organizational documents could delay or prevent a change of control.
Certain provisions of our certificate of incorporation and bylaws may have an anti-takeover effect and may delay, defer or prevent
a merger, acquisition, tender offer, takeover attempt, or other change of control transaction that a stockholder might consider in its best
interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders.
These provisions provide for, among other things, our Board of Directors to issue one or more series of preferred stock; advance
notice requirements for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual
meetings; certain limitations on convening special stockholder meetings; the removal of directors only upon the affirmative vote of the
holders of at least 66 2(cid:187)3% of the shares of common stock entitled to vote generally in the election of directors if the Sponsors and their
affiliates cease to beneficially own at least 40% of shares of common stock entitled to vote generally in the election of directors. In
addition, certain provisions of our certificate of incorporation and bylaws may be amended only by the affirmative vote of at least 66 2(cid:187)3%
of shares of common stock entitled to vote generally in the election of directors if the Sponsors and their affiliates cease to beneficially
own at least 40% of shares of common stock entitled to vote generally in the election of directors. These anti-takeover provisions could
make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many of our
stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares.
Our Board of Directors is authorized to issue and designate shares of our preferred stock in additional series without stockholder
approval.
Our certificate of incorporation authorizes our Board of Directors, without the approval of our stockholders, to issue 50,000,000
shares of our preferred stock, subject to limitations prescribed by applicable law, rules and regulations and the provisions of our
certificate of incorporation, as shares of preferred stock in series, to establish from time to time the number of shares to be included in
each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications,
limitations or restrictions thereof. The powers, preferences and rights of these additional series of preferred stock may be senior to or on
parity with our common stock, which may reduce its value.
Our certificate of incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware and the
federal district courts of the United States of America will be the sole and exclusive forums for certain stockholder litigation matters,
which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers,
employees or stockholders.
Our certificate of incorporation provides, subject to limited exceptions, that unless we consent to the selection of an alternative
forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for
any (i) derivative action or proceeding brought on behalf of our company, (ii) action asserting a claim of breach of a fiduciary duty owed
by any director, officer, or other employee or stockholder of our company to the Company or our stockholders, creditors or other
constituents, (iii) action asserting a claim against the Company or any director or officer of the Company arising pursuant to any
provision of the Delaware General Corporation Law, or the DGCL, or our amended and restated certificate of incorporation or our
28
amended and restated bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or
(iv) action asserting a claim against the Company or any director or officer of the Company governed by the internal affairs doctrine.
Our certificate of incorporation further provides that, to the fullest extent permitted by law, the federal district courts of the United States
of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the United States federal
securities laws. While the Delaware Supreme Court has upheld the validity of similar provisions under the DGCL, there is uncertainty
as to whether a court in another state would enforce such a forum selection provision. Our exclusive forum provision does not relieve
us of our duties to comply with the federal securities laws and the rules and regulations thereunder, and our stockholders will not be
deemed to have waived our compliance with these laws, rules and regulations.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice
of and consented to the forum provisions in our certificate of incorporation. These choice of forum provisions may limit a stockholder’s
ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees
or stockholders which may discourage lawsuits with respect to such claims. It is possible that these exclusive forum provisions may be
challenged in court and may be deemed unenforceable in whole or in part. If a court were to find the choice of forum provisions contained
in our certificate of incorporation to be inapplicable or unenforceable with respect to one or more of the specified types of actions or
proceedings, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business,
operating results and financial condition.
General Risk Factors
Natural disasters, terrorist attacks and other external events could adversely affect our business.
Natural disasters, terrorist attacks and other adverse external events could materially damage our facilities or disrupt our
operations, or damage the facilities or disrupt the operations of our customers or suppliers. The occurrence of any such event could
prevent us from providing services and adversely affect our business, financial position and results of operations.
Our stock price may change significantly, and you may not be able to resell shares of our common stock at or above the price you
paid or at all, and you could lose all or part of your investment as a result.
You may not be able to resell your shares at or above your purchase price due to the factors described in this Risk Factors
section. Other factors that may impact our stock price include: results of operations that vary from the expectations of securities analysts
and investors or from those of our competitors; changes in expectations as to our future financial performance, including estimates and
investment recommendations by securities analysts and investors; changes in market valuations, stock prices, or earnings and other
announcements by peer companies or companies in the service sector; announcements by us, our competitors, and our suppliers related
to significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments; investor perceptions of or the
investment opportunity associated with our common stock relative to other investment alternatives; the public’s response to press
releases, SEC filings or other public announcements by us or third parties, including our filings with the SEC; guidance, if any, that we
provide to the public, and any changes in or our failure to meet this guidance; and the development and sustainability of an active trading
market for our stock.
Furthermore, the stock market may experience extreme volatility that, in some cases, may be unrelated or disproportionate to the
operating performance of particular companies. These broad market and industry fluctuations may adversely affect the market price of
our common stock, regardless of our actual operating performance. In addition, price volatility may be greater if the public float and
trading volume of our common stock is low, such as that experienced in the period of July 1, 2018 to the date of this filing.
In the past, following periods of market volatility, or following periods or events unrelated to market volatility, stockholders have
instituted securities class action litigation. If we were to become involved in securities litigation, it could have a substantial cost and
divert resources and the attention of executive management from our business regardless of the merits or outcome of such litigation.
If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, our stock
price and trading volume could decline.
The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish
about us or our industry. We do not control these analysts. Furthermore, if one or more of the analysts who do cover us downgrade our
stock or our industry, or the stock of any of our competitors, or publish inaccurate or unfavorable research about our business, the price
of our stock could decline. If one or more of these analysts stop covering us or fail to publish reports on us regularly, we could lose
visibility in the market, which in turn could cause our stock price or trading volume to decline.
Maintaining the requirements of being a public company may strain our resources, divert management’s attention and affect our
ability to attract and retain qualified Board members.
As a public company, we incur significant legal, regulatory, finance, accounting, investor relations and other expenses that we did
not incur as a private company, including costs associated with public company reporting requirements. We are also required to comply
with, and incur costs associated with such compliance with, the Sarbanes-Oxley Act of 2002, (“the Sarbanes-Oxley Act”), and the Dodd-
Frank Wall Street Reform and Consumer Protection Act, (“the Dodd-Frank Act”), as well as rules and regulations implemented by the
SEC and the NYSE. These rules and regulations have increased our legal and financial compliance costs and made some activities more
29
time-consuming and costly. Our management devotes a substantial amount of time to ensure that we comply with all of these
requirements, diverting the attention of management away from revenue-producing activities. These laws and regulations also could
make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may
be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These
laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors,
our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we
could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation.
Failure to comply with requirements to maintain effective internal controls could have a material adverse effect on our business and
stock price.
As a public company, we have significant requirements for financial reporting and internal controls. The process of maintaining
effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and
regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our
reporting obligations as a public company. If we are unable to maintain appropriate internal financial reporting controls and procedures,
it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our consolidated financial
statements and harm our results of operations. In addition, we are required, pursuant to Section 404, to furnish annually a report by
management on, among other things, the effectiveness of our internal control over financial reporting. This assessment includes
disclosure of any material weaknesses identified by our management in our internal control over financial reporting. The rules governing
the standards that must be met for our management to assess our internal control over financial reporting are complex and require
significant documentation, testing and possible remediation. Testing and maintaining internal controls may divert our management’s
attention from other matters that are important to our business. Our independent registered public accounting firm is also required to
issue an attestation report on effectiveness of our internal controls in each annual report on Form 10-K.
In the future, if we identify a control deficiency that rises to the level of a material weakness in our internal controls over financial
reporting, this material weakness may adversely affect our ability to record, process, summarize and report financial information timely
and accurately. Any material weaknesses could result in a material misstatement of our annual or quarterly consolidated financial
statements or disclosures that may not be prevented or detected. In addition, we may encounter problems or delays in completing the
remediation of any deficiencies identified by our independent registered public accounting firm in connection with the issuance of their
attestation report.
We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance
with Section 404 or our independent registered public accounting firm may not issue an unqualified opinion. If either we are unable to
conclude that we have effective internal control over financial reporting or our independent registered public accounting firm is unable
to provide us with an unqualified report, investors could lose confidence in our reported financial information, which could have a
material adverse effect on the trading price of our common stock.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our corporate headquarters is a leased facility located at 980 Jolly Road, Suite 300, Blue Bell, Pennsylvania 19422.
We and our operating companies own and lease a variety of facilities primarily located in the United States, for branch and service
center operations and for office, call center and storage space. Our branches are strategically located to optimize route efficiency, market
coverage and branch overhead. The following chart identifies the number of owned and leased facilities, other than our headquarters
listed above, used by each of our operating segments as of September 30, 2021. We believe that these facilities, when considered with
our headquarters, are in good operating condition and suitable and adequate to support the current needs of our business.
Segment (1)
Maintenance Services
Development Services
Total
Owned
Facilities
Leased
Facilities
31
3
34
236
13
249
(1)
19 facilities are shared between our segments and each is counted once, in the Maintenance Services segment, to avoid double counting.
Item 3. Legal Proceedings
The information set forth in Note 14 “Commitments and Contingencies” to our consolidated financial statements under Part II,
Item 8, “Financial Statements and Supplementary Data,” is incorporated herein by reference.
30
Item 4. Mine Safety Disclosures
Not applicable.
31
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock trades on the New York Stock Exchange under the symbol “BV”. As of October 31, 2021, there were 314
holders of record of our common stock. This stockholder figure does not include a substantially greater number of holders whose shares
are held of record by banks, brokers, and other financial institutions.
Dividend Policy
We do not intend to pay cash dividends on our common stock in the foreseeable future. Any future determination to pay dividends
will be at the discretion of our board of directors and will depend on, among other things, our results of operations, cash requirements,
financial condition, contractual restrictions contained in current or future financing instruments and other factors that our board of
directors deem relevant. We did not declare or pay dividends to the holders of our common stock in the year ended September 30, 2021.
Unregistered Sales of Equity Securities
None.
Company Repurchases of Equity Securities
None.
Stock Performance Graph
This performance graph shall not be deemed “soliciting material” or “filed” with the SEC for purposes of Section 18 of the
Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into
any of our filings under the Securities Act or the Exchange Act.
The graph below presents the Company’s cumulative total stockholder returns relative to the performance of the Russell 2000
(“R2000”) Index and the Russell 2500 Environmental Maintenance & Security Service (“R2500 Service”) Index from June 28, 2018
(the Company’s initial day of trading) through September 30, 2021. All values assume a $100 initial investment at the opening price of
the Company’s common stock on the NYSE and data for the R2000 Index and the R2500 Service Index assumes any dividends were
reinvested on the date paid. The points on the graph represent fiscal quarter-end values based on the last trading day of each fiscal
quarter. The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our
common stock.
32
Note: In prior reports, the Company has referenced the Russell 2500 Environmental Maintenance and Security Services Index. That index was discontinued and merged
into the Russell 2500 Waste & Disposal Services Index. The graph above includes the full history for the Russell 2500 Waste & Disposal Services Index.
Item 6. Removed and Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion contains management’s discussion and analysis of our financial condition and results of operations and
should be read together with our audited consolidated financial statements and the related notes thereto included elsewhere in this Form
10-K.
This section of this Form 10-K generally discusses the fiscal years ended September 30, 2021 and 2020 items and year to year
comparisons between the fiscal years ended September 30, 2021 and 2020. The discussion around results of operations for the fiscal
year ended September 30, 2019 and a comparison of our results for the fiscal years ended September 30, 2020 and 2019 is included in
Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K
for fiscal year ended September 30, 2020, filed with the SEC on November 18, 2020 and is incorporated by reference herein (Fiscal
Year Ended September 30, 2020 10-K).
Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy
for our business, includes forward-looking statements that involve risks and uncertainties. You should review “Item 1A. Risk Factors”
and the “Special Note Regarding Forward-Looking Statements” sections of this Form 10-K for a discussion of important factors that
could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in
the following discussion and analysis.
Overview
Our Company
We are the largest provider of commercial landscaping services in the United States, with revenues approximately 7 times those
of our next largest commercial landscaping competitor. We provide commercial landscaping services ranging from landscape
maintenance and enhancements to tree care and landscape development. We operate through a differentiated and integrated national
service model which systematically delivers services at the local level by combining our network of over 280 branches with a qualified
service partner network. Our branch delivery model underpins our position as a single-source end-to-end landscaping solution provider
to our diverse customer base at the national, regional and local levels, which we believe represents a significant competitive advantage.
We believe our commercial customer base understands the financial and reputational risk associated with inadequate landscape
maintenance and considers our services to be essential and non-discretionary.
33
Our Segments
We report our results of operations through two reportable segments: Maintenance Services and Development Services. We serve
a geographically diverse set of customers through our strategically located network of branches in 32 U.S. states, and, through our
qualified service partner network, we are able to efficiently provide nationwide coverage in all 50 U.S. states.
To align with changes in how we manage our business, in the second quarter of fiscal 2021, we reclassified Net service revenues
and expenses related to a second quarter fiscal 2020 acquisition from the Maintenance Services segment to the Development Services
segment. Prior period segment results have been reclassified with no significant impact on segment results. There were no changes to
the Company’s consolidated financial statements.
Maintenance Services
Our Maintenance Services segment delivers a full suite of recurring commercial landscaping services in both evergreen and
seasonal markets, ranging from mowing, gardening, mulching and snow removal, to more horticulturally advanced services, such as
water management, irrigation maintenance, tree care, golf course maintenance and specialty turf maintenance. In addition to contracted
maintenance services, we also have a strong track record of providing value-added landscape enhancements. We primarily self-perform
our maintenance services through our national branch network, which are route-based in nature. Our maintenance services customers
include Fortune 500 corporate campuses and commercial properties, HOAs, public parks, leading international hotels and resorts, airport
authorities, municipalities, hospitals and other healthcare facilities, educational institutions, restaurants and retail, and golf courses,
among others.
Development Services
Through our Development Services segment, we provide landscape architecture and development services for new facilities and
significant redesign projects. Specific services include project design and management services, landscape architecture, landscape
installation, irrigation installation, tree moving and installation, pool and water features and sports field services, among others. Our
development services are comprised of sophisticated design, coordination and installation of landscapes at some of the most recognizable
corporate, athletic and university complexes and showcase highly visible work that is paramount to our customers’ perception of our
brand as a market leader.
In our Development Services business, we are typically hired by general contractors, with whom we maintain strong relationships
as a result of our superior technical and project management capabilities. We believe the quality of our work is also well-regarded by
our end-customers, some of whom directly request that their general contractors utilize our services when outsourcing their landscape
development projects.
Components of Our Revenues and Expenses
Net Service Revenues
Maintenance Services
Our Maintenance Services revenues are generated primarily through landscape maintenance services and snow removal services.
Landscape maintenance services that are primarily viewed as non-discretionary, such as lawn care, mowing, gardening, mulching, leaf
removal, irrigation and tree care, are provided under recurring annual contracts, which typically range from one to three years in duration
and are generally cancellable by the customer with 30-90 days’ notice. Snow removal services are provided on either fixed fee based
contracts or per occurrence contracts. Both landscape maintenance services and snow removal services can also include enhancement
services that represent supplemental maintenance or improvement services generally provided under contracts of short duration related
to specific services. Revenue for landscape maintenance and snow removal services under fixed fee models is recognized over time
using an output based method. Additionally, a portion of our recurring fixed fee landscape maintenance and snow removal services are
recorded under the series guidance. The right to invoice practical expedient, defined within Note 4 “Revenue” to our audited consolidated
financial statements, is generally applied to revenue related to landscape maintenance and snow removal services performed in relation
to per occurrence contracts as well as enhancement services. When use of the practical expedient is not appropriate for these contracts,
revenue is recognized using a cost-to-cost input method. Fees for contracted landscape maintenance services are typically billed on an
equal monthly basis. Fees for fixed fee snow removal services are typically billed on an equal monthly basis during snow season, while
fees for time and material or other activity-based snow removal services are typically billed as the services are performed. Fees for
enhancement services are typically billed as the services are performed.
Development Services
For Development Services, revenue is primarily recognized over time using the cost-to-cost input method, measured by the
percentage of cost incurred to date to the estimated total cost for each contract, which we believe to be the best measure of progress.
The full amount of anticipated losses on contracts is recorded as soon as such losses can be estimated. These losses have been immaterial
34
in prior periods. 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.
Expenses
Cost of Services Provided
Cost of services provided is comprised of direct costs we incur associated with our operations during a period and includes
employee costs, subcontractor costs, purchased materials, operating equipment and vehicle costs. Employee costs consist of wages and
other labor-related expenses, including benefits, workers compensation and healthcare costs, for those employees involved in delivering
our services. Subcontractor costs consist of costs relating to our qualified service partner network in our Maintenance Services segment
and subcontractors we engage from time to time in our Development Services segment. When our use of subcontractors increases, we
may experience incrementally higher costs of services provided. Operating equipment and vehicle costs primarily consist of depreciation
related to branch operating equipment and vehicles and related fuel expenses. A large component of our costs are variable, such as labor,
subcontractor expense and materials.
Selling, General and Administrative Expense
Selling, general and administrative expense consists of costs incurred related to compensation and benefits for management, sales
and administrative personnel, equity-based compensation, branch and office rent and facility operating costs, depreciation expense
related to branch and office locations, as well as professional fees, software costs, goodwill impairment, gains and losses on divestitures,
and other miscellaneous expenses. Corporate expenses, including corporate executive compensation, finance, legal and information
technology, are included in consolidated selling, general and administrative expense and not allocated to the business segments.
Amortization Expense
Amortization expense consists of the periodic amortization of intangible assets, including customer relationships, non-compete
agreements and trademarks, recognized when KKR acquired us on December 18, 2013 and in connection with businesses we have
acquired since December 18, 2013.
Interest Expense
Interest expense relates primarily to our long term debt. See Note 9 “Long-term Debt” to our audited consolidated financial
statements included in Part II. Item 8 of this Form 10-K.
Income Tax Expense (Benefit)
The benefit for income taxes includes U.S. federal, state and local income taxes. Our effective tax rate differs from the statutory
U.S. income tax rate due to the effect of state and local income taxes, tax credits and certain nondeductible expenses. Our effective tax
rate may vary from quarter to quarter based on recurring and nonrecurring factors including, but not limited to the geographical
distribution of our pre-tax earnings, changes in the tax rates of different jurisdictions, the availability of tax credits and nondeductible
items. Changes in judgment due to the evaluation of new information resulting in the recognition, derecognition or remeasurement of a
tax position taken in a prior annual period are recognized separately in the period of the change.
Other Income (Expense)
Other income (expense) consists primarily of losses on debt extinguishment and investment gains and losses related to investments
held in Rabbi Trust.
How We Assess the Performance of our Business
We manage operations through the two operating segments described above. In addition to our GAAP financial measures, we
review various non-GAAP financial measures, including Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings per Share
(“Adjusted EPS”), and Free Cash Flow.
We believe Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are helpful supplemental measures to assist us and
investors in evaluating our operating results as they exclude certain items whose fluctuations from period to period do not necessarily
correspond to changes in the operations of our business. Adjusted EBITDA represents net (loss) income before interest, taxes,
depreciation, amortization and certain non-cash, non-recurring and other adjustment items. Adjusted Net Income is defined as net income
(loss) including interest and depreciation, and excluding other items used to calculate Adjusted EBITDA and further adjusted for the tax
effect of these exclusions and the removal of the discrete tax items. Adjusted EPS is defined as Adjusted Net Income divided by the
weighted average number of common shares outstanding for the period used in the calculation of basic EPS. We believe that the
adjustments applied in presenting Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are appropriate to provide additional
35
information to investors about certain material non-cash items and about non-recurring items that we do not expect to continue at the
same level in the future.
We believe Free Cash Flow is a helpful supplemental measure to assist us and investors in evaluating our liquidity. Free Cash
Flow represents cash flows from operating activities less capital expenditures, net of proceeds from sales of property and equipment.
We believe Free Cash Flow is useful to provide additional information to assess our ability to pursue business opportunities and
investments and to service our debt. Free Cash Flow has limitations as an analytical tool, including that it does not account for our future
contractual commitments and excludes investments made to acquire assets under finance leases and required debt service payments.
Management regularly uses these measures as tools in evaluating our operating performance, financial performance and liquidity,
while other measures can differ significantly depending on long-term strategic decisions regarding capital structure and capital
investments. Management uses Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, and Free Cash Flow to supplement comparable
GAAP measures in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary
annual incentive compensation and to compare our performance against that of other peer companies using similar measures. In addition,
we believe that Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, and Free Cash Flow are frequently used by investors and other
interested parties in the evaluation of issuers, many of which also present Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, and
Free Cash Flow when reporting their results in an effort to facilitate an understanding of their operating and financial results and liquidity.
Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors
and trends affecting the business than GAAP results alone.
Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are provided in addition to, and should not be considered as
alternatives to, net income (loss) or any other performance measure derived in accordance with GAAP, and Free Cash Flow is provided
in addition to, and should not be considered as an alternative to, cash flow from operating activities or any other measure derived in
accordance with GAAP as a measure of our liquidity. Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, and Free Cash Flow
have limitations as analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing our
results as reported under GAAP. In addition, because not all companies use identical calculations, the presentations of these measures
may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company.
Additionally, these measures are not intended to be a measure of free cash flow available for management’s discretionary use as they
do not consider certain cash requirements such as interest payments, tax payments and debt service requirements.
For a reconciliation of the most directly comparable GAAP measures, see “Non-GAAP Financial Measures” below.
Trends and Other Factors Affecting Our Business
Various trends and other factors affect or have affected our operating results, including:
Seasonality
Our services, particularly in our Maintenance Services segment, have seasonal variability such as increased mulching, flower
planting and intensive mowing in the spring, leaf removal and cleanup work in the fall, snow removal services in the winter and
potentially minimal mowing during drier summer months. This can drive fluctuations in revenue, costs and cash flows for interim
periods.
We have a significant presence in geographies that have a year-round growing season, which we refer to as our evergreen markets.
Such markets require landscape maintenance services twelve months per year. In markets that do not have a year-round growing season,
which we refer to as our seasonal markets, the demand for our landscape maintenance services decreases during the winter months.
Typically, our revenues and net income have been higher in the spring and summer seasons, which correspond with our third and fourth
fiscal quarters of our fiscal year ended September 30. The lower level of activity in seasonal markets during our first and second fiscal
quarters is partially offset by revenue from our snow removal services. Such seasonality causes our results of operations to vary from
quarter to quarter.
Weather Conditions
Weather may impact the timing of performance of landscape maintenance and enhancement services and progress on development
projects from quarter to quarter. For example, snow events in the winter, hurricane-related cleanup in the summer and fall, and the
effects of abnormally high rainfall or drought in a given market may impact our services. These less predictable weather patterns can
impact both our revenues and our costs, especially from quarter to quarter, but also from year to year in some cases. Extreme weather
events such as hurricanes and tropical storms can result in a positive impact to our business in the form of increased enhancement
services revenues related to cleanup and other services. However, such weather events may also negatively impact our ability to deliver
our contracted services or impact the timing of performance.
In our seasonal markets, the performance of our snow removal services is correlated with the amount of snowfall and number of
snowfall events in a given season. We benchmark our performance against ten- and thirty-year cumulative annual snowfall averages.
36
Acquisitions
In addition to our organic growth, we have grown, and expect to continue to grow, our business through acquisitions in an effort
to better service our existing customers and to attract new customers. These acquisitions have allowed us to execute our “strong-on-
strong” acquisition strategy in which we focus on increasing our density and leadership positions in existing local markets, entering into
attractive new geographic markets and expanding our portfolio of landscape enhancement services and improving technical capabilities
in specialized services. As we continue to selectively pursue acquisitions that complement our “strong-on-strong” acquisition strategy,
we believe we are the acquirer of choice in the highly fragmented commercial landscaping industry because we offer the ability to
leverage our significant size and scale, as well as provide stable and potentially expanding career opportunities for employees of acquired
businesses. In accordance with GAAP, the results of the acquisitions we have completed are reflected in our consolidated financial
statements from the date of acquisition. We incur transaction costs in connection with identifying and completing acquisitions and
ongoing integration costs as we integrate acquired companies and seek to achieve synergies. Since October 1, 2020, we have acquired
eight businesses with approximately $158.6 million of aggregate annualized revenue, for aggregate consideration of $110.4 million, net
of cash acquired. We anticipate incurring integration related costs in respect of these acquisitions of $9.2 million, of which $6.2 million
had been incurred as of September 30, 2021, with the remainder to be incurred in fiscal 2022. Additionally, we incurred $7.8 million of
integration costs during fiscal 2021 related to acquisitions completed prior to fiscal 2021. While integration costs vary based on factors
specific to each acquisition, such costs are primarily comprised of one-time employee retention costs, employee onboarding and training
costs, and fleet and uniform rebranding costs. We typically anticipate integration costs to represent approximately 7%-9% of the
acquisition price, and to be incurred within 12 months of acquisition completion.
Industry and Economic Conditions
We believe the non-discretionary nature of our landscape maintenance services provides us with a fairly predictable recurring
revenue model. The perennial nature of the landscape maintenance service sector, as well as its wide range of end users, minimizes the
impact of a broad or sector-specific downturn. However, in connection with our enhancement services and development services, when
demand for commercial construction declines, demand for landscape enhancement services and development projects may decline.
When commercial construction activity rises, demand for landscape enhancement services to maintain green space may also increase.
This is especially true for new developments in which green space tends to play an increasingly important role. Economic conditions,
including fluctuations in labor markets, may impact our ability to identify, hire and retain employees. Increased labor costs, including
recruiting, retention, and overtime expenditures, could adversely affect our profitability.
COVID-19 Update
The impact of the COVID-19 pandemic and related economic conditions on the Company’s results continue to be highly uncertain
and outside the Company’s control. Although our Maintenance and Development operations are considered essential services, future
governmental orders or other restrictions may limit, restrict or prohibit operations in the future. Further limitations could have a material
adverse impact on our business, financial condition and results of operations. The scope, duration and magnitude of the direct and
indirect effects of the COVID-19 pandemic are difficult or impossible to anticipate. Due to the uncertainty related to the extent of the
ongoing impact of the pandemic, the Company’s results in the fourth quarter of 2021 may not be indicative of the Company’s future
results. We have experienced and may experience a loss in revenue as a result of restrictions on our ability to operate our business. In
addition, the economic deterioration resulting from the impacts of the COVID-19 pandemic will likely continue to negatively impact
our results of operations and financial condition. Although optimism for an economic recovery has increased in the fourth quarter of
fiscal 2021, the degree of the impact on our business continues to be unpredictable as it will depend on factors such as the duration and
spread of COVID-19, including new variants; the extent of vaccinations, vaccine mandates, the cost of complying with such mandates,
and the extent to which a mandate impacts our workforce, including employee recruiting and attrition; inflationary pressures and
increased costs for materials; and the timing and success of the reopening of the economy. For additional information on the risks posed
by COVID-19, see “Item 1A – Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2021.
37
Results of Operations
The following tables summarize key components of our results of operations for the periods indicated.
(In millions)
Net service revenues
Cost of services provided
Gross profit
Selling, general and administrative expense
Amortization expense
Income from operations
Other income
Interest expense
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Adjusted EBITDA(1)
Adjusted Net Income (1)
Cash flows from operating activities
Free Cash Flow(1)
Fiscal Year Ended September 30,
2021
2020
$
$
$
$
$
$
2,553.6 $
1,902.8
650.8
508.0
52.3
90.5
2.7
42.3
50.9
4.6
46.3 $
302.3 $
126.3 $
148.4 $
96.7 $
2,346.0
1,750.7
595.3
527.4
55.8
12.1
1.3
64.6
(51.2 )
(9.6 )
(41.6 )
271.6
94.7
245.1
197.2
(1)
See “Non-GAAP Financial Measures” below for a reconciliation to the most directly comparable GAAP measure.
Fiscal Year Ended September 30, 2021 compared to Fiscal Year Ended September 30, 2020
Net Service Revenues
Net service revenues for the fiscal year ended September 30, 2021 increased $207.6 million, or 8.8%, to $2,553.6 million, from
$2,346.0 million in the 2020 period. The increase was driven by increases in Maintenance Services revenues of $253.5 million partially
offset by a decrease in Development Services revenues of $45.4 million as discussed further below in Segment Results.
Gross Profit
Gross profit for the fiscal year ended September 30, 2021 increased $55.5 million, or 9.3%, to $650.8 million, from $595.3 million
in the 2020 period. Additionally, gross margin increased 10 basis points to 25.5% for the fiscal year ended September 30, 2021, from
25.4% in the 2020 period. The increase in gross profit was driven by the increase in revenues described above. This was partially offset
by an increase in sub-contractor costs due principally to the increased snowfall experienced in the first half of the fiscal year, and by an
increase in labor and material costs as a result of the increase in revenues described above.
Selling, General and Administrative Expense
Selling, general and administrative expense for the fiscal year ended September 30, 2021 decreased $19.4 million, or 3.7%, to
$508.0 million, from $527.4 million in the 2020 period. This decrease was largely driven by a decrease of $22.2 million related to the
sale of BrightView Tree Company in fiscal 2020, consisting principally of a goodwill impairment of $15.5 million and a loss on sale of
$5.7 million. Additionally, in fiscal 2021, stock based compensation decreased $4.0 million. This was offset by an increase of $6.3
million for salaries and other employee related expenses, driven primarily by acquisitions. As a percentage of revenue, selling, general
and administrative expense decreased 260 basis points for the fiscal year ended September 30, 2021 to 19.9%, from 22.5% in the 2020
period.
Amortization Expense
Amortization expense for the fiscal year ended September 30, 2021 decreased $3.5 million, or 6.3%, to $52.3 million, from $55.8
million in the 2020 period. The decrease was principally due to an $8.9 million decrease in the amortization of historical intangible
assets recognized in connection with the KKR Acquisition and the ValleyCrest Acquisition, based on the pattern consistent with
expected future cash flows calculated at that time, partially offset by a $5.3 million increase in amortization expense for intangible assets
recognized in connection with our acquired businesses subsequent to the ValleyCrest Acquisition.
38
Other Income (Expense)
Other income was $2.7 million for the fiscal year ended September 30, 2021 compared to $1.3 million of income in the 2020
period. The $1.4 million increase was due to a gain on investments held in the Rabbi Trust.
Interest Expense
Interest expense for the fiscal year ended September 30, 2021 decreased $22.3 million, or 34.5%, to $42.3 million, from $64.6
million in the 2020 period. The decrease was driven by a lower weighted average interest rate on our term loans in the 2021 period of
2.65% compared to 3.51% in the 2020 period, coupled with the impact of our interest rate swaps for the period.
Income Tax Expense (Benefit)
For the fiscal year ended September 30, 2021, Income tax expense was $4.6 million, compared to an Income tax benefit of $9.6
million in the 2020 period. The change to an income tax expense from an income tax benefit is primarily attributable to the Company’s
pretax income of $50.9 million in the current period compared to pretax loss of $51.2 million in the prior period. The increase in the tax
expense is partially offset by the tax benefit from the CARES Act.
Net Income (Loss)
For the fiscal year ended September 30, 2021, net income increased by $87.9 million, to $46.3 million, from a net loss of $41.6
million in the 2020 period. The increase in net income was primarily due to the changes noted above.
Adjusted EBITDA
Adjusted EBITDA increased $30.7 million for the fiscal year ended September 30, 2021, to $302.3 million, from $271.6 million
in the 2020 period. Adjusted EBITDA as a percent of revenue was 11.8% and 11.6% for the fiscal year ended September 30, 2021 and
2020, respectively. The increase in Adjusted EBITDA was driven by an increase of $50.9 million, or 20.5% in Maintenance Services
Segment Adjusted EBITDA and a decrease of $16.4 million, or 20.1% in Development Services Segment Adjusted EBITDA, as
discussed further below in Segment Results.
Adjusted Net Income
Adjusted Net Income for the fiscal year ended September 30, 2021 increased $31.6 million to $126.3 million, from $94.7 million
in the 2020 period due to the changes noted above.
Segment Results
We classify our business into two segments: Maintenance Services and Development Services. Our corporate operations are not
allocated to the segments and are not discussed separately as any results that had a significant impact on operating results are included
in the consolidated results discussion above.
We evaluate the performance of our segments on Net Service Revenues, Segment Adjusted EBITDA and Segment Adjusted
EBITDA Margin (Segment Adjusted EBITDA as a percentage of Net Service Revenues). Segment Adjusted EBITDA is indicative of
operational performance and ongoing profitability. Our management closely monitors Segment Adjusted EBITDA to evaluate past
performance and identify actions required to improve profitability.
Segment Results for the Fiscal Years Ended September 30, 2021 and 2020
The following tables present Net Service Revenues, Segment Adjusted EBITDA, and Segment Adjusted EBITDA Margin for
each of our segments. Changes in Segment Adjusted EBITDA Margin are shown in basis points, or bps.
Maintenance Services Segment Results
(In millions)
Net Service Revenues
Segment Adjusted EBITDA
Segment Adjusted EBITDA Margin
39
Fiscal Year Ended September 30, Percent Change
2020
$1,729.4
$248.7
14.4%
2021
$1,982.9
$299.6
15.1%
14.7%
20.5%
70 bps
2021 vs. 2020
Maintenance Services Net Service Revenues
Maintenance Services net service revenues for the fiscal year ended September 30, 2021 increased by $253.5 million, or 14.7%,
compared to the 2020 period. Revenues from landscape maintenance services were $1,698.0 million for the fiscal year ended
September 30, 2021, an increase of $131.7 million over the 2020 period. Revenues from snow removal services were $284.9 million,
an increase of $121.8 million over the 2020 period. The increase in landscape maintenance service revenues was driven by an increase
in commercial landscaping revenues of $57.6 million underpinned by a combination of contract and ancillary revenue growth. In
addition, acquisitions contributed $77.2 million of incremental landscape maintenance service revenues. The increase in snow removal
services was primarily attributable to growth in our snow contract book of business coupled with the increased frequency of snowfall
events and the higher relative snowfall compared to the 2020 period.
Maintenance Services Segment Adjusted EBITDA
Segment Adjusted EBITDA for the fiscal year ended September 30, 2021 increased $50.9 million, to $299.6 million, compared
to $248.7 million in the 2020 period. Segment Adjusted EBITDA Margin increased 70 basis points, to 15.1%, in the fiscal year ended
September 30, 2021, from 14.4% in the 2020 period. The increase in Segment Adjusted EBITDA and Segment Adjusted EBITDA
Margin were due to the increase in net service revenues described above.
Development Services Segment Results
(In millions)
Net Service Revenues
Segment Adjusted EBITDA
Segment Adjusted EBITDA Margin
Fiscal Year Ended September 30,
2021
2020
Percent Change
2021 vs. 2020
$574.9
$65.2
11.3%
$620.3
$81.6
13.2%
(7.3)%
(20.1)%
(190) bps
Development Services Net Service Revenues
Development Services net service revenues for the fiscal year ended September 30, 2021 decreased $45.4 million, or 7.3%,
compared to the 2020 period. The decrease in Development Services revenues was principally driven by a $70.5 million reduction due
to reduced backlog as a result of the COVID-19 pandemic, partially offset by $49.8 million of revenue contributions from acquired
businesses. In addition, the sale of BrightView Tree Company in September 2020 reduced net service revenues by $24.7 million for the
fiscal year ended September 30, 2021.
Development Services Segment Adjusted EBITDA
Segment Adjusted EBITDA for the fiscal year ended September 30, 2021 decreased $16.4 million, to $65.2 million, compared to
$81.6 million in the 2020 period. Segment Adjusted EBITDA Margin decreased 190 basis points, to 11.3%, in the fiscal year ended
September 30, 2021, from 13.2% in the 2020 period. The decreases in Segment Adjusted EBITDA and Segment Adjusted EBITDA
Margin were primarily due to the decrease in net service revenues described above coupled with higher material costs experienced in
the second half of the fiscal year, partially offset by a decrease in Selling, general, and administrative expenses due to cost containment
actions.
40
Non-GAAP Financial Measures
Set forth below are the reconciliations of net income (loss) to Adjusted EBITDA and Adjusted Net Income and cash flows from
operating activities to Free Cash Flow.
(in millions)
Adjusted EBITDA
Net income (loss)
Plus:
Interest expense, net
Income tax expense (benefit)
Depreciation expense
Amortization expense
Establish public company financial reporting compliance (a)
Business transformation and integration costs (b)
Offering-related expenses (c)
Equity-based compensation (d)
COVID-19 related expenses (e)
Changes in self-insured liability estimates (f)
Sale of tree company (g)
Adjusted EBITDA
Adjusted Net Income
Net income (loss)
Plus:
Amortization expense
Establish public company financial reporting compliance (a)
Business transformation and integration costs (b)
Offering-related expenses (c)
Equity-based compensation (d)
COVID-19 related expenses (e)
Changes in self-insured liability estimates (f)
Sale of tree company (g)
Income tax adjustment (h)
Adjusted Net Income
Free Cash Flow
Cash flows from operating activities
Minus:
Capital expenditures
Plus:
Proceeds from sale of property and equipment
Free Cash Flow
Fiscal Year Ended September 30,
2020
2021
$
$
$
$
$
46.3 $
42.3
4.6
84.7
52.3
—
28.5
0.6
20.0
23.0
—
—
302.3 $
46.3
52.3
—
28.5
0.6
20.0
23.0
—
—
(44.4 )
126.3 $
148.4
$
61.2
9.5
96.7
$
(41.6 )
64.6
(9.6 )
80.5
55.8
0.9
32.5
4.4
24.0
13.8
24.1
22.2
271.6
(41.6 )
55.8
0.9
32.5
4.4
24.0
13.8
24.1
22.2
(41.4 )
94.7
245.1
52.7
4.8
197.2
(a)
Represents costs incurred to establish public company financial reporting compliance, including costs to comply with the requirements of
Sarbanes-Oxley and the accelerated adoption of the revenue recognition standard (ASC 606 – Revenue from Contracts with Customers), and
other miscellaneous costs.
(b) Business transformation and integration costs consist of (i) severance and related costs; (ii) business integration costs and (iii) information
technology infrastructure, transformation costs, and other.
(in millions)
Severance and related costs
Business integration (i)
IT infrastructure, transformation, and other (j)
Business transformation and integration costs
Fiscal Year Ended September 30,
2020
2021
0.3 $
14.0
14.2
28.5 $
3.8
13.4
15.3
32.5
$
$
41
(c)
Represents transaction related expenses incurred for IPO related litigation and completed or contemplated subsequent registration statements.
(d) Represents equity-based compensation expense and related taxes recognized for equity incentive plans outstanding.
(e)
(f)
Represents expenses related to the Company’s response to the COVID-19 pandemic, principally temporary and incremental salary and related
expenses, personal protective equipment and cleaning and supply purchases, and other.
Represents expenses related to changes in estimates and actuarial assumptions associated with the Company’s self-insured liability amounts for
workers’ compensation, general liability, auto liability, and employee health care insurance programs, to reflect uncertainties associated with
the current environment, including the COVID-19 pandemic.
(g) Represents the goodwill impairment charge, realized loss on sale, and transaction related expenses related to the sale of BrightView Tree
Company on September 30, 2020.
(h) Represents the tax effect of pre-tax items excluded from Adjusted Net Income and the removal of the applicable discrete tax items, which
collectively result in a reduction of income tax. The tax effect of pre-tax items excluded from Adjusted Net Income is computed using the
statutory rate related to the jurisdiction that was impacted by the adjustment after taking into account the impact of permanent differences and
valuation allowances. Discrete tax items include changes in laws or rates, changes in uncertain tax positions relating to prior years and changes
in valuation allowances.
(in millions)
Tax impact of pre-tax income adjustments
Discrete tax items
Income tax adjustment
Fiscal Year Ended September 30,
2020
2021
33.7 $
10.7
44.4 $
37.9
3.5
41.4
$
$
(i)
(j)
Represents isolated expenses specifically related to the integration of acquired companies such as one-time employee retention costs, employee
onboarding and training costs, and fleet and uniform rebranding costs. The Company excludes Business integration costs from the measures
disclosed above since such expenses vary in amount due to the number of acquisitions and size of acquired companies as well as factors specific
to each acquisition, and as a result lack predictability as to occurrence and/or timing, and create a lack of comparability between periods.
Represents expenses related to distinct initiatives, typically significant enterprise-wide changes. Such expenses are excluded from the measures
disclosed above since such expenses vary in amount based on occurrence as well as factors specific to each of the activities, are outside of the
normal operations of the business, and create a lack of comparability between periods.
Liquidity and Capital Resources
Liquidity
Our principal sources of liquidity are existing cash and cash equivalents, cash generated from operations and borrowings under
the Credit Agreement (as defined below) and the Receivables Financing Agreement (as defined below). Our principal uses of cash are
to provide working capital, meet debt service requirements, fund capital expenditures and finance strategic plans, including acquisitions.
We may also seek to finance capital expenditures under finance leases or other debt arrangements that provide liquidity or favorable
borrowing terms. We continue to consider acquisition opportunities, but the size and timing of any future acquisitions and the related
potential capital requirements cannot be predicted. While we have in the past financed certain acquisitions with internally generated
cash, in the event that suitable businesses are available for acquisition upon acceptable terms, we may obtain all or a portion of the
necessary financing through the incurrence of additional long-term borrowings.
Based on our current level of operations and available cash, we believe our cash flow from operations, together with availability
under the Revolving Credit Facility under the Credit Agreement and the Receivables Financing Agreement (each as defined below),
will provide sufficient liquidity to fund our current obligations, projected working capital requirements, debt service requirements and
capital spending requirements for the next twelve months.
A substantial portion of our liquidity needs arise from debt service requirements, and from the ongoing cost of operations, working
capital and capital expenditures.
(In millions)
Cash and cash equivalents
Short-term borrowings and current maturities of long-term debt
Long-term debt
Total debt
September 30,
2021
September 30,
2020
$
$
$
$
123.7 $
10.4 $
1,130.6 $
1,141.0 $
157.1
12.3
1,127.5
1,139.8
42
The Company is party to a credit agreement dated December 18, 2013 (as amended, the “Credit Agreement”), a five-year revolving
credit facility that matures on August 15, 2023 (the “Revolving Credit Facility”) and, through a wholly-owned subsidiary, a receivables
financing agreement dated April 28, 2017 (as amended, the “Receivables Financing Agreement”). See “Description of Indebtedness”.
We can increase the borrowing availability under the Credit Agreement or increase the term loans outstanding under the Credit
Agreement by up to $303.0 million, in the aggregate, in the form of additional commitments under the Revolving Credit Facility and/or
incremental term loans under the Credit Agreement, or in the form of other indebtedness in lieu thereof, plus an additional amount so
long as we do not exceed a specified first lien secured leverage ratio. We can incur such additional secured or other unsecured
indebtedness under the Credit Agreement if certain specified conditions are met. Our liquidity requirements are significant primarily
due to debt service requirements. See Note 9 “Long-term Debt” to our audited consolidated financial statements included elsewhere in
Part II. Item 8 of this Form 10-K.
On July 17, 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that it will no longer persuade or
compel banks to submit rates for the calculation of LIBOR to the LIBOR administrator after 2021. On March 5, 2021, the ICE
Benchmark Association (“IBA”) stated that it will cease the publication of all non-U.S. dollar LIBOR and the one-week and two-month
U.S. dollar LIBOR settings immediately following the LIBOR publication on December 31, 2021, with the publication of the remaining
U.S. dollar LIBOR settings being discontinued on June 30, 2023. It is expected that a transition away from the widespread use of LIBOR
to alternative rates will occur over the course of the next several years. The Credit Agreement and the Receivables Financing Agreement
each provide that the Company and the applicable administrative agent may amend such Credit Agreement or Receivables Financing
Agreement, as applicable, to replace the LIBOR definition with a successor rate based on prevailing market convention, subject to
notifying the lending syndicate of such change and not receiving within 5 business days of such notification written objections to such
replacement rate from (i) with respect to the Receivables Financing Agreement, lenders holding at least a majority of the aggregate
principal amount of commitments then outstanding thereunder or (ii) with respect to any class of loans under the Credit Agreement,
lenders holding at least a majority of the aggregate principal amount of loans and commitments then outstanding in such class. The
consequences of these developments cannot be entirely predicted, but could include an increase in the interest cost of our variable rate
indebtedness.
Our business may not generate sufficient cash flows from operations or future borrowings may not be available to us under our
Revolving Credit Facility or the Receivables Financing Agreement in an amount sufficient to enable us to pay our indebtedness, or to
fund our other liquidity needs. Our ability to do so depends on, among other factors, prevailing economic conditions, many of which
are beyond our control, including the ongoing impact of the COVID-19 pandemic. In addition, upon the occurrence of certain events,
such as a change in control, we could be required to repay or refinance our indebtedness. We may not be able to refinance any of our
indebtedness, including the Series B Term Loan under the Credit Agreement, on commercially reasonable terms or at all. Any future
acquisitions, joint ventures, or other similar transactions may require additional capital and there can be no assurance that any such
capital will be available to us on acceptable terms or at all.
Cash Flows
Information about our cash flows, by category, is presented in our statements of cash flows and is summarized below:
(In millions)
Operating activities
Investing activities
Financing activities
Free Cash Flow (1)
Fiscal Year Ended September 30,
2021
2020
$
$
$
$
$
148.4
(158.7 ) $
(23.1 ) $
$
96.7
245.1
(108.8 )
(18.3 )
197.2
(1)
See “Non-GAAP Financial Measures” above for a reconciliation to the most directly comparable GAAP measure.
Cash Flows provided by Operating Activities
Net cash provided by operating activities for the fiscal year ended September 30, 2021 decreased $96.7 million, to $148.4 million,
from $245.1 million in the 2020 period. This decrease was primarily due to a decrease in cash provided by net working capital, including
accounts payable and other operating liabilities, accounts receivable, unbilled and deferred revenue, and other operating assets. The
decrease was partially offset by an increase in cash provided by net income (loss).
Cash Flows used in Investing Activities
Net cash used in investing activities was $158.7 million in the fiscal year ended September 30, 2021, an increase of $49.9 million
compared to $108.8 million for the 2020 period. This increased cash use was driven by an increase in consideration paid for acquisitions
net of cash acquired of $20.1 million. Additionally proceeds from divestitures of $28.5 million were received in fiscal 2020.
43
Cash Flows provided by (used in) Financing Activities
Net cash flows used in financing activities of $23.1 million for the fiscal year ended September 30, 2021 consisted of finance
lease obligations repayments of $20.5 million, term loan repayments of $10.4 million, offset by net proceeds from our Receivables
Financing Agreement of $9.9 million.
Net cash flows used in financing activities of $18.3 million for the fiscal year ended September 30, 2020 included proceeds from
our Receivables Financing Agreement of $80.0 million and proceeds from our Revolving Credit Facility of $70.0 million drawn
principally in response to the COVID-19 pandemic, both of which were fully repaid during the period. Additionally term loan
repayments of $10.4 million and finance lease obligations repayments of $9.9 million were made during the period.
Free Cash Flow
Free Cash Flow decreased $100.5 million to $96.7 million for the fiscal year ended September 30, 2021 from $197.2 million in
the 2020 period. The decrease in Free Cash Flow was principally due to the decrease in cash flows from operating activities of $96.7
million as described above.
Working Capital
(In millions)
Net Working Capital:
Current assets
Less: Current liabilities
Net working capital
September 30, 2021 September 30, 2020
$
$
710.8 $
496.1
214.7 $
633.1
450.1
183.0
Net working capital is defined as current assets less current liabilities. Net working capital increased $31.7 million, to $214.7
million, at September 30, 2021, from $183.0 million at September 30, 2020, primarily driven by an increase in accounts receivable of
$59.7 million, an increase in unbilled revenue of $16.6 million, and an increase of $34.8 million in other current assets, partially offset
by an increase in accrued expenses and other current liabilities of $23.7 million, an increase in accounts payable by $27.6 million, and
a decrease in cash and cash equivalents of $33.4 million.
Description of Indebtedness
Series B Term Loan due 2025
On August 15, 2018, the Company entered into Amendment No. 5 to the Credit Agreement (the “Amendment”). The Credit
Agreement was amended to provide for: (i) a $1,037.0 million seven-year term loan (the “Series B Term Loan”) and (ii) a $260.0 million
five-year revolving credit facility. The Series B Term Loan matures on August 15, 2025 and bears interest at a rate per annum of LIBOR,
plus 2.5%. The Company used the net proceeds from the Series B Term Loan to repay all amounts outstanding under the Company’s
First Lien Term Loans. An original discount of $2.8 million was incurred when the Series B Term Loan was issued and is being
amortized using the effective interest method over the life of the debt resulting in an effective yield of 2.5%.
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. The excess
cash flow calculation did not result in any accelerated payment due for the periods ended September 30, 2021, September 30, 2020, and
September 30, 2019.
Revolving credit facility
The Company’s five-year $260.0 million Revolving Credit Facility matures on August 15, 2023 and bears interest at a rate per
annum of LIBOR plus a margin ranging from 2.50% to 2.00%, with the margin determined based on the Company’s first lien net
leverage ratio. The Revolving Credit Facility replaces the previous $210.0 million revolving credit facility under the Credit Agreement.
The Company had no outstanding balance under either facility as of September 30, 2021 and September 30, 2020. There is a quarterly
commitment fee equal to either 1(cid:187)2 of 1% or 3/8 of 1% of the unused balance of the Revolving Credit Facility depending on the Company’s
leverage ratio. The Company had $52.3 million and $78.0 million of letters of credits issued and outstanding as of September 30, 2021
and September 30, 2020, respectively. There was no activity or outstanding balance on the Revolving Credit Facility for the year ended
September 30, 2021. The interest rates on the Revolving Credit Facility and previous revolving credit facility were 2.3% and 2.5% for
the years ended September 30, 2020 and 2019, respectively. During the fiscal year ended September 30, 2020, the Company borrowed
and fully repaid $70.0 million against the Revolving Credit Facility.
44
Receivables financing agreement
On April 28, 2017, the Company, through a wholly-owned subsidiary, entered into the Receivables Financing Agreement. The
Receivables Financing Agreement provides a borrowing capacity of $175.0 million through April 27, 2020. On February 21, 2019, the
Company entered into the First Amendment to the Receivables Financing Agreement (the “Amendment Agreement”) which increased
the borrowing capacity to $200.0 million and extended the term through February 20, 2022. On February 19, 2021, the Company entered
into the Second Amendment to the Receivables Financing Agreement (the "Second Amendment") which extended the term through
February 20, 2024 and increased the borrowing capacity to $235.0 million through September 20, 2021 and $250.0 million thereafter.
All amounts outstanding under the Receivables Financing Agreement are collateralized by substantially all of the Accounts receivables
and Unbilled revenue of the Company.
During the year ended September 30, 2021, the Company borrowed $34.5 million against the capacity and voluntarily repaid
$24.6 million. During the year ended September 30, 2020, the Company borrowed and fully repaid $80.0 million against the capacity.
For additional information on our material indebtedness, including our First Lien Term Loans, Second Lien Term Loans, Series
B Term Loans and Revolving Credit Facility and our outstanding borrowings under the Receivables Financing Agreement, see “Note 9
“Long-term Debt” in our audited consolidated financial statements included elsewhere in this Form 10-K.
As of September 30, 2021, September 30, 2020, and September 30, 2019, we were in compliance with all of our debt covenants
and no event of default had occurred or was ongoing.
Contractual Obligations and Commercial Commitments
The Company’s primary contractual obligations include the payment of interest and principal on our outstanding long term debt,
our operating and finance lease portfolios, and other operational purchase obligations
The Company has outstanding variable-rate debt through its Term loan and other debt instruments, which hold varying maturities.
See Note 9, “Long Term Debt” to our audited consolidated financial statements included in Part II. Item 8 of this Form 10-K for further
information, including the timing of principal and interest payments associated with the Company’s long term debt.
The Company has operating and finance leases for branch and administrative offices, vehicles, certain machinery and equipment,
and furniture. The Company’s leases have remaining non-cancellable lease terms of month to month up to 10.5 years. See Note 12
“Leases” to our audited consolidated financial statements included in Part II. Item 8 of this Form 10-K for additional information,
including the maturity schedule of future principal and interest payments associated with our finance and operating lease portfolios.
Purchase obligations include commitments for various products and services made in the normal course of business to meet
operational requirements, including the procurement of capital assets. As of September 30, 2021, the Company had $46.5 million of
operational purchase obligations, with $8.5 million payable within twelve months. These purchase obligation amounts represent only
those items for which we are contractually obligated as of September 30, 2021.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our
financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources.
Critical Accounting Policies and Estimates
Accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an
understanding of our consolidated financial statements because they involve significant judgments and uncertainties. Management
believes that the application of these policies on a consistent basis enables us to provide the users of the consolidated financial statements
with useful and reliable information about our operating results and financial condition. Certain of these estimates include determining
fair value. All of these estimates reflect our best judgment about current, and for some estimates, future economic and market conditions
and their effect based on information available as of the date of these consolidated financial statements. If these conditions change from
those expected, it is reasonably possible that the judgments and estimates described below could change, which may result in future
impairments of goodwill, intangibles and long-lived assets, increases in reserves for contingencies, establishment of valuation
allowances on deferred tax assets and increase in tax liabilities, among other effects. Also see Note 2 “Summary of Significant
Accounting Policies” to our audited consolidated financial statements included elsewhere in this Form 10-K, which discusses the
significant accounting policies that we have selected from acceptable alternatives.
Acquisitions
From time to time we enter into strategic acquisitions in an effort to better service existing customers and to attain new customers.
When we acquire a controlling financial interest in an entity or group of assets that are determined to meet the definition of a business,
45
we apply the acquisition method described in ASC Topic 805, Business Combinations. In accordance with GAAP, the results of the
acquisitions we have completed are reflected in our consolidated financial statements from the date of acquisition forward.
We allocate the purchase consideration paid to acquire the business to the assets and liabilities acquired based on estimated fair
values at the acquisition date, with the excess of purchase price over the estimated fair value of the net assets acquired recorded as
goodwill. If during the measurement period (a period not to exceed twelve months from the acquisition date) we receive additional
information that existed as of the acquisition date but at the time of the original allocation described above was unknown to us, we make
the appropriate adjustments to the purchase price allocation in the reporting period the amounts are determined.
Significant judgment is required to estimate the fair value of intangible assets and in assigning their respective useful lives.
Accordingly, we typically engage third-party valuation specialists, who work under the direction of management, to assist in valuing
significant tangible and intangible assets acquired.
The fair value estimates are based on available historical information and on future expectations and assumptions deemed
reasonable by management, but are inherently uncertain.
We typically use an income method to estimate the fair value of intangible assets, which is based on forecasts of the expected
future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in the valuations reflect a
consideration of other marketplace participants, and include the amount and timing of future cash flows (including expected growth
rates and profitability), a brand’s relative market position and the discount rate applied to the cash flows. Unanticipated market or
macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.
Determining the useful life of an intangible asset also requires judgment. All of our acquired intangible assets (e.g., trademarks,
non-compete agreements and customer relationships) are expected to have finite useful lives. Our estimates of the useful lives of finite-
lived intangible assets are based on a number of factors including competitive environment, market share, brand history, operating plans
and the macroeconomic environment of the regions in which the brands are sold.
The costs of finite-lived intangible assets are amortized to expense over their estimated lives. The value of residual goodwill is
not amortized, but is tested at least annually for impairment as described in the following note.
Goodwill
Goodwill represents the excess of the purchase price over the fair values of the underlying net assets acquired in an acquisition.
Goodwill is not amortized, but rather is tested annually for impairment, or more frequently if events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable. We test goodwill for impairment annually in the fourth quarter of each
year using data as of July 1 of that year.
Goodwill is allocated to, and evaluated for impairment at our three identified reporting units. Goodwill is tested for impairment
by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors to determine
whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount. We may elect not to perform the
qualitative assessment for some or all reporting units and perform the quantitative impairment test. The quantitative goodwill impairment
test requires us to compare the carrying value of the reporting unit’s net assets to the fair value of the reporting unit. The Company
determined fair values of each of the reporting units using a combination of the income and market multiple approaches. The estimates
used in each approach include significant management assumptions, including long-term future growth rates, operating margins,
discount rates and future economic and market conditions.
If the fair value exceeds the carrying value, no further evaluation is required, and no impairment loss is recognized. If the carrying
amount of a reporting unit, including goodwill, exceeds the estimated fair value, the excess of the carrying value over the fair value is
recorded as an impairment loss, the amount of which not to exceed the total amount of goodwill allocated to the reporting unit.
Our methodology for estimating the fair value of our reporting units utilizes a combination of the market and income approaches.
The market approach is based on the guideline public company method, which measures the value of the reporting unit through applying
valuation multiples of selected guideline public companies to the reporting unit’s key operating metrics. The income approach is based
on the Discounted Cash Flow (“DCF”) method, which is based on the present value of future cash flows. The principal assumptions
utilized in the DCF methodology include long-term future growth rates, operating margins, and discount rates. There can be no assurance
that our estimates and assumptions regarding forecasted cash flow, long-term future growth rates and operating margins made for
purposes of the annual goodwill impairment test will prove to be accurate predictions of the future. We believe the current assumptions
and estimates utilized under each approach are both reasonable and appropriate.
Based on our most recent annual analysis as of July 1, 2021, the fair values for all three of our reporting units exceeded the carrying
values, and therefore no indicators of impairment existed for our reporting units. See Note 7 “Intangible Assets, Goodwill, Acquisitions
and Divestitures” to our audited consolidated financial statements included in Part II. Item 8 of this Form 10-K for additional
information.
46
Long-lived Assets (Excluding Goodwill)
Long-lived assets with finite lives are depreciated and amortized generally on a straight-line basis over their estimated useful lives.
These lives are based on our previous experience for similar assets, potential market obsolescence and other industry and business data.
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. Changes in estimated useful lives or in the asset values could cause us to adjust our
book value or future expense accordingly.
Net Service Revenues
We perform landscape maintenance and enhancement services, development services, other landscape services 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.
Maintenance Services
Our Maintenance Services revenues are generated primarily through landscape maintenance services and snow removal services.
Landscape maintenance services that are primarily viewed as non-discretionary, such as lawn care, mowing, gardening, mulching, leaf
removal, irrigation and tree care, are provided under recurring annual contracts, which typically range from one to three years in duration
and are generally cancellable by the customer with 30-90 days’ notice. Snow removal services are provided on either fixed fee based
contracts or per occurrence contracts. Both landscape maintenance services and snow removal services can also include enhancement
services that represent supplemental maintenance or improvement services generally provided under contracts of short duration related
to specific services. Revenue for landscape maintenance and snow removal services under fixed fee models is recognized over time
using an output based method. Additionally, a portion of our recurring fixed fee landscape maintenance and snow removal services are
recorded under the series guidance. The right to invoice practical expedient, defined within Note 4 “Revenue” to our audited consolidated
financial statements, is generally applied to revenue related to landscape maintenance and snow removal services performed in relation
to per occurrence contracts as well as enhancement services. When use of the practical expedient is not appropriate for these contracts,
revenue is recognized using a cost-to-cost input method. Fees for contracted landscape maintenance services are typically billed on an
equal monthly basis. Fees for fixed fee snow removal services are typically billed on an equal monthly basis during snow season, while
fees for time and material or other activity-based snow removal services are typically billed as the services are performed. Fees for
enhancement services are typically billed as the services are performed.
Development Services
For Development Services, revenue is primarily recognized over time using the cost-to-cost input method, measured by the
percentage of cost incurred to date to the estimated total cost for each contract, which we believe to be the best measure of progress.
The full amount of anticipated losses on contracts is recorded as soon as such losses can be estimated. These losses have been immaterial
in prior periods. 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.
Risk Management and Insurance
We carry general liability, auto liability, workers’ compensation, professional liability, directors’ and officers’ liability, and
employee health care insurance policies. In addition, we carry umbrella liability insurance policies to cover claims over the liability
limits contained in the primary policies. Our insurance programs for workers’ compensation, general liability, auto liability and
employee health care for certain employees contain self-insured retention amounts, deductibles and other coverage limits (“self-insured
liability”). Claims that are not self-insured as well as claims in excess of the self-insured liability amounts are insured. We use estimates
in the determination of the required accrued self-insured claims. These estimates are based upon calculations performed by third-party
actuaries, as well as examination of historical trends, and industry claims experience. We adjust our estimate of accrued self-insured
claims when required to reflect changes based on factors such as changes in health care costs, accident frequency and claim severity.
We believe the use of actuarial methods to account for these liabilities provides a consistent and effective way to measure these highly
judgmental accruals. However, the use of any estimation technique in this area is inherently sensitive given the magnitude of claims
involved and the length of time until the ultimate cost is known. We believe our recorded obligations for these expenses are consistently
measured. Nevertheless, changes in healthcare costs, accident frequency and claim severity can materially affect the estimates for these
liabilities.
47
Equity-based Compensation
We account for equity-based compensation plans under the fair value recognition and measurement provisions in accordance with
applicable accounting standards, which require all equity-based payments to employees and non-employees, including grants of stock
options, to be measured based on the grant date fair value of the awards. We use the Black-Scholes-Merton valuation model to estimate
the fair value of stock options granted to employees and non-employees. The model requires certain assumptions including the estimated
expected term of the stock options, the risk-free interest rate and the exercise price, of which certain assumptions are highly complex
and subjective. The expected option life represents the period of time that the options granted are expected to be outstanding based on
management’s best estimate of the timing of a liquidity event and the contractual term of the stock option. As there is not sufficient
trading history of our common stock, we use a group of our competitors which we believe are similar to us, adjusted for our capital
structure, in order to estimate volatility. Our exercise price is the stock price on the date in which shares were granted.
Prior to our IPO, our stock price was calculated based on a combination of the income and market multiple approaches. Under the
income approach, specifically the discounted cash flow method, forecasted cash flows are discounted to the present value at a risk-
adjusted discount rate. The valuation analyses determine discrete free cash flows over several years based on forecast financial
information provided by management and a terminal value for the residual period beyond the discrete forecast, which are discounted at
an appropriate rate to estimate our enterprise value. Under the market multiple approach, specifically the guideline public company
methods, we selected publicly traded companies with similar financial and operating characteristics as us and calculated valuation
multiples based on the guideline public company’s financial information and market data. Subsequent to the IPO, the estimation of our
stock price is no longer necessary as we rely on the market price to determine the market value of our common stock. For additional
information related to the assumptions used, see Note 13 “Equity-Based Compensation” to our audited consolidated financial statements
included elsewhere in Part II. Item 8 of this Form 10-K.
Income Taxes
The determination of our provision for income taxes requires management’s judgment in the use of estimates and the interpretation
and application of complex tax laws. Judgment is also required in assessing the timing and amounts of deductible and taxable items. We
establish contingency reserves for material, known tax exposures relating to deductions, transactions, and other matters involving some
uncertainty as to the proper tax treatment of the item. Our reserves reflect our judgment as to the resolution of the issues involved if
subject to judicial review. Several years may elapse before a particular matter, for which we have established a reserve, is audited and
finally resolved or clarified. While we believe that our reserves are adequate to cover reasonably expected tax risks, issues raised by a
tax authority may be finally resolved at an amount different than the related reserve. Such differences could materially increase or
decrease our income tax provision in the current and/or future periods. When facts and circumstances change (including a resolution of
an issue or statute of limitations expiration), these reserves are adjusted through the provision for income taxes in the period of change.
Recently Issued Accounting Pronouncements
Measurement of Credit Losses
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurements of Credit
Losses on Financial Instruments, which was amended in May 2019 by ASU No. 2019-04, Codification Improvements to Topic 326,
Financial Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments and ASU No. 2019-05, Financial
Instruments – Credit Losses (Topic 326): Targeted Transition Relief. These ASUs require entities to account for expected credit losses
on financial instruments including trade receivables. The Company adopted the guidance in the first quarter of fiscal 2021. The adoption
of ASU No. 2016-13 did not have a material impact on the Company’s consolidated financial statements and disclosures.
Fair Value Measurement
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to
the Disclosure Requirements for Fair Value Measurement which modifies the disclosures on fair value measurements by removing the
requirement to disclose the amount and reason for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for
timing of such transfers. The ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on
changes in unrealized gains and losses included in other comprehensive income. The Company adopted the guidance in the first quarter
of fiscal 2021. The adoption of ASU No. 2018-13 did not have a material impact on the Company’s consolidated financial statements
and disclosures.
Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes which removes specified exceptions and adds requirements to simplify the accounting for income taxes. The guidance is effective
for the Company in the first quarter of fiscal 2022 and early adoption is permitted. The Company does not expect the adoption to have
a material impact on its consolidated financial statements.
48
Reference Rate Reform
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference
Rate Reform on Financial Reporting which provides optional expedients and exceptions for the accounting for contracts, hedging
relationships, and other transactions affected by reference rate reform if certain criteria are met. The guidance is effective for the
Company upon issuance through December 31, 2022. The guidance in ASU 2020-04 is optional and may be elected over time as
reference rate reform activities occur. During the third quarter of fiscal 2020 the Company elected to apply the hedge accounting
expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index
upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients
preserves the presentation of derivatives consistent with past presentation. In January 2021, the FASB issued ASU 2021-01 to clarify
the scope of certain optional expedients for derivatives that are affected by the discounting transition. The Company continues to evaluate
the impact of the guidance on its consolidated financial statements and may apply other elections as applicable as additional changes in
the market occur.
Business Combinations
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and
Contract Liabilities from Contracts with Customers which requires that an entity (acquirer) recognize and measure contract assets and
contract liabilities acquired in a business combination in accordance with Topic 606 as if it had originated the contracts. The guidance
is effective for the Company in the first quarter of fiscal 2023. The Company is in the process of evaluating the impact of ASU No.
2021-08 on its consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
We are exposed to interest rate risk as a result of our variable rate borrowings. We manage our exposure to interest rate risk by
using pay-fixed interest rate swaps as cash flow hedges of a portion of our variable rate debt. We have historically targeted hedging
between 30% and 50% of the principal amount outstanding under our Term Loans.
As of September 30, 2021, we had variable rate debt outstanding of $1.15 billion at a current weighted average interest rate of
2.65%, substantially all of which was incurred under our Senior Secured Credit Facilities and the Receivables Financing Agreement.
Each of these loans bears interest based on LIBOR plus a spread.
We use interest rate swaps to offset our exposure to interest rate movements. These outstanding interest rate swaps qualify and
are designated as cash flow hedges of forecasted LIBOR-based interest payments. At September 30, 2021, we were a fixed rate payer
on fixed-floating interest rate swap contracts that effectively fixed the LIBOR-based index used to determine the interest rates charged
on our LIBOR-based variable rate borrowings. See Note 10 “Fair Value Measurements and Derivative Instruments” to our audited
consolidated financial statements included elsewhere in this Form 10-K.
Based on the debt position and hedge contracts in place as of September 30, 2021, a 100 basis point change in interest rates on
our variable rate debt would result in a change to our fiscal 2021 interest expense by approximately $6.5 million inclusive of the impact
from the active hedge contracts. Actual interest rates could change significantly more than 100 bps.
Commodity Price Risk
We are exposed to market risk for changes in fuel prices through the consumption of fuel by our vehicle fleet and mowers in the
delivery of services to our customers. We purchase our fuel at prevailing market prices. We manage our exposure through the execution
of a documented hedging strategy. We have historically entered into fuel swap contracts to mitigate the financial impact of fluctuations
in fuel prices when appropriate. We currently have open fuel-based derivative instruments.
During the year ended September 30, 2021 we purchased approximately 17.1 million gallons of fuel. Based on the hedging
contracts in place during fiscal 2021, a ten percent change in fuel prices would have resulted in a change of approximately $3.4 million
in our annual fuel cost inclusive of the impact from the active hedge contracts.
We continue to monitor our exposure and the current pricing environment and may execute new fuel-based derivative instruments
in the future. See Note 10 “Fair Value Measurements and Derivative Instruments” to our audited consolidated financial statements
included elsewhere in this Form 10-K.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements, supplementary information and financial statement schedules of the Company are set forth
beginning on page F-1 of this report.
49
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Regulations under the Exchange Act require public companies, including us, to maintain disclosure controls and procedures,
which are defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act to mean a company’s controls and other procedures that
are designed to ensure that information required to be disclosed in the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is
accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions regarding required or necessary disclosures. In designing and
evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures
are met. The design of any controls and procedures also is based on certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Additionally, in
designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-
benefit relationship of possible disclosure controls and procedures. Our management, with the participation of our principal executive
officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and
procedures as of September 30, 2021. Based upon that evaluation and subject to the foregoing, our principal executive officer and
principal financial officer concluded that, as of September 30, 2021, the design and operation of our disclosure controls and procedures
were effective to accomplish their objectives at a reasonable assurance level.
Management’s Annual Report on Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). The Company’s internal control over financial reporting is designed
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements
for external purposes in accordance with generally accepted accounting principles in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the process or procedures may deteriorate.
Under the supervision and with the participation our Chief Executive Officer and Chief Financial Officer, the Company conducted
an evaluation of the effectiveness of the Company’s internal control over financial reporting as of September 30, 2021 based on the
framework set forth in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on that evaluation, the Company’s management concluded that the Company’s internal control over
financial reporting was effective as of September 30, 2021.
The effectiveness of the Company’s internal control over financial reporting as of September 30, 2021 has been audited by Deloitte
& Touche LLP, an independent registered public accounting firm. Refer to “Opinion on Internal Control over Financial Reporting” on
page F-4 herein.
Changes in Internal Control Over Financial Reporting
Regulations under the Exchange Act require public companies to evaluate any change in the Company’s internal control over
financial reporting as such term is defined in Rule 13a-15(f) and Rule 15d-15(f) of the Exchange Act. There have been no changes in
the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that have materially affected,
or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Company’s ability to maintain an effective internal control environment has not been impacted by the COVID-19 pandemic.
The Company is continually monitoring and assessing the impact of the COVID-19 pandemic on its internal controls to minimize the
impact on their design and operating effectiveness.
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
50
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item is incorporated by reference to the applicable information in the Company’s Proxy Statement
for the 2022 Annual Meeting of Stockholders, which is expected to be filed with the SEC on or before January 19, 2022.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference to the applicable information in the Company’s Proxy Statement
for the 2022 Annual Meeting of Stockholders, which is expected to be filed with the SEC on or before January 19, 2022.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated by reference to the applicable information in the Company’s Proxy Statement
for the 2022 Annual Meeting of Stockholders, which is expected to be filed with the SEC on or before January 19, 2022.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated by reference to the applicable information in the Company’s Proxy Statement
for the 2022 Annual Meeting of Stockholders, which is expected to be filed with the SEC on or before January 19, 2022.
Item 14. Principal Accounting Fees and Services
The information required by this Item is incorporated by reference to the applicable information in the Company’s Proxy Statement
for the 2022 Annual Meeting of Stockholders, which is expected to be filed with the SEC on or before January 19, 2022.
51
Item 15. Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this report:
(1) Consolidated Financial Statements;
PART IV
See the “Index” to the Consolidated Financial Statements commencing on page F-1 of this Form 10-K.
(2) Financial Statement Schedules
All financial statement schedules are omitted since the required information is not present or is not present in amounts sufficient
to require submission of the schedules, or because the information required is included in the consolidated financial statements and notes
thereto.
(3) Exhibits
See the “Exhibit Index” beginning on page 53 of this Form 10-K.
Item 16. Form 10-K Summary
Not applicable.
52
Exhibit
Number
Exhibit Index
Description
3.1
3.2
4.1
4.2
4.3
4.4
4.5
10.1
10.2
10.3
10.4
10.5
10.6
Third Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to
the Company’s Current Report on Form 8-K filed on July 2, 2018)
Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current
Report on Form 8-K filed on July 2, 2018)
Stockholders Agreement, dated as of June 27, 2018, among BrightView Holdings, Inc. and the stockholders party
thereto (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on
July 2, 2018)
Second Amended and Restated Limited Partnership Agreement of BrightView Parent, L.P., dated June 30, 2014, by
and among BrightView GP I, LLC and the other parties party thereto (incorporated by reference to Exhibit 10.2 to the
Company’s Registration Statement on Form S-1/A filed with the SEC on June 11, 2018)
Amendment No. 1 to the Second Amended and Restated Limited Partnership Agreement of BrightView Parent, L.P.,
dated July 5, 2016, by BrightView GP I, LLC (incorporated by reference to Exhibit 10.3 to the Company’s Registration
Statement on Form S-1/A filed with the SEC on June 11, 2018)
Amendment No. 2 to the Second Amended and Restated Limited Partnership Agreement of BrightView Parent L.P.,
dated as of June 27, 2018, by and among BrightView GP I, LLC and BrightView Holdings, Inc. (incorporated by
reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on July 2, 2018)
Description of Registrant’s Securities (incorporated by reference to Exhibit 4.5 to the Company’s Annual Report on
Form 10-K filed with the SEC on November 21, 2019)
Amended and Restated Indemnification Agreement, dated as of May 21, 2014, by and among BrightView Holdings,
Inc., Kohlberg Kravis Roberts & Co. L.P. and MSD Capital, L.P. (incorporated by reference to Exhibit 10.6 to the
Company’s Registration Statement on Form S-1/A filed with the SEC on June 11, 2018)
First Lien Credit Agreement, dated as of December 18, 2013, among Garden Acquisition Holdings, Inc., Garden
Merger Sub, LLC, Morgan Stanley Senior Funding, Inc., as administrative agent, collateral agent, swingline lender and
a lender, Morgan Stanley Bank N.A., as the letter of credit issuer, Morgan Stanley Senior Funding, Inc., Credit Suisse
Securities (USA) LLC, Goldman Sachs Bank USA, Royal Bank of Canada, Mizuho Bank, Ltd., KKR Capital Markets
LLC, Macquarie Capital (USA) Inc., Sumitomo Mitsui Banking Corporation, and UBS Securities LLC, as joint lead
arrangers and bookrunners, and the several lenders from time to time parties thereto (incorporated by reference to
Exhibit 10.7 to the Company’s Registration Statement on Form S-1 filed with the SEC on May 30, 2018)
Amendment to First Lien Credit Agreement, dated as of June 30, 2014, among Garden Acquisition Holdings, Inc., The
Brickman Group Ltd. LLC, Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, and the
several lenders from time to time parties thereto (incorporated by reference to Exhibit 10.8 to the Company’s
Registration Statement on Form S-1 filed with the SEC on May 30, 2018)
Amendment No. 2 to First Lien Credit Agreement, dated as of December 18, 2017, among BrightView Acquisition
Holdings, Inc., BrightView Landscapes, LLC and Morgan Stanley Senior Funding, Inc., as administrative agent, letter
of credit issuer and swingline lender and the several lenders from time to time parties thereto (incorporated by
reference to Exhibit 10.9 to the Company’s Registration Statement on Form S-1 filed with the SEC on May 30, 2018)
Amendment No. 3 to First Lien Credit Agreement, dated as of March 1, 2018, by and among BrightView Acquisition
Holdings, Inc., BrightView Landscapes, LLC and Morgan Stanley Senior Funding, Inc., as administrative agent
(incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement on Form S-1 filed with the SEC
on May 30, 2018)
Amended and Restated Joinder Agreement, dated as of June 30, 2014, by and among Jefferies Finance LLC, MIHI,
Mizuho Bank, Ltd., Sumitomo Mitsui Banking Corporation, Nomura Corporate Funding Americas, LLC, and KKR
Corporate Lending LLC, Garden Merger Sub, LLC, as borrower, Morgan Stanley Bank, N.A., as a letter of credit
issuer and Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent (incorporated by reference
to Exhibit 10.11 to the Company’s Registration Statement on Form S-1 filed with the SEC on May 30, 2018)
53
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
First Lien Guarantee, dated as of December 18, 2013, by the guarantors party thereto (incorporated by reference to
Exhibit 10.12 to the Company’s Registration Statement on Form S-1 filed with the SEC on May 30, 2018)
First Lien Security Agreement, dated as of December 18, 2013, among Garden Acquisition Holdings, Inc., Garden
Merger Sub, LLC, The Brickman Group Ltd. LLC, the subsidiary grantors party thereto and Morgan Stanley Senior
Funding, Inc., as collateral agent (incorporated by reference to Exhibit 10.13 to the Company’s Registration Statement
on Form S-1 filed with the SEC on May 30, 2018)
First Lien Pledge Agreement, dated as of December 18, 2013, among Garden Acquisition Holdings, Inc., Garden
Merger Sub, LLC, The Brickman Group Ltd. LLC, each of the subsidiary pledgors party thereto and Morgan Stanley
Senior Funding, Inc., as collateral agent (incorporated by reference to Exhibit 10.14 to the Company’s Registration
Statement on Form S-1 filed with the SEC on May 30, 2018)
Grant of Security Interest in Trademark Rights, dated as of December 18, 2013, by The Brickman Group Ltd. LLC
(incorporated by reference to Exhibit 10.15 to the Company’s Registration Statement on Form S-1 filed with the SEC
on May 30, 2018)
Second Lien Credit Agreement, dated as of December 18, 2013, among Garden Acquisition Holdings, Inc., Garden
Merger Sub, LLC, Credit Suisse AG, as administrative agent and collateral agent, Morgan Stanley Senior Funding,
Inc., Credit Suisse Securities (USA) LLC, Goldman Sachs Bank USA, Royal Bank of Canada, Mizuho Bank, Ltd.,
KKR Capital Markets LLC, Macquarie Capital (USA) Inc., Sumitomo Mitsui Banking Corporation, and UBS
Securities LLC, as joint lead arrangers and bookrunners, and the several lenders from time to time parties thereto
(incorporated by reference to Exhibit 10.16 to the Company’s Registration Statement on Form S-1 filed with the SEC
on May 30, 2018)
Amendment No. 1 to Second Lien Credit Agreement, dated as of March 1, 2018, by and among BrightView
Acquisition Holdings, Inc., BrightView Landscapes, LLC and Credit Suisse AG, as administrative agent (incorporated
by reference to Exhibit 10.17 to the Company’s Registration Statement on Form S-1 filed with the SEC on May 30,
2018)
Second Lien Guarantee, dated as of December 18, 2013, by the guarantors party thereto (incorporated by reference to
Exhibit 10.18 to the Company’s Registration Statement on Form S-1 filed with the SEC on May 30, 2018)
Second Lien Security Agreement, dated as of December 18, 2013, among Garden Acquisition Holdings, Inc., Garden
Merger Sub, LLC, The Brickman Group Ltd. LLC, the subsidiary grantors party thereto and Credit Suisse AG, as
collateral agent (incorporated by reference to Exhibit 10.19 to the Company’s Registration Statement on Form S-1 filed
with the SEC on May 30, 2018)
Second Lien Pledge Agreement, dated as of December 18, 2013, among Garden Acquisition Holdings, Inc., Garden
Merger Sub, LLC, The Brickman Group Ltd. LLC, subsidiary pledgors party thereto and Credit Suisse AG, as
collateral agent (incorporated by reference to Exhibit 10.20 to the Company’s Registration Statement on Form S-1 filed
with the SEC on May 30, 2018)
First Lien/Second Lien Intercreditor Agreement, dated as of December 18, 2013, among Garden Acquisition Holdings,
Inc., Garden Merger Sub, LLC, other grantors party thereto, Morgan Stanley Senior Funding, Inc., Credit Suisse AG
and each additional representative from time to time party thereto (incorporated by reference to Exhibit 10.21 to the
Company’s Registration Statement on Form S-1 filed with the SEC on May 30, 2018)
Receivables Financing Agreement, dated as of April 28, 2017, by and among BrightView Funding LLC, BrightView
Landscapes, LLC, PNC Bank, National Association, PNC Capital Markets LLC and the persons from time to time
party thereto as lenders and LC participant (incorporated by reference to Exhibit 10.22 to the Company’s Registration
Statement on Form S-1 filed with the SEC on May 30, 2018)
First Amendment to the Receivables Financing Agreement, including as Exhibit A thereto, a marked version of the
Receivables Financing Agreement, dated as of February 21, 2019, by and among BrightView Funding LLC, as
borrower, BrightView Landscapes LLC, as initial servicer and PNC Bank, National Association, as lender, letter of
credit bank, letter of credit participant and administrative agent (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed with the SEC on February 22, 2019)
Second Amendment to the Receivables Financing Agreement, including as Exhibit A thereto, a marked version of the
Receivables Financing Agreement, dated as of February 19, 2021, by and among BrightView Funding LLC, as
borrower, BrightView Landscapes LLC, as initial servicer and PNC Bank, National Association, as lender, letter of
credit bank, letter of credit participant and administrative agent (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on February 19, 2021)
54
10.20
10.21
10.22
10.23
10.24
Second Amendment to the Purchase and Sale Agreement, dated as of September 30, 2020, by and among BrightView
Landscapes, LLC, as servicer, BrightView Tree Company, as an originator, BrightView Funding LLC, as buyer, and
the parties listed thereto as remaining originators (incorporated by reference to Exhibit 10.20 to the Company’s Annual
Report on Form 10-K filed with the SEC on November 18, 2020)
Third Amendment to the Purchase and Sale Agreement, dated as of September 30, 2020, by and among BrightView
Landscapes, LLC, as servicer, BrightView Puerto Rico, LLC, as an originator, BrightView Funding LLC, as buyer, and
the parties listed thereto as remaining originators (incorporated by reference to Exhibit 10.21 to the Company’s Annual
Report on Form 10-K filed with the SEC on November 18, 2020)
Fourth Amendment to the Purchase and Sale Agreement, dated as of November 23, 2020, by and among BrightView
Landscapes, LLC, as servicer, Metheny Commercial Lawn Maintenance, INC., as an originator, BrightView Funding
LLC, as buyer, and the parties listed thereto as remaining originators (incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q filed with the SEC on February 4, 2021)
Incremental Amendment and Amendment No. 4 to First Lien Credit Agreement, dated June 8, 2018, by and among
JPMorgan Chase Bank N.A., BrightView Holdings, Inc., BrightView Landscapes, LLC and Morgan Stanley Senior
Funding, Inc., as administrative agent (incorporated by reference to Exhibit 10.35 to the Company’s Registration
Statement on Form S-1/A filed with the SEC on June 11, 2018)
Amendment No. 5 to Credit Agreement, including as Exhibit A thereto, the Amended Credit Agreement, dated as of
August 15, 2018, by and among BrightView Holdings, Inc., BrightView Landscapes, LLC and the lenders or other
financial institutions or entities from time to time party thereto and JPMorgan Chase Bank, N.A., as successor
Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed with the SEC on August 15, 2018)
10.25†
2018 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-
K filed with the SEC on July 2, 2018)
10.26†
Form of Restricted Stock Unit Agreement for Non-Employee Directors under the 2018 Omnibus Incentive Plan
(incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K filed with the SEC on
November 21, 2019)
10.27†
2018 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on
Form 8-K filed with the SEC on July 2, 2018)
10.28†
Amendment No. 1 to 2018 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.25 to the
Company’s Annual Report on Form 10-K filed with the SEC on November 21, 2019)
10.29†
Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.26 to the Company’s
Registration Statement on Form S-1 filed with the SEC on May 30, 2018)
10.30†
Form of Letter Agreement between BrightView Holdings, Inc. and Andrew V. Masterman (incorporated by reference
to Exhibit 10.27 to the Company’s Registration Statement on Form S-1 filed with the SEC on May 30, 2018)
10.31†
Form of Letter Agreement between BrightView Holdings, Inc. and John A. Feenan (incorporated by reference to
Exhibit 10.28 to the Company’s Registration Statement on Form S-1 filed with the SEC on May 30, 2018)
10.32†
Form of Letter Agreement between BrightView Holdings, Inc. and Thomas C. Donnelly (incorporated by reference to
Exhibit 10.29 to the Company’s Registration Statement on Form S-1 filed with the SEC on May 30, 2018)
10.33†
Form of Letter Agreement between BrightView Holdings, Inc. and Jonathan M. Gottsegen (incorporated by reference
to Exhibit 10.30 to the Company’s Registration Statement on Form S-1 filed with the SEC on May 30, 2018)
10.34†
Form of Letter Agreement between BrightView Holdings, Inc. and Jeffery R. Herold (incorporated by reference to
Exhibit 10.31 to the Company’s Registration Statement on Form S-1 filed with the SEC on May 30, 2018)
10.35†
Form of Award Notice and Nonqualified Stock Option Agreement (incorporated by reference to Exhibit 10.32 to the
Company’s Registration Statement on Form S-1/A filed with the SEC on June 11, 2018)
10.36†
Form of Award Notice and Nonqualified Stock Option Agreement (Top-Up Option) (incorporated by reference to
Exhibit 10.33 to the Company’s Registration Statement on Form S-1/A filed with the SEC on June 11, 2018)
10.37†
Form of BrightView Holdings, Inc. Restricted Stock Grant and Acknowledgment (incorporated by reference to Exhibit
10.34 to the Company’s Registration Statement on Form S-1/A filed with the SEC on June 11, 2018)
55
10.38†
Form of BrightView Holdings, Inc. Restricted Stock Unit Grant (2019) (incorporated by reference to Exhibit 10.1 to
the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 6, 2020)
10.39†
Form of Award Notice and Nonqualified Stock Option Agreement (2019) (incorporated by reference to Exhibit 10.2 to
the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 6, 2020)
10.40†
Form of BrightView Holdings, Inc. Restricted Stock Unit Grant (2019 Bonus Grant) (incorporated by reference to
Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 6, 2020)
10.41†
The BrightView Holdings, Inc. Amended and Restated 2018 Omnibus Incentive Plan (incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 11, 2020)
10.42†
BrightView Holdings, Inc. Executive Leadership Team Annual Bonus Plan (incorporated by reference to Exhibit 10.2
to the Company’s Quarterly Report on Form 10-Q filed on May 7, 2020)
21.1*
Subsidiaries of BrightView Holdings, Inc.
23.1*
Consent of Deloitte & Touche LLP
31.1*
31.2*
32.1*
32.2*
Certification of Periodic Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
(furnished herewith)
Certification of Periodic Report by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
(furnished herewith)
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (furnished herewith)
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (furnished herewith)
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its
XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
The cover page for the Company’s Quarterly Report on Form 10-K for the fiscal year ended September 30, 2021, has
been formatted in Inline XBRL.
† Indicates a management contract or any compensatory plan, contract or arrangement.
* Filed herewith.
56
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 17, 2021
BrightView Holdings, Inc.
By:
/s/ Andrew V. Masterman
Andrew V. Masterman
Chief Executive Officer, President and
Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed
below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Name
Title
Date
/s/ Andrew V. Masterman
Andrew V. Masterman
Chief Executive Officer, President and
Director
(Principal Executive Officer)
November 17, 2021
/s/ John A. Feenan
John A. Feenan
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
November 17, 2021
/s/ Louay H. Khatib
Louay H. Khatib
Chief Accounting Officer
(Principal Accounting Officer)
November 17, 2021
/s/ Paul E. Raether
Paul E. Raether
Chairman of Board of Directors
November 17, 2021
/s/ James R. Abrahamson
James R. Abrahamson
Director
/s/ Jane Okun Bomba
Jane Okun Bomba
/s/ Frank Lopez
Frank Lopez
Director
Director
/s/ Richard W. Roedel
Richard W. Roedel
Director
November 17, 2021
November 17, 2021
November 17, 2021
November 17, 2021
/s/ Mara Swan
Mara Swan
Director
November 17, 2021
/s/ Joshua T. Weisenbeck
Joshua T. Weisenbeck
Director
November 17, 2021
57
[This page intentionally left blank.]
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of September 30, 2021 and September 30, 2020
Consolidated Statements of Operations for the fiscal years ended September 30, 2021, September 30, 2020 and September
30, 2019
Consolidated Statements of Comprehensive Income (Loss) for the fiscal years ended September 30, 2021, September 30,
2020, and September 30, 2019
Consolidated Statements of Stockholders’ Equity for the fiscal years ended September 30, 2021, September 30, 2020, and
September 30, 2019
Consolidated Statements of Cash Flows for the fiscal years ended September 30, 2021, September 30, 2020, and September
30, 2019
Notes to Consolidated Financial Statements
F-2
F-5
F-6
F-7
F-8
F-9
F-10
F-1
Report of Independent Registered Public Accounting Firm
To the stockholders and the Board of Directors of BrightView Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of BrightView Holdings, Inc. and subsidiaries (the "Company") as of
September 30, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity,
and cash flows, for each of the three years in the period ended September 30, 2021, and the related notes (collectively referred to as
the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Company as of September 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the
period ended September 30, 2021, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of September 30, 2021, based on criteria established in Internal
Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated November 17, 2021 expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that
our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to
the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical
audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the
critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill – Maintenance Reporting Unit – Refer to Notes 2 and 7 to the financial statements
Critical Audit Matter Description
The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying
value annually in the fourth quarter of each year using data as of July 1 of that year. The Company performed a quantitative test to
determine the fair value of each reporting unit, which required management to make significant estimates and assumptions related to
long-term future growth rates, operating margins, discount rate and future economic and market conditions. Changes in these
assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge, or both. The fair
value of the Maintenance reporting unit as of the measurement date of July 1, 2021 exceeded the carrying value. Therefore, no
impairment was recognized.
We identified the valuation of goodwill allocated to the Maintenance reporting unit as a critical audit matter because of the significant
judgments made by management to estimate the fair value of the Maintenance reporting unit. Auditing the income approach fair value
of this reporting unit involved a high degree of auditor judgment and an increased effort, which included the involvement of our fair
value specialists, as it related to evaluating whether management’s significant estimates and assumptions related to long-term future
growth rates, operating margins, discount rate and future economic and market conditions were appropriate.
F-2
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the significant estimates and assumptions of long-term future growth rates, operating margins, discount
rate and future economic and market conditions used by management to estimate the fair value of the Maintenance reporting unit
included the following, among others:
(cid:120) We tested the effectiveness of internal controls over management’s goodwill impairment evaluation, including those over
the determination of the fair value of the Maintenance reporting unit, including controls related to management’s significant
estimates and assumptions of long-term future growth rates, operating margins, discount rate and future economic and
market conditions.
(cid:120) We evaluated management’s ability to accurately forecast future Maintenance reporting unit revenue and operating margin
by comparing actual results to management’s historical forecasts.
(cid:120) We evaluated the reasonableness of management’s Maintenance reporting unit revenue and operating margin forecasts by
comparing the forecasts to:
o
o
o
historical results,
internal communications to management and the Board of Directors, and
forecasted information included in analyst and industry reports for the Company and certain peer companies.
(cid:120) With the assistance of our fair value specialists, we evaluated (1) the valuation methodology used and (2) the projections
of long-term future growth rates and the discount rate by testing the underlying source information, and by developing a
range of independent estimates and comparing those to the rate selected by management.
/S/ Deloitte & Touche LLP
Philadelphia, PA
November 17, 2021
We have served as the Company’s auditor since 2014.
F-3
Report of Independent Registered Public Accounting Firm
To the stockholders and the Board of Directors of BrightView Holdings, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of BrightView Holdings, Inc. and subsidiaries (the “Company”) as of
September 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control —
Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements and related notes as of and for the year ended September 30, 2021, of the Company
and our report dated November 17, 2021 expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/S/ Deloitte & Touche LLP
Philadelphia, PA
November 17, 2021
F-4
BrightView Holdings, Inc.
Consolidated Balance Sheets
(In millions, except par value and share data)
September 30,
2021
September 30,
2020
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Unbilled revenue
Other current assets
Total current assets
Property and equipment, net
Intangible assets, net
Goodwill
Operating lease assets
Other assets
Total assets
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
Current portion of long-term debt
Deferred revenue
Current portion of self-insurance reserves
Accrued expenses and other current liabilities
Current portion of operating lease liabilities
Total current liabilities
Long-term debt, net
Deferred tax liabilities
Self-insurance reserves
Long-term operating lease liabilities
Other liabilities
Total liabilities
Stockholders’ equity:
Preferred stock, $0.01 par value; 50,000,000 shares authorized; no shares
issued or outstanding as of September 30, 2021 and September 30, 2020
Common stock, $0.01 par value; 500,000,000 shares authorized; 105,200,000 and
104,900,000 shares issued and outstanding as of September 30, 2021 and
September 30, 2020, respectively
Treasury stock, at cost; 287,000 and 91,000 shares as of September 30, 2021 and
September 30, 2020, respectively
Additional paid-in-capital
Accumulated deficit
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
$
$
$
123.7 $
378.9
111.2
97.0
710.8
264.4
197.6
1,950.8
69.5
44.5
3,237.6 $
144.4 $
10.4
48.2
50.2
220.9
22.0
496.1
1,130.6
70.8
104.5
54.2
38.7
1,894.9
—
1.1
(4.4 )
1,489.1
(141.6 )
(1.5 )
1,342.7
3,237.6 $
157.1
319.2
94.6
62.2
633.1
251.5
221.3
1,859.3
58.8
47.0
3,071.0
116.8
12.3
57.1
48.4
197.2
18.3
450.1
1,127.5
38.9
102.7
47.5
32.8
1,799.5
—
1.0
(2.5 )
1,467.8
(187.9 )
(6.9 )
1,271.5
3,071.0
The accompanying notes are an integral part of these consolidated financial statements.
F-5
BrightView Holdings, Inc.
Consolidated Statements of Operations
(In millions, except per share data)
Net service revenues
Cost of services provided
Gross profit
Selling, general and administrative expense
Amortization expense
Income from operations
Other income
Interest expense
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Income (loss) per share:
Basic and Diluted
September 30,
2021
Fiscal Year Ended
September 30,
2020
September 30,
2019
2,553.6 $
1,902.8
650.8
508.0
52.3
90.5
2.7
42.3
50.9
4.6
46.3 $
2,346.0 $
1,750.7
595.3
527.4
55.8
12.1
1.3
64.6
(51.2 )
(9.6 )
(41.6 ) $
2,404.6
1,766.4
638.2
452.2
56.3
129.7
—
72.5
57.2
12.8
44.4
0.44 $
(0.40 ) $
0.43
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-6
BrightView Holdings, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(In millions)
September 30,
2021
Fiscal Year Ended
September 30,
2020
September 30,
2019
Net income (loss)
$
46.3
$
(41.6) $
Net derivative (losses) gains arising during the period, net
of tax of ($0.8), $3.6, and $2.4, respectively
Reclassification of losses into net (loss) income, net of
tax of $(1.2), $5.1, and $2.0, respectively
Other comprehensive income (loss)
Comprehensive income (loss)
$
2.1
3.3
5.4
51.7 $
(9.4)
14.2
4.8
(36.8) $
44.4
(6.4)
5.1
(1.3)
43.1
The accompanying notes are an integral part of these consolidated financial statements.
F-7
BrightView Holdings, Inc.
Consolidated Statements of Stockholders’ Equity
(In millions)
Balance, September 30, 2018
Net income
Other comprehensive (loss), net of tax
Capital contributions and issuance of common
stock
Equity-based compensation
Repurchase of common stock and distributions
Adoption of ASC 606
Balance, September 30, 2019
Net (loss)
Other comprehensive income, net of tax
Capital contributions and issuance of common
stock
Equity-based compensation
Repurchase of common stock and distributions
Balance, September 30, 2020
Net income
Other comprehensive income, net of tax
Capital contributions and issuance of common
stock
Equity-based compensation
Repurchase of common stock and distributions
Balance, September 30, 2021
Additional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total
Stockholders’
Equity
Common Stock
Shares
Amount
104.5 $
—
—
1.0 $ 1,426.3 $
—
—
—
—
(189.6) $
44.4
—
0.2
—
—
—
104.7
—
—
0.2
—
—
104.9
—
—
—
—
15.7
—
(0.2 )
—
—
—
1.0 1,441.8
—
—
—
—
2.4
—
23.6
—
—
—
1.0 1,467.8
—
—
—
—
—
—
—
(1.1)
(146.3)
(41.6)
—
—
—
—
(187.9)
46.3
—
(10.4 )
—
(1.3 )
—
—
—
—
(11.7 )
—
4.8
—
—
—
(6.9 )
—
5.4
— $ 1,227.3
44.4
—
(1.3 )
—
—
—
(1.0 )
—
(1.0 )
—
—
—
—
(1.5 )
(2.5 )
—
—
—
15.7
(1.2 )
(1.1 )
1,283.8
(41.6 )
4.8
2.4
23.6
(1.5 )
1,271.5
46.3
5.4
0.3
—
—
105.2 $
1.6
19.7
—
0.1
—
—
1.1 $ 1,489.1 $
—
—
—
(141.6) $
—
—
—
(1.5 ) $
1.7
—
19.7
—
(1.9 )
(1.9 )
(4.4 ) $ 1,342.7
The accompanying notes are an integral part of these consolidated financial statements.
F-8
BrightView Holdings, Inc.
Consolidated Statements of Cash Flows
(In millions)
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation
Amortization of intangible assets
Amortization of financing costs and original issue discount
Deferred taxes
Equity-based compensation
Realized loss on hedges
Goodwill impairment
Other non-cash activities, net
Change in operating assets and liabilities:
Accounts receivable
Unbilled and deferred revenue
Inventories
Other operating assets
Accounts payable and other operating liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of property and equipment
Proceeds from sale of property and equipment
Business acquisitions, net of cash acquired
Proceeds from divestitures
Other investing activities, net
Net cash (used) by investing activities
Cash flows from financing activities:
Repayments of finance lease obligations
Repayments of term loan
Repayments of receivables financing agreement
Repayments of revolving credit facility
Proceeds from receivables financing agreement
Proceeds from revolving credit facility
Proceeds from issuance of common stock,
net of share issuance costs
Repurchase of common stock and distributions
Other financing activities, net
Net cash (used) by financing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental Cash Flow Information:
Cash paid for income taxes, net
Cash paid for interest
September 30,
2021
Fiscal Year Ended
September 30,
2020
September 30,
2019
$
46.3
$
(41.6 ) $
44.4
84.7
52.3
3.7
28.9
19.7
4.6
—
(4.1 )
(41.9 )
(25.8 )
—
(28.4 )
8.4
148.4
(61.2 )
9.5
(110.4 )
2.7
0.7
(158.7 )
(20.5 )
(10.4 )
(24.6 )
—
34.5
—
1.8
(1.9 )
(2.0 )
(23.1 )
(33.4 )
157.1
123.7
$
19.5
40.1
$
$
80.5
55.8
3.7
(27.1 )
23.6
19.3
15.5
6.1
18.6
21.2
0.7
(5.2 )
74.0
245.1
(52.7 )
4.8
(90.3 )
28.5
0.9
(108.8 )
(9.9 )
(10.4 )
(80.0 )
(70.0 )
80.0
70.0
1.8
(1.5 )
1.7
(18.3 )
118.0
39.1
157.1 $
8.6 $
61.4 $
80.1
56.3
3.7
(2.3 )
15.7
7.0
—
(0.3 )
(12.8 )
(34.8 )
(2.4 )
17.1
(2.0 )
169.7
(89.9 )
6.8
(64.0 )
—
1.6
(145.5 )
(5.8 )
(13.0 )
(120.0 )
(10.0 )
120.0
10.0
—
(1.2 )
(0.3 )
(20.3 )
3.9
35.2
39.1
1.9
71.7
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-9
BrightView Holdings, Inc.
Notes to Consolidated Financial Statements
(In millions, except per share and share data)
1.
Business
BrightView Holdings, Inc. (the “Company” and, collectively with its consolidated subsidiaries, “BrightView”) provides landscape
maintenance and enhancements, landscape development, snow removal and other landscape related services for commercial customers
throughout the United States. BrightView is aligned into two reportable segments: Maintenance Services and Development Services.
Prior to its initial public offering completed in July 2018 (the “IPO”), the Company was a wholly-owned subsidiary of BrightView
Parent L.P. (“Parent”), an affiliate of KKR & Co. Inc. (“KKR”). The Parent and Company were formed through a series of transactions
entered into by KKR to acquire the Company on December 18, 2013 (the “KKR Acquisition”). The Parent was dissolved in August
2018 following the IPO.
After the completion of the IPO and through May 13, 2021, affiliates of the Sponsors controlled a majority of the voting power
of the Company’s common stock. On May 14, 2021, in accordance with the terms of the Stockholders Agreement, MSD Partners, L.P.
notified the Company of its election to terminate (i) its right to nominate a director pursuant to Section 2.1(a) of the Stockholders
Agreement and (ii) the voting agreement pursuant to Section 2.1(j) of the Stockholders Agreement, effective immediately. As a result,
the Company no longer qualifies as a “controlled company” within the meaning of the corporate governance standards of the New York
Stock Exchange (“NYSE”).
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. Results of acquired companies are included in the consolidated financial statements
from the effective date of the acquisition. All intercompany transactions and account balances have been eliminated.
Use of Estimates
The preparation of the consolidated 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
consolidated 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.
2.
Summary of Significant Accounting Policies
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
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 5 “Accounts Receivable”). Account balances are
written off against the allowance when the potential for recovery is considered remote.
Accounts receivable also includes customer balances that have been billed or are billable to the Company’s customers but will not
be collected until completion of the project or as otherwise specified in the contract. These amounts generally represent 5-10% of the
total contract value.
Property and Equipment
Property and equipment is carried 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, less accumulated depreciation. 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 and included in Cost of services provided or Selling, general and administrative expense as
appropriate.
F-10
Goodwill and Other Intangible Assets
Goodwill represents the excess of the purchase price over the fair values of the underlying net assets acquired in an acquisition.
Goodwill is not amortized, but rather is tested annually for impairment or more frequently if events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable. The Company tests goodwill for impairment annually in the fourth quarter
of each year using data as of July 1 of that year.
Goodwill is allocated to, and evaluated for impairment at, the Company’s three identified reporting units. Goodwill is tested for
impairment by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors to
determine whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount. The Company may elect
not to perform the qualitative assessment for some or all reporting units and perform the quantitative impairment test. The quantitative
goodwill impairment test requires the Company to compare the carrying value of the reporting unit’s net assets to the estimated fair
value of the reporting unit. The Company determines the estimated fair values of each of the reporting units using a combination of the
income and market multiple approaches. The estimates used in each approach include significant management assumptions, including
long-term future growth rates, operating margins, discount rates and future economic and market conditions.
If the estimated fair value exceeds the carrying value, no further evaluation is required, and no impairment loss is recognized. If
the carrying amount of a reporting unit, including goodwill, exceeds the estimated fair value, the excess of the carrying value over the
estimated fair value is recorded as an impairment loss, the amount of which is not to exceed the total amount of goodwill allocated to
the reporting unit.
Definite-lived intangible assets consist principally of acquired customer contracts and relationships, non-compete agreements and
trademarks. Acquired customer relationships are amortized in an accelerated pattern consistent with expected future cash flows. Non-
compete agreements and trademarks are amortized straight-line over their estimated useful lives.
Impairment of 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.
Financing Costs
Financing costs, 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 9 “Long-term Debt”). Financing costs are presented in the Consolidated
Balance Sheets as a direct reduction from the carrying amount of the related borrowings.
Self-Insurance Reserves
The Company carries general liability, vehicle liability, workers’ compensation, professional liability, directors’ and officers’
liability, cyber security 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 general
liability, vehicle liability, workers’ compensation 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, demographic factors and industry claims experience. A receivable for an insurance recovery is generally
recognized when the loss has occurred and collection is considered probable (see Note 14 “Commitments and Contingencies”).
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:
F-11
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 the Company believes market participants would use in pricing the asset or liability based
on the best information available.
The carrying amounts shown for the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate
fair value due to the short-term maturity of those instruments. 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. See Note 9 “Long-term Debt” and Note 10 “Fair Value
Measurements and Derivative Instruments” for other financial instruments subject to fair value estimates.
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 entire
change in the fair value of the derivative included in the assessment of hedge effectiveness is initially reported in Other comprehensive
income (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. 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, the amount
recognized in Accumulated other comprehensive income (loss) is released to earnings. See Note 10 “Fair Value Measurements and
Derivative Instruments” for more information.
Revenue Recognition
The Company’s revenue is generated from Maintenance Services and Development Services. The Company generally recognizes
revenue from the sale of services as the services are performed, which is typically ratably over the term of the contract(s), which the
Company believes to be the best measure of progress. The Company recognizes revenues as it transfers control of services to its
customers in an amount reflecting the total consideration it expects to receive from the customer.
Revenue is recognized according to the following five step model: (1) identify the contract with a customer, (2) identify the
performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance
obligations in the contract, and (5) recognize revenues when a performance obligation is satisfied. The Company determined that for
contracts containing multiple performance obligations, stand-alone selling price is readily determinable for each performance obligation.
The transaction price will include estimates of variable consideration, such as returns and provisions for doubtful accounts and sales
incentives, to the extent it is probable that a significant reversal of revenue recognized will not occur. In all cases, when a sale is recorded
by the Company, no significant uncertainty exists surrounding the purchaser’s obligation to pay.
For Maintenance Services, revenue for landscape maintenance and snow removal services under fixed fee models is recognized
over time using an output based method. Additionally, a portion of the Company’s recurring fixed fee landscape maintenance and snow
removal services are recorded under the series guidance. The right to invoice practical expedient is generally applied to revenue related
to per occurrence contracts as well as enhancement services. When the practical expedient is not applied, revenue is recognized using a
cost-to-cost input method. Fees for contracted landscape maintenance services are typically billed on an equal monthly basis. Fees for
fixed fee snow removal services are typically billed on an equal monthly basis during snow season, while fees for time and material or
other activity-based snow removal services are typically billed as the services are performed. Fees for enhancement services are typically
billed as the services are performed.
For Development Services, revenue is primarily recognized over time using the cost-to-cost input 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.
When contract revenue is recognized in excess of the amount the Company has invoiced or has the right to invoice, a contract
asset is recognized. Contract assets are transferred to Accounts receivable, net when the rights to the consideration become unconditional.
Contract assets are presented as Unbilled revenue on the consolidated balance sheets.
Contract liabilities consist of payments received from customers, or such consideration that is contractually due, in advance of
providing the product or performing services such that control has not passed to the customer. Contract liabilities are presented as
Deferred revenue on the consolidated balance sheets.
F-12
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.
Leases
The Company leases office space, branch locations, vehicles, and operating equipment. Lease agreements are evaluated to
determine whether they are finance 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 finance lease.
Finance leases are capitalized at the lower of net present value of the total amount of rent payable under the leasing agreement
(utilizing the implicit borrowing rate of the Company, as applicable) or the fair market value of the leased asset. Finance 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 finance
lease obligation.
Equity-based Compensation
The Company’s equity-based compensation consists of stock options, restricted stock awards and restricted stock units. 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 later
periods if subsequent information indicates actual forfeitures will differ from those estimates. See Note 13 “Equity-Based
Compensation” for more information.
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 records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken
in a tax return. Such tax positions are, based solely on their technical merits, more likely than not to be sustained upon examination by
taxing authorities and reflect the largest amount of benefit, determined on a cumulative probability basis that is more likely than not to
be realized upon settlement with the applicable taxing authority with full knowledge of all relevant information. The Company
recognizes interest and penalties, if any, related to unrecognized tax benefits in Income tax expense and benefit.
3.
Recent Accounting Pronouncements
Measurement of Credit Losses
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurements of Credit
Losses on Financial Instruments, which was amended in May 2019 by ASU No. 2019-04, Codification Improvements to Topic 326,
Financial Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments and ASU No. 2019-05, Financial
Instruments – Credit Losses (Topic 326): Targeted Transition Relief. These ASUs require entities to account for expected credit losses
on financial instruments including trade receivables. The Company adopted the guidance in the first quarter of fiscal 2021. The adoption
of ASU No. 2016-13 did not have a material impact on the Company’s consolidated financial statements and disclosures.
Fair Value Measurement
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to
the Disclosure Requirements for Fair Value Measurement which modifies the disclosures on fair value measurements by removing the
requirement to disclose the amount and reason for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for
timing of such transfers. The ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on
changes in unrealized gains and losses included in Other comprehensive income. The Company adopted the guidance in the first quarter
of fiscal 2021. The adoption of ASU No. 2018-13 did not have a material impact on the Company’s consolidated financial statements
and disclosures.
F-13
Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes which removes specified exceptions and adds requirements to simplify the accounting for income taxes. The guidance is effective
for the Company in the first quarter of fiscal 2022 and early adoption is permitted. The Company does not expect the adoption to have
a material impact on its consolidated financial statements.
Reference Rate Reform
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference
Rate Reform on Financial Reporting which provides optional expedients and exceptions for the accounting for contracts, hedging
relationships, and other transactions affected by reference rate reform if certain criteria are met. The guidance is effective for the
Company upon issuance through December 31, 2022. The guidance in ASU 2020-04 is optional and may be elected over time as
reference rate reform activities occur. During the third quarter of fiscal 2020 the Company elected to apply the hedge accounting
expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index
upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients
preserves the presentation of derivatives consistent with past presentation. In January 2021, the FASB issued ASU 2021-01 to clarify
the scope of certain optional expedients for derivatives that are affected by the discounting transition. The Company continues to evaluate
the impact of the guidance on its consolidated financial statements and may apply other elections as applicable as additional changes in
the market occur.
Business Combinations
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and
Contract Liabilities from Contracts with Customers which requires that an entity (acquirer) recognize and measure contract assets and
contract liabilities acquired in a business combination in accordance with Topic 606 as if it had originated the contracts. The guidance
is effective for the Company in the first quarter of fiscal 2023. The Company is in the process of evaluating the impact of ASU No.
2021-08 on its consolidated financial statements.
4.
Revenue
The Company’s revenue is generated from Maintenance Services and Development Services. The Company generally recognizes
revenue from the sale of services as the services are performed, typically ratably over the term of the contract(s), which the Company
believes to be the best measure of progress. The Company recognizes revenues as it transfers control of products and services to its
customers. The Company recognizes revenue in an amount reflecting the total consideration it expects to receive from the customer.
Revenue is recognized according to the following five step model: (1) identify the contract with a customer, (2) identify the performance
obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the
contract, and (5) recognize revenues when a performance obligation is satisfied. The Company determined that for contracts containing
multiple performance obligations, stand-alone selling price is readily determinable for each performance obligation and therefore
allocation of the transaction price to multiple performance obligations is not necessary. The transaction price will include estimates of
variable consideration, such as returns and provisions for doubtful accounts and sales incentives, to the extent it is probable that a
significant reversal of revenue recognized will not occur. In all cases, when a sale is recorded by the Company, no significant uncertainty
exists surrounding the purchaser’s obligation to pay.
Maintenance Services
The Company’s Maintenance Services revenues are generated primarily through landscape maintenance services and snow
removal services. Landscape maintenance services that are primarily viewed as non-discretionary, such as lawn care, mowing,
gardening, mulching, leaf removal, irrigation and tree care, are provided under recurring annual contracts, which typically range from
one to three years in duration and are generally cancellable by the customer with 30-90 days’ notice. Snow removal services are provided
on either fixed fee based contracts or per occurrence contracts. Both landscape maintenance services and snow removal services can
also include enhancement services that represent supplemental maintenance or improvement services generally provided under contracts
of short duration related to specific services. Revenue for landscape maintenance and snow removal services under fixed fee models is
recognized over time using an output based method. Additionally, a portion of the Company’s recurring fixed fee landscape maintenance
and snow removal services are recorded under the series guidance. The right to invoice practical expedient, defined below, is generally
applied to revenue related to landscape maintenance and snow removal services performed in relation to per occurrence contracts as
well as enhancement services. When use of the practical expedient is not appropriate for these contracts, revenue is recognized using a
cost-to-cost input method. Fees for contracted landscape maintenance services are typically billed on an equal monthly basis. Fees for
fixed fee snow removal services are typically billed on an equal monthly basis during snow season, while fees for time and material or
F-14
other activity-based snow removal services are typically billed as the services are performed. Fees for enhancement services are typically
billed as the services are performed.
Development Services
For Development Services, revenue is primarily recognized over time using the cost-to-cost input method, measured by the
percentage of cost incurred to date to the estimated total cost for each contract, which we believe to be the best measure of progress.
The full amount of anticipated losses on contracts is recorded as soon as such losses can be estimated. These losses have been immaterial
in prior periods. 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.
Disaggregation of revenue
The following table presents the Company’s reportable segment revenues, disaggregated by revenue type. The Company
disaggregates revenue from contracts with customers into major services lines. The Company has determined that disaggregating
revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and
cash flows are affected by economic factors. The Company’s reportable segments are Maintenance Services and Development Services.
During the second quarter of fiscal 2021, the Company reclassified revenue related to a second quarter fiscal 2020 acquisition from the
Maintenance Services segment to the Development Services segment to align with changes in how we manage our business. Prior period
segment results have been reclassified with no significant impact on Net service revenues. See Note 15, “Segments”.
Landscape Maintenance
Snow Removal
Maintenance Services
Development Services
Eliminations
Net service revenues
Remaining Performance Obligations
2021
Fiscal Year Ended September 30,
2020
2019
$
$
1,698.0 $
284.9
1,982.9
574.9
(4.2 )
2,553.6
$
1,566.3 $
163.1
1,729.4
620.3
(3.7 )
2,346.0 $
1,568.3
245.1
1,813.4
595.4
(4.2 )
2,404.6
Remaining performance obligations represent the estimated revenue expected to be recognized in the future related to performance
obligations which are fully or partially unsatisfied at the end of the period.
As of September 30, 2021, the estimated future revenues for remaining performance obligations that are part of a contract that has
an original expected duration of greater than one year was approximately $338.7 million. The Company expects to recognize revenue
on 53% of the remaining performance obligations over the next 12 months and an additional 47% over the 12 months thereafter.
In accordance with the disclosure provisions of ASU 2014-09, the paragraph above excludes i) estimated future revenues for
performance obligations that are part of a contract that has an original expected duration of one year or less, ii) contracts with variable
consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the
series guidance and iii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services
performed.
Contract Assets and Liabilities
When a contract results in revenue being recognized in excess of the amount the Company has invoiced or has the right to invoice
to the customer, a contract asset is recognized. Contract assets are transferred to Accounts receivable, net when the rights to the
consideration become unconditional. Contract assets are presented as Unbilled revenue on the consolidated balance sheets.
Contract liabilities consist of payments received from customers, or such consideration that is contractually due, in advance of
providing the product or performing services such that control has not passed to the customer. Contract liabilities are presented as
Deferred revenue on the consolidated balance sheets.
F-15
Changes in deferred revenue for the fiscal year ended September 30, 2021 were as follows:
Balance, October 1, 2020
Recognition of revenue
Deferral of revenue
Balance, September 30, 2021
Deferred Revenue
$
57.1
(1,056.6 )
1,047.7
48.2
$
There were $132.6 of amounts billed during the period and $149.2 of additions to our unbilled revenue balance during the twelve
month period from October 1, 2020 to September 30, 2021.
Practical Expedients and Exemptions
The Company offers certain interest-free contracts to customers where payments are received over a period not exceeding one
year. Additionally, certain Maintenance Services and Development Services customers may pay in advance for services. The Company
does not adjust the promised amount of consideration for the effects of these financing components. At contract inception, the period of
time between the performance of services and the customer payment is one year or less.
As permitted under the practical expedient available under ASU No. 2014-09, the Company does not disclose the value of
unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable
consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the
series guidance and (iii) contracts for which the Company recognizes revenue at the amount which we have the right to invoice for
services performed.
5.
Accounts Receivable
Accounts receivable of $378.9 and $319.2, is net of an allowance for doubtful accounts of $3.2 and $2.8 and includes amounts of
retention on incomplete projects to be completed within one year of $43.4 and $45.9 at September 30, 2021 and September 30, 2020,
respectively.
6.
Property and Equipment
Property and equipment, net consists of the following:
Land
Buildings and leasehold improvements
Operating equipment
Transportation vehicles
Office equipment and software
Construction in progress
Property and equipment
Less: Accumulated depreciation
Property and equipment, net
Useful
Life
September 30,
2021
September 30,
2020
— $
2-40 yrs.
2-7 yrs.
3-7 yrs.
3-10 yrs.
—
$
42.2 $
38.6
239.1
288.4
74.3
4.1
686.7
422.3
264.4 $
40.0
30.3
208.2
262.8
68.1
5.0
614.4
362.9
251.5
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 $84.7, $80.5 and $80.1 for the years ended September 30, 2021, September 30, 2020
and September 30, 2019, respectively.
7.
Intangible Assets, Goodwill, Acquisitions and Divestitures
Intangible Assets
Identifiable intangible assets consist of acquired customer contracts and relationships, trademarks and non-compete agreements.
Amortization expense related to intangible assets was $52.3, $55.8 and $56.3 for the years ended September 30, 2021, September 30,
2020 and September 30, 2019, respectively. These assets are amortized over their estimated useful lives of which the reasonableness is
continually evaluated by the Company.
F-16
Intangible assets as of September 30, 2021 and September 30, 2020 consisted of the following:
Customer relationships
Trademarks
Non-compete agreements
Total intangible assets
Useful
Life
6-21 yrs.
4-12 yrs.
5 yrs.
$
$
September 30, 2021
September 30, 2020
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
694.9 $
3.8
2.7
701.4 $
(499.8) $
(2.3)
(1.7)
(503.8) $
666.3 $
3.8
2.7
672.8 $
(448.3 )
(2.0 )
(1.2 )
(451.5 )
The weighted average amortization period for intangible assets is 17.0 years. Amortization expense is anticipated to be as follows
in future years:
Fiscal Year Ended September 30,
2022
2023
2024
2025
2026
2027 and thereafter
$
$
46.3
38.3
30.7
25.2
18.5
38.6
197.6
Goodwill
The following is a summary of the goodwill activity for the periods ended September 30, 2020 and September 30, 2021:
Balance, September 30, 2019
Acquisitions
Impairment Loss
Balance, September 30, 2020
Acquisitions
Balance, September 30, 2021
Maintenance
Services
Development
Services
1,616.0
64.4
—
1,680.4 $
77.6
1,758.0 $
$
$
194.4
—
(15.5 )
178.9 $
13.9
192.8 $
Total
1,810.4
64.4
(15.5 )
1,859.3
91.5
1,950.8
The Company performed its annual goodwill impairment assessment as of July 1, 2021 utilizing a quantitative test approach as
described in Note 2 “Summary of Significant Accounting Policies”. During the prior year analysis, performed as of July 1, 2020, it was
identified that the BrightView Tree Company reporting unit’s carrying value exceeded its fair value, thus indicating an impairment. As
a result of the analysis and in conjunction with the initiation and conclusion of the sale of the BrightView Tree Company reporting unit
in the fourth quarter of fiscal 2020, an impairment loss of $15.5 was recognized within the Tree reporting unit which is reported within
the Development Services operating segment. The goodwill impairment loss was recognized during the fourth quarter of fiscal 2020
and is included in Selling, general and administrative expense in the Consolidated Statements of Operations for the fiscal year ended
September 30, 2020.
Acquisitions
During the year ended September 30, 2021, the Company acquired, through a series of separate transactions, 100% of the
operations of eight unrelated companies, of which three were allocated between both Maintenance Services and Development Services.
The Company paid approximately $110.4 in consideration for the acquisitions, net of cash acquired. The Company accounted for the
business combinations under the acquisition method and, accordingly, recorded the assets acquired and liabilities assumed at their
estimated fair market values based on management’s preliminary estimates, with the excess allocated to goodwill. The fair values were
primarily estimated using Level 3 assumptions within the fair value hierarchy, including estimated future cash flows, discount rates and
other factors. The valuation process to determine fair values is not yet complete. The Company will finalize the amounts recognized as
it obtains the information necessary to complete the analysis, but no later than one year from the acquisition date. The identifiable assets
acquired were primarily intangible assets, including customer relationships of $28.6. The amount allocated to goodwill is reflective of
the benefits the Company expects to realize from anticipated synergies and the acquired assembled workforce. The Company expects a
portion of the goodwill resulting from these acquisitions will be deductible for tax purposes.
F-17
During the year ended September 30, 2020, the Company acquired, through a series of separate transactions, 100% of the
operations of six unrelated Maintenance Services companies. The Company paid approximately $90.3 in consideration for the
acquisitions, net of cash acquired. The Company accounted for the business combinations under the acquisition method and, accordingly,
recorded the assets acquired and liabilities assumed at their estimated fair market values based on management’s estimates at the time
of the acquisition, with the excess allocated to goodwill. The fair values were primarily estimated using Level 3 assumptions within the
fair value hierarchy, including estimated future cash flows, discount rates and other factors. The Company finalized the amounts
recognized as it obtained the information necessary to complete the analysis within one year from the acquisition date. The identifiable
assets acquired were primarily intangible assets, including customer relationships and non-compete agreements of $26.7. The amount
allocated to goodwill is reflective of the benefits the Company expects to realize from anticipated synergies and the acquired assembled
workforce. The Company expects a portion of the goodwill resulting from these acquisitions will be deductible for tax purposes.
Divestitures
On September 30, 2020, the Company completed the sale of two of its fully owned subsidiaries in separate transactions. Total
consideration received in the transactions was $32.3, which consisted of $29.3 in cash and, included in one of the transactions, a
promissory note of $3.0 that was repaid in fiscal 2021 prior to its original maturity date. The combined pre-tax loss on sale of the
transactions totaling $5.7 is included in Selling, general and administrative expense in the Consolidated Statements of Operations for
the fiscal year ended September 30, 2020. Each of the Maintenance Services and Development Services operating segments include the
operations of one of the divested entities, and their results of operations through the closing date are included in the Consolidated
Statements of Operations for the fiscal years ended September 30, 2020 and September 30, 2019.
8.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following as of:
Payroll related accruals
Accrued operating expenses
Other accruals (a)
Accrued expenses and other current liabilities
September 30,
2021
September 30,
2020
$
$
70.2 $
84.0
66.7
220.9 $
59.8
84.4
53.0
197.2
(a) Other accruals for the fiscal years ended September 30, 2021 and September 30, 2020 include the Company’s deferral of Federal Insurance
Contributions Act (FICA) payroll tax under the CARES Act.
9.
Long-term Debt
Long-term debt consists of the following:
Series B term loan
Revolving credit facility
Receivables financing agreement
Insurance policy
Financing costs, net
Total debt, net
Less: Current portion of long-term debt
Long-term debt, net
September 30,
2021
September 30,
2020
$
$
1,001.7 $
—
150.4
—
(11.1)
1,141.0
10.4
1,130.6 $
1,011.8
—
140.0
1.9
(13.9 )
1,139.8
12.3
1,127.5
First Lien credit facility term loans due 2020 and Series B Term Loan due 2025
In connection with the KKR Acquisition, the Company and a group of financial institutions entered into a credit agreement (the
“Credit Agreement”) dated December 18, 2013. The Credit Agreement consisted of seven-year $1,460.0 term loans (“First Lien Term
Loans”) and a five-year $210.0 revolving credit facility. All amounts outstanding under the Credit Agreement were collateralized by
substantially all of the assets of the Company.
F-18
On August 15, 2018, the Company entered into Amendment No. 5 to the Credit Agreement (the “Amended Credit Agreement”).
Under the terms of the Amended Credit Agreement, the Credit Agreement was amended to provide for: (i) a $1,037.0 seven-year term
loan (the “Series B Term Loan”) and (ii) a $260.0 five-year revolving credit facility. The Series B Term Loan matures on August 15,
2025 and bears interest at a rate per annum of LIBOR, plus 2.5%. The Company used the net proceeds from the Series B Term Loan to
repay all amounts outstanding under the Company’s First Lien Term Loans. An original discount of $2.8 was incurred when the Series
B Term Loan was issued and is being amortized using the effective interest method over the life of the debt, resulting in an effective
yield of 2.5%. Debt repayments for the Series B Term Loan consisted of contractual payments per the Credit Agreement and totaled
$10.4 for the fiscal years ended September 30, 2021 and 2020.
In addition to scheduled payments, the Company is obligated to pay a percentage of excess cash flow, as defined in the Amended
Credit Agreement, as accelerated principal payments. The percentage varies with the ratio of the Company’s debt to its cash flow. The
excess cash flow calculation did not result in any accelerated payment due for the periods ended September 30, 2021, September 30,
2020, and September 30, 2019.
The amended 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. In certain circumstances, under the Amended Credit Agreement, the Company is prohibited from making certain restricted
payments, including dividends or distributions to its stockholders, subject to certain exceptions set forth in that agreement (including an
exception for the making of such restricted payments up to an agreed limit, which limit is determined by a formula that takes into account
consolidated net income, net cash proceeds and other amounts, in each case as described in greater detail in that agreement). The
Amended Credit Agreement imposes financial covenants upon the Company with respect to leverage and interest coverage under certain
circumstances. The Amended 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 in the Amended Credit Agreement, including a material
adverse change in the financial condition of the Company since the date of issuance of the Amended Credit Agreement.
The weighted average interest rate on the Series B Term Loan was 2.7% and 3.5% for the years ended September 30, 2021 and
September 30, 2020. The Amended Credit Agreement debt repayments are 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 a five-year $260.0 revolving credit facility (the “Revolving Credit Facility”) that matures on August 15, 2023
and bears interest at a rate per annum of LIBOR plus a margin ranging from 2.50% to 2.00%, with the margin determined based on the
Company’s first lien net leverage ratio. The Revolving Credit Facility replaces the previous $210.0 revolving credit facility under the
Credit Agreement. The Company had no outstanding balance under the Revolving Credit Facility as of September 30, 2021 and 2020.
There were no borrowings or repayments under the facility for the year ended September 30, 2021. There is a quarterly commitment fee
equal to either 1(cid:187)2 of 1% or 3/8 of 1% of the unused balance of the Revolving Credit Facility depending on the Company’s leverage ratio.
The Company had $52.3 and $78.0 of letters of credits issued and outstanding as of September 30, 2021 and September 30, 2020,
respectively. There was no activity or outstanding balance on the Revolving Credit Facility for the year ended September 30, 2021. The
interest rates on the Revolving Credit Facility and previous revolving credit facility were 2.3% and 2.5% for the years ended
September 30, 2020 and 2019, respectively.
During the fiscal year ended September 30, 2020, the Company borrowed and fully repaid $70.0 against the Revolving Credit
Facility.
Receivables financing agreement
On April 28, 2017, the Company, through a wholly-owned subsidiary, entered into a receivables financing agreement (the
“Receivables Financing Agreement”). The Receivables Financing Agreement provided a borrowing capacity of $175.0 through April 27,
2020. On February 21, 2019, the Company entered into the First Amendment to the Receivables Financing Agreement (the "Amendment
Agreement") which increased the borrowing capacity to $200.0 and extended the term through February 20, 2022. On February 19,
2021, the Company entered into the Second Amendment to the Receivables Financing Agreement (the "Second Amendment") which
extended the term through February 20, 2024 and increased the borrowing capacity to $235.0 through September 20, 2021 and $250.0
thereafter. All amounts outstanding under the Receivables Financing Agreement are collateralized by substantially all of the accounts
receivables and unbilled revenue of the Company. During the year ended September 30, 2021, the Company borrowed $34.5 against
the capacity and voluntarily repaid $24.6. During the year ended September 30, 2020, the Company borrowed and fully repaid $80.0
against the capacity.
The interest rate on the amounts borrowed under the Receivables Financing Agreement is established daily at LIBOR plus a spread
of 140-170 bps, and a commitment fee equal to 0.4% of the unused balance of the facility. The weighted average interest rate on the
F-19
amounts borrowed under the Receivables Financing Agreement was 1.6% and 2.7% for the years ended September 30, 2021 and
September 30, 2020, respectively.
The following are the scheduled maturities of long-term debt for the next five fiscal years and thereafter, which do not include
any estimated excess cash flow payments:
2022
2023
2024
2025
2026 and thereafter
Total long term debt
Less: Current maturities
Less: Original issue discount
Less: Financing costs
Total long term debt, net
September 30,
10.4
$
10.4
160.8
972.2
—
1,153.8
10.4
1.7
11.1
1,130.6
$
$
The Company has estimated the fair value of its long-term debt to be approximately $1,148.7 and $1,143.5 as of September 30,
2021 and September 30, 2020, respectively. Fair value is based on market bid prices around period-end (Level 2 inputs).
10. Fair Value Measurements and Derivative Instruments
Fair value is defined as the price at which an orderly transaction to sell an asset or to 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:
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 the Company believes market participants would use in pricing the asset or liability based
on the best information available.
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. 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.
Investments held in Rabbi Trust
A non-qualified deferred compensation plan is available to certain executives. Under this 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 within Other assets on the Consolidated Balance Sheets. 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. Gains and losses on these investments are included in Other income on the Consolidated Statements of Operations.
F-20
Derivatives
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 September 30, 2021 and September 30, 2020, 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.
The following table summarizes the financial assets and liabilities measured at fair value on a recurring basis as of September 30,
2021 and September 30, 2020:
Other assets:
Investments held by Rabbi Trust
Fuel hedges
Total Assets
Accrued expenses and other current liabilities:
Interest rate swap contracts
Fuel hedges
Other liabilities:
Interest rate swap contracts
Obligation to Rabbi Trust
Total Liabilities
Other assets:
Investments held by Rabbi Trust
Fuel hedges
Total Assets
Accrued expenses and other current liabilities:
Interest rate swap contracts
Fuel hedges
Other liabilities:
Interest rate swap contracts
Obligation to Rabbi Trust
Total Liabilities
Carrying Value
Level 1
Level 2
Level 3
September 30, 2021
$
$
$
$
13.5 $
1.2
14.7 $
— $
—
3.6
13.5
17.1 $
13.5 $
—
13.5 $
— $
—
—
13.5
13.5 $
— $
1.2
1.2 $
— $
—
3.6
—
3.6 $
Carrying Value
Level 1
Level 2
Level 3
September 30, 2020
$
$
$
$
11.4 $
0.7
12.1 $
4.5 $
0.8
5.5
11.4
22.2 $
11.4 $
—
11.4 $
— $
—
—
11.4
11.4 $
— $
0.7
0.7 $
4.5 $
0.8
5.5
—
10.8 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Hedging Activities
As of September 30, 2021 and September 30, 2020, the Company’s outstanding derivatives qualify as cash flow hedges. 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 entire change in the fair value for highly effective derivatives is reported in Other comprehensive income
(loss) and subsequently reclassified into Interest expense (in the case of interest rate contracts) and Cost of services provided (in the case
of fuel hedge contracts) in the Consolidated Statements of Operations when the hedged item affects earnings. 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.
F-21
Interest Rate Swap Contracts
The Company has exposures to variability in interest rates associated with its variable interest rate debt, which includes the Series
B Term Loan. 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 periods March 18, 2016 through December 31, 2022.
The notional amount of interest rate contracts was $500.0 and $980.0 at September 30, 2021 and September 30, 2020, respectively. The
net deferred losses on the interest rate swaps as of September 30, 2021 of $2.2, 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:
(Loss) recognized in Other comprehensive
income (loss)
Net loss reclassified from Accumulated other
comprehensive loss into Interest expense
Fuel Swap Contracts
September 30,
2021
Fiscal Year Ended
September 30,
2020
September 30,
2019
$
(0.6) $
(10.3 ) $
(10.2)
(6.8)
(16.9 )
(8.1)
The Company has exposures to variability in fuel pricing associated with its purchase and usage of fuel during the ordinary course
of business operating a large fleet of vehicles and equipment. As such, the Company has entered into gasoline hedge contracts to help
reduce its exposure to volatility in the fuel markets. As of September 30, 2021, the Company has two outstanding fuel contracts covering
the period January 1, 2021 through December 31, 2021 with a notional volume of 5.3 million gallons. The net deferred gains on the fuel
swaps as of September 30, 2021 were immaterial and 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:
Income (loss) recognized in Other comprehensive
income (loss)
Net gain (loss) reclassified from Accumulated other
comprehensive loss into Cost of services provided
September 30,
2021
Fiscal Year Ended
September 30,
2020
September 30,
2019
$
3.5 $
(2.7 ) $
2.3
(2.4 )
1.4
1.1
11.
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 components of income tax expense (benefit) are as follows:
Current:
Federal
State
Deferred:
Federal
State
Total income tax (benefit) expense
September 30,
2021
Fiscal Year Ended
September 30,
2020
September 30,
2019
$
$
(28.1) $
3.8
28.4
0.5
4.6 $
12.5 $
5.0
(19.6 )
(7.5 )
(9.6 ) $
10.1
5.0
0.8
(3.1)
12.8
F-22
Income tax expense (benefit) differs from the amount computed at the federal statutory corporate tax rate as follows:
September 30,
2021
Fiscal Year Ended
September 30,
2020
September 30,
2019
Federal tax at statutory rate
State tax, net of federal tax (benefit) expense
Tax effect of:
Equity-based compensation
Provision to return and deferred tax adjustments
Non-deductible promotional and entertainment
expense
Goodwill impairment
Fuel tax credit and other credits
Change in uncertain tax positions
Carryback claim, net of adjustments
Rate change
Other, net
Income tax expense (benefit)
$
$
10.7 $
3.6
(10.8 ) $
(2.5 )
1.2
(0.6 )
0.6
—
(0.8 )
—
(10.1 )
—
—
4.6 $
1.5
(0.7 )
0.6
3.3
(0.8 )
(0.1 )
—
—
(0.1 )
(9.6 ) $
12.0
1.5
1.0
(0.9 )
0.8
—
(0.8 )
(0.8 )
—
0.1
(0.1 )
12.8
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:
Deferred tax assets:
Interest rate swaps
Self-insurance reserves
Deferred compensation
Payroll related accruals
Other accrued expenses
Allowance for doubtful accounts
Lease liabilities
Net operating loss carryforward
Other non-current deferred tax assets
Total non-current deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Intangible assets
Property and equipment
Deferred revenue
Prepaid assets
Lease assets
Other non-current deferred tax liabilities
Total non-current deferred tax liabilities
Total deferred tax liabilities
Classification on balance sheets:
Other Assets
Deferred Tax Liabilities
September 30,
2021
September 30,
2020
$
$
$
$
$
$
1.4 $
29.6
2.7
18.3
1.8
0.8
17.7
11.2
1.8
85.3
—
85.3 $
49.0 $
79.0
8.7
0.4
15.9
0.5
153.5
68.2 $
2.6
70.8 $
3.3
27.4
2.7
15.8
5.1
0.8
16.6
5.5
2.3
79.5
—
79.5
53.2
42.3
7.1
0.5
14.8
0.5
118.4
38.9
—
38.9
The CARES Act
In March 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law and included
various provisions to provide additional economic relief to address the impact of the COVID-19 pandemic. Notable provisions included
net operating loss carrybacks, adjustments to the interest expense limitations under the U.S Tax Code Section 163(j), increase in the
charitable contributions limitation, payroll tax deferrals of the employer portion of social security tax to be repaid in 2021 and 2022, and
an employee retention credit for wages paid to an idle employee under certain circumstances resulting from the COVID-19 pandemic.
F-23
The Company recorded a tax receivable and benefit to the tax provision for the anticipated tax net operating losses incurred in 2021 that
will be carried back to prior years. The Company recorded an income tax receivable of $39 million and a tax benefit of $10.1 million
from the enactment of the CARES Act, net of adjustments. Further, the Company elected to defer the employer portion of social security
taxes through 2020 and will file for the employee retention credit allowed for under the CARES Act.
Net Operating Losses
The Company has state income tax net operating losses of $207.5 which expire in tax years from fiscal year 2021 through fiscal
year 2041. The Company believes it is more likely than not it will be able to utilize all losses to offset future income.
Uncertain Income Tax Positions
As of September 30, 2021 and 2020, the Company had no unrecognized tax benefits that, if recognized, would impact the
Company's effective tax rate. The total amount of unrecognized tax benefits could change within the next twelve months for a number
of reasons including audit settlements, tax examination activities and the recognition and measurement considerations under this
guidance.
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 2018 and 2016, respectively.
12. Leases
The Company determines if an arrangement is a lease at the inception of the agreement. The Company determines an arrangement
is a lease if it conveys the right to control the use of the asset for a period of time in exchange for consideration.
The Company has operating and finance leases for branch and administrative offices, vehicles, certain machinery and equipment,
and furniture. The Company’s leases have remaining lease terms of month to month up to 10.5 years with one or more exercisable
renewal periods and specified increases in lease payments upon exercise of the renewal options. For purposes of calculating lease
liabilities, lease terms may be deemed to include options to extend the lease when it is reasonably certain that the Company will exercise
those options. Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons,
such as insurance, common area maintenance, and tax payments. The variable lease payments are not presented as part of the initial
right-of-use asset or lease liability. The Company's lease agreements do not contain any material restrictive covenants or residual value
guarantees.
The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheet at September 30,
2021 and 2020:
Operating leases:
Right-of-use asset
Current portion of lease liabilities
Lease liabilities
Total operating lease liabilities
Finance leases:
Right-of-use asset(1)
Current portion of lease liabilities(2)
Lease liabilities(3)
Total finance lease liabilities
Fiscal Year Ended
September 30,
2021
September 30,
2020
$
$
$
$
69.5 $
22.0
54.2
76.2 $
32.1 $
14.9
12.7
27.6 $
58.8
18.3
47.5
65.8
24.3
4.1
14.6
18.7
(1)
(2)
(3)
Included in “Property and equipment, net” in the consolidated balance sheet.
Included in “Accrued expenses and other liabilities” in the consolidated balance sheet.
Included in “Other liabilities” in the consolidated balance sheet.
As most of the Company’s leases do not specifically state an implicit rate, the Company uses an incremental borrowing rate
consistent with the lease term as of the lease commencement date when calculating the present value of remaining lease payments. The
incremental borrowing rate reflects the cost to borrow on a securitized basis. The remaining lease term does not reflect all renewal
F-24
options available to the Company, only those renewal options that the Company has assessed as reasonably certain taking into
consideration the economic factors noted above.
The weighted-average remaining lease terms and incremental borrowing rates as of September 30, 2021 and 2020 were as follows:
Operating leases:
Weighted-average remaining lease term (years)
Weighted-average incremental borrowing rate
Finance leases:
Weighted-average remaining lease term (years)
Weighted-average incremental borrowing rate
Fiscal Year Ended
September 30,
2021
September 30,
2020
4.9
3.3 %
2.7
3.3 %
5.4
3.3 %
2.4
3.3 %
The components of lease cost for operating and finance leases for the fiscal year ended September 30, 2021 and 2020 were as
follows:
Fiscal Year Ended
September 30,
2021
September 30,
2020
$
25.3 $
26.5
Operating lease cost
Finance lease cost:
Amortization of right-of-use asset
Interest on lease liabilities
Total finance lease cost
Short-term lease cost
Variable lease costs not included in lease liability
Sublease income
Total lease cost
$
17.1
0.8
17.9
18.4
2.4
(0.5 )
63.5 $
7.3
0.3
7.6
23.6
1.6
(0.7 )
58.6
Supplemental cash flow information for the fiscal year ended September 30, 2021 and 2020 were as follows:
Fiscal Year Ended
September 30,
2021
September 30,
2020
Cash paid for amounts included in the measurement
of lease liabilities:
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
$
23.6 $
0.7
20.5
25.3
0.3
9.9
Non-cash items:
Right-of-use Assets Obtained In Exchange For
New Operating Liabilities
Right-of-use Assets Obtained In Exchange For
New Finance Liabilities
33.8
22.0
17.1
20.2
As of September 30, 2021, the Company does not have material operating or financing leases that have not yet commenced.
F-25
Maturities of operating and finance lease liabilities as of September 30, 2021 were as follows:
Fiscal Year
2022
2023
2024
2025
2026
Thereafter
Total
Less: Executory Costs
Total net lease payments
Less: Amounts representing interest
Total lease liabilities
Less: Current portion of lease liabilities
Non-current lease liabilities
Operating
Lease
Finance
Lease
$
$
24.1 $
19.3
13.8
8.4
5.6
12.4
83.6
—
83.6
7.4
76.2
(22.0)
54.2 $
15.0
7.0
3.9
2.4
1.2
0.2
29.7
—
29.7
2.1
27.6
(14.9 )
12.7
13. Equity-Based Compensation
Amended and Restated 2018 Omnibus Incentive Plan
On June 28, 2018 (and as amended and restated on March 10, 2020), in connection with the IPO, the Company’s Board of Directors
adopted, and its stockholders approved, the BrightView Holdings, Inc. 2018 Omnibus Incentive Plan (the “2018 Omnibus Incentive
Plan”). The 2018 Omnibus Incentive Plan provides that the total number of shares of common stock that may be issued under the plan
is 18,650,000. Under the plan, the Company may grant stock options, stock appreciation rights, restricted stock, other equity-based
awards and other cash-based awards to employees, directors, officers, consultants and advisors.
Restricted Stock Awards
A summary of the Company’s restricted stock award activity for the year ended September 30, 2021 is presented in the following
table:
Outstanding at September 30, 2020
Granted
Less: Redeemed
Less: Forfeited
Outstanding at September 30, 2021
Restricted Stock Units
Shares
Weighted-Avg
Purchase Price per
Share
1,123,000 $
—
253,000 $
68,000 $
802,000 $
15.12
—
17.54
16.47
14.31
A summary of the Company’s restricted stock unit activity for the year ended September 30, 2021 is presented in the following
table:
Outstanding at September 30, 2020
Granted
Exercised
Forfeited
Outstanding at September 30, 2021
Shares
Weighted-Avg
Purchase Price per
Share
749,000 $
876,000 $
221,000 $
105,000 $
1,299,000 $
16.58
14.28
16.68
15.20
15.14
During the fiscal year ended September 30, 2021, the Company issued 876,000 restricted stock units (“RSUs”) at a weighted
average grant date fair value of $14.28, all of which are subject to vesting. The majority of these units vest ratably over a four-year
F-26
period commencing on the first anniversary of the grant date. Non-cash equity-based compensation expense associated with the new
grants will be approximately $10.5 over the requisite service period. During the fiscal year ended September 30, 2021, 221,000 RSUs
were exercised and 105,000 RSUs were forfeited.
Stock Option Awards
A summary of the Company’s stock option activity for the year ended September 30, 2021 is presented in the following table:
Outstanding at September 30, 2020
Granted
Exercised
Forfeited
Outstanding at September 30, 2021
Vested and exercisable at September 30, 2021
Expected to vest after September 30, 2021
Shares
Weighted-Avg
Purchase Price per
Share
6,711,000 $
687,000 $
26,000 $
355,000 $
7,017,000 $
3,432,000 $
3,585,000 $
20.08
13.78
13.98
20.84
21.55
20.81
22.42
On November 19, 2020, the Company issued 687,000 stock options at a weighted average exercise price of $13.78 and a weighted
average grant date fair value of $6.71, the majority of which vest and become exercisable ratably over a four-year period commencing
on the first anniversary of the grant date. Non-cash equity-based compensation expense associated with the grant will be approximately
$4.1 over the requisite service period. During the fiscal year ended September 30, 2021, 26,000 options were exercised and 355,000
options were forfeited.
Valuation Assumptions
The fair value of each restricted stock award or RSU granted under the Plan and the 2018 Omnibus Incentive Plan was estimated
on the date of grant in accordance with the fair value provisions in ASC 718. The fair value of the Unit awards and stock option awards
granted were estimated on the date of grant using the Black-Scholes-Merton option-pricing model. The Company chose the Black-
Scholes-Merton model based on its experience with the model and the determination that the model could be used to provide a reasonable
estimate of the fair value of awards with terms such as those discussed above. The fair value of the Unit awards and stock option awards
are calculated based on a combination of the income and market multiple approaches. Under the income approach, specifically the
discounted cash flow method, forecast cash flows are discounted to the present value at a risk-adjusted discount rate. The valuation
analyses determine discrete free cash flows over several years based on the forecast financial information provided by management and
a terminal value for the residual period beyond the discrete forecast, which are discounted at the appropriate rate to estimate the
Company’s enterprise value.
The weighted-average assumptions used in the valuation of Unit awards, restricted stock into which such Unit awards were
converted and stock option awards granted or modified for the years ended September 30, 2021, September 30, 2020 and September 30,
2019 are presented in the table below:
Assumptions:
Risk-free interest rate
Dividend yield
Volatility factor
Expected term (in years)
September 30,
2021
Fiscal Year Ended
September 30,
2020
September 30,
2019
0.49 %
—
54.40 %
6.4
1.56 %
—
43.51 %
6.3
2.85 %
—
38.85 %
6.3
(cid:120)
(cid:120)
Risk-free interest rate – The risk-free rate for Units, restricted stock into which such Unit awards were converted and stock
option awards granted during the periods presented above was determined by using the U.S. Treasury constant maturity rate
as of the valuation date commensurate with the expected term.
Expected dividend yield – No routine dividends are currently being paid by the Plan, or are expected to be paid in future
periods.
F-27
(cid:120)
(cid:120)
Expected volatility – The expected volatility is based upon an analysis of the historical and implied volatility of the guideline
companies and adjusting the volatility to take into account the differences in leverage between the Company and the
guideline companies.
Expected term – The expected term represents the expected time to a liquidity event or re-capitalization. The Company
estimated the expected life by considering historical exercise and termination behavior of employees and the vesting
conditions of the Units and stock option awards granted under the Plan.
Equity-Based Compensation Expense
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 Company recognized $19.7, $23.6 and $15.7 in equity-based compensation expense for the years ended September 30, 2021,
September 30, 2020 and September 30, 2019, respectively, included in Selling, general and administrative expense in the accompanying
Consolidated Statements of Operations. The resulting charge increased Additional paid in capital by the same amount. Total
unrecognized compensation cost was $25.6, $36.2 and $40.2 as of the years ended September 30, 2021, September 30, 2020 and
September 30, 2019, respectively, which is expected to be recognized over a weighted average period of 1.2 years.
2018 Employee Stock Purchase Plan
The Company’s Stockholders have approved the Company’s 2018 Employee Stock Purchase Plan, (the “ESPP”). A total of
1,100,000 shares of the Company’s common stock were made available for sale on October 22, 2018, of which 172,000 were issued on
November 14, 2019, and 120,000 were issued on November 14, 2020. An additional portion thereof is expected to be issued in November
2021.
14. Commitments and Contingencies
Risk Management
The Company carries general liability, auto 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, auto liability and employee health care for certain employees contain self-insured retention amounts, deductibles and other
coverage limits (“self-insured liability”). Claims that are not self-insured as well as claims in excess of the self-insured liability 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. The Company’s reserve
for unpaid and incurred but not reported claims under these programs at September 30, 2021 was $154.7, of which $50.2 was classified
in current liabilities and $104.5 was classified in non-current liabilities in the accompanying Consolidated Balance Sheets. The
Company’s reserve for unpaid and incurred but not reported claims under these programs at September 30, 2020 was $151.1, of which
$48.4 was classified in current liabilities and $102.7 was classified in non-current liabilities in the accompanying Consolidated Balance
Sheets. Reflected in this reserve is an expense totaling $24.1 recorded during the year ended September 30, 2020, related to changes in
estimates and actuarial assumptions associated with the Company’s self-insured liability to reflect uncertainties associated with the
current environment, including the COVID-19 pandemic. While the ultimate amount of these claims is dependent on future
developments, in management’s opinion, recorded reserves are adequate to cover these claims. The Company’s reserve for unpaid and
incurred but not reported claims at September 30, 2021 includes $30.5 related to claims recoverable from third-party insurance carriers.
Corresponding assets of $8.2 and $22.3 are recorded at September 30, 2021, as Other current assets and Other assets, respectively. The
Company’s reserve for unpaid and incurred but not reported claims at September 30, 2020 includes $34.1 related to claims recoverable
from third party insurance carriers. Corresponding assets of $8.1 and $26.0 were recorded at September 30, 2020, as Other current assets
and Other assets, respectively.
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 vehicle and general liability matters as well as workers compensation and property casualty
claims). Such claims, even if lacking merit, can result in expenditures 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
commercial and regulatory matters. Regulatory matters include, among other things, audits and reviews of local and federal tax
F-28
compliance, safety and employment practices. Although the process of resolving regulatory matters and claims through litigation and
other means is inherently uncertain, the Company is not aware of any such matter, legal proceeding or claim that it believes will have,
individually or in the aggregate, a material effect on the Company, its financial condition, and results of operations or cash flows. For
all legal matters, an estimated liability is established in accordance with the loss contingencies accounting guidance. This estimated
liability is included in Accrued expenses and other current liabilities in the accompanying Consolidated Balance Sheets.
15. Segments
The operations of the Company are conducted through two operating segments, Maintenance Services and Development Services,
which are also its reportable segments.
Maintenance Services primarily consists of recurring landscape maintenance services and snow removal services as well as
supplemental landscape enhancement services.
Development Services primarily consists of landscape architecture and development services for new construction and large scale
redesign projects.
The operating segments identified above are determined based on the services provided, and they reflect the manner in which
operating results are regularly reviewed by the Chief Operating Decision Maker (“CODM”) to allocate resources and assess
performance. The CODM is the Company’s Chief Executive Officer. The CODM evaluates the performance of the Company’s operating
segments based upon Net Service Revenues, Adjusted EBITDA and Capital Expenditures. Management uses Adjusted EBITDA to
evaluate performance and profitability of each operating segment.
The accounting policies of the segments are the same as those described in Note 2 “Summary of Significant Accounting Policies.”
Corporate includes corporate executive compensation, finance, legal and information technology which are not allocated to the
segments. Eliminations represent eliminations of intersegment revenues. The Company does not currently provide asset information by
segment, as this information is not used by management when allocating resources or evaluating performance.
During the second quarter of fiscal 2021, to align with changes in how we manage our business, the Company reclassified Net
service revenues and expenses related to a second quarter fiscal 2020 acquisition from the Maintenance Services segment to the
Development Services segment. Prior period segment results have been reclassified with no significant impact on segment results. There
were no changes to the Company’s consolidated financial statements.
The following is a summary of certain financial data for each of the segments:
Maintenance Services
Development Services
Eliminations
Net Service Revenues
Maintenance Services
Development Services
Corporate
Adjusted EBITDA(1)
Maintenance Services
Development Services
Corporate
Capital Expenditures
$
$
Fiscal Year Ended
September 30, 2021 September 30, 2020 September 30, 2019
1,813.4
$
595.4
(4.2)
2,404.6
282.0
81.7
(58.6)
305.1
65.4
10.6
13.9
89.9
1,982.9 $
574.9
(4.2)
2,553.6 $
299.6 $
65.2
(62.5)
302.3 $
52.4 $
6.2
2.6
61.2 $
1,729.4 $
620.3
(3.7)
2,346.0 $
248.7 $
81.6
(58.7)
271.6 $
40.6 $
9.4
2.7
52.7 $
$
$
$
(1)
Presented below is a reconciliation of Net (loss) income to Adjusted EBITDA:
F-29
Net income (loss)
Interest expense
Income tax (benefit) provision
Depreciation expense
Amortization expense
Establish public company financial reporting compliance
(a)
Business transformation and integration costs (b)
Offering-related expenses (c)
Equity-based compensation (d)
COVID-19 related expenses (e)
Changes in self-insured liability estimates (f)
Sale of tree company (g)
Adjusted EBITDA
$
Fiscal Year Ended
September 30, 2021 September 30, 2020 September 30, 2019
44.4
$
72.5
12.8
80.1
56.3
(41.6 )
64.6
(9.6 )
80.5
55.8
46.3
42.3
4.6
84.7
52.3
$
$
—
28.5
0.6
20.0
23.0
—
—
302.3 $
0.9
32.5
4.4
24.0
13.8
24.1
22.2
271.6 $
4.8
17.5
1.0
15.7
—
—
—
305.1
(a)
Represents costs incurred to establish public company financial reporting compliance, including costs to comply with the requirements of
Sarbanes-Oxley and the accelerated adoption of the revenue recognition standard (ASC 606 – Revenue from Contracts with Customers) and
other miscellaneous costs.
(b) Business transformation and integration costs consist of (i) severance and related costs; (ii) vehicle fleet rebranding costs; (iii) business
integration costs and (iv) information technology infrastructure, transformation costs, and other.
(c)
Represents transaction related expenses incurred for IPO related litigation and completed or contemplated subsequent registration statements.
(d) Represents equity-based compensation expense and related taxes recognized for equity incentive plans outstanding.
(e)
(f)
Represents expenses related to the Company’s response to the COVID-19 pandemic, principally temporary and incremental salary and related
expenses, personal protective equipment and cleaning and supply purchases, and other.
Represents expenses related to changes in estimates and actuarial assumptions associated with the Company’s self-insured liability amounts for
workers’ compensation, general liability, auto liability, and employee health care insurance programs, to reflect uncertainties associated with
the current environment, including the COVID-19 pandemic.
(g) Represents the goodwill impairment charge, realized loss on sale, and transaction related expenses related to the sale of BrightView Tree
Company on September 30, 2020.
16. Earnings (Loss) Per Share of Common Stock
Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common shares by the weighted average
number of common shares outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by
the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of
common stock that would have been outstanding had potential dilutive shares of common stock been issued. Set forth below is a
reconciliation of the numerator and denominator for basic and diluted earnings (loss) per share calculation for the periods indicated:
Numerator:
Net (loss) income available to common stockholders
Denominator:
Weighted average number of common shares outstanding – basic
Basic (loss) earnings per share
Weighted average number of common shares outstanding – diluted
Diluted (loss) earnings per share
Other Information:
Weighted average number of anti-dilutive options and restricted
stock (a)
F-30
September 30,
2021
Fiscal Year Ended
September 30,
2020
September 30,
2019
$
46.3 $
(41.6 ) $
44.4
105,183,000 103,670,000
0.44 $
$
(0.40 ) $
102,800,000
0.43
105,690,000 103,670,000
0.44 $
$
(0.40 ) $
103,363,000
0.43
7,452,000
8,210,000
5,935,000
(a) Weighted average number of anti-dilutive options is based upon the average closing price of the Company’s common stock on the NYSE for
the period.
F-31
[This page intentionally left blank.]
[This page intentionally left blank.]
[This page intentionally left blank.]
CORPORATE INFORMATION
Annual Meeting
BrightView’s 2022 annual meeting of shareholders will be held virtually
on March 8, 2022 at 11 a.m. EST.
Transfer Agent/Shareholder Services
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
(800) 937-5449 or (718) 921-8124
help@astfinancial.com
www.astfinancial.com
Listing of Common Stock
New York Stock Exchange: BV
Form 10-K Report/Shareholder Information
A copy of the company’s 2021 Form 10-K annual report (without
exhibits) as filed with the Securities and Exchange Commission, is
included in this report. Shareholder information, including news,
releases, presentations, webcasts and SEC filings, is available on the
investor’s section of the company’s website: investor.brightview.com
Independent Registered Public Accounting Firm
Deloitte & Touche LLP, Philadelphia, Pennsylvania
Trademarks
Trademarks appearing in this document are the
property of their respective owners.
The Leader in U.S. Commercial
Landscape Maintenance & Development
Total Revenues: $2,553.6 million1
Adjusted EBITDA2: $302.3 million1
Cash Flow from Operations: $148.4 million1
Market share: 2.7%3
Market Coverage: Network of over 280
branches across the United States
Employees: Approximately 20,000
Data as of September 30, 2021, unless otherwise noted.
Market defined as United States commercial landscape
maintenance and snow removal services.
1For the twelve months ended 9/30/21.
2Non-GAAP financial measure reconciled to comparable
GAAP measure as set forth in Form 10-K.
3Company estimate based on IBISWorld data for total
market in 2021.
© 2022 BrightView Holdings, Inc. All rights reserved.
980 Jolly Rd. Suite 300
Blue Bell, PA 19422
BrightView Holdings, Inc.
www.brightview.com