8.Fair Value Measurements and Derivatives 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

The fair value of the investments held in the Rabbi Trust is based on the quoted market prices of the underlying mutual fund investments. These investments are based on the participants’ selected investments, which represent the underlying liabilities to the participants in the non-qualified deferred compensation plan.

Derivatives

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. The Company has determined that the significant inputs to the overall valuation of its derivatives, such as interest yield curve and discount rate, fall within 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 June 30, 2018 and September 30, 2017:

	June 30, 2018
	Carrying Value		Level 1		Level 2		Level 3
Other assets:
Investments held by Rabbi Trust	$	12,015	$	12,015	$	—	$	—
Total assets	$	12,015	$	12,015	$	—	$	—
Accrued expenses and other current liabilities:
Interest rate swap contracts	$	5,706	$	—	$	5,706	$	—
Other liabilities:
Interest rate swap contracts		12,868		—		12,868		—
Obligation to Rabbi Trust		12,015		12,015		—		—
Total liabilities	$	30,589	$	12,015	$	18,574	$	—

	September 30, 2017
	Carrying Value		Level 1		Level 2		Level 3
Other assets:
Investments held by Rabbi Trust	$	11,004	$	11,004	$	—	$	—
Total assets	$	11,004	$	11,004	$	—	$	—
Accrued expenses and other current liabilities:
Interest rate swap contracts	$	4,621	$	—	$	4,621	$	—
Fuel hedge contracts		50		—		50		—
Other liabilities:
Interest rate swap contracts		30,518		—		30,518		—
Obligation to Rabbi Trust		11,004		11,004		—		—
Total liabilities	$	46,193	$	11,004	$	35,189	$	—

Hedging Activities

As of June 30, 2018 and September 30, 2017, 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 effective portion of the changes in the fair value of the derivative is initially reported in Other comprehensive income and subsequently reclassified to Interest expense (interest rate contracts) and Cost of services provided (fuel hedge contracts) in the Consolidated Statements of Operations when the hedged item affects earnings. The ineffective portion of changes in the fair value of the derivative is recognized directly to Interest expense and Cost of services provided in the period incurred. If it is determined that a derivative is not highly effective as a hedge, or if the hedged forecasted transaction is no longer probable of occurring, then the amount recognized in Accumulated other comprehensive loss is released to earnings. Cash flows from the derivatives are classified in the same category as the cash flows from the underlying hedged transaction.

Interest Rate Swap Contracts

The Company has exposures to variability in interest rates associated with both its First Lien Credit Agreement and Second Lien Credit Agreement. As such, the Company has entered into interest rate swaps to help manage interest rate exposure by economically converting a portion of its variable-rate debt to fixed-rate debt effective for the periods March 18, 2016 through December 31, 2020. The notional amount of interest rate contracts was $1,560,000 at June 30, 2018 and $2,180,000 at September 30, 2017. The net deferred losses on the interest rate swaps as of June 30, 2018 of $5,689, net of taxes, are expected to be recognized in interest expense over the next 12 months.

Subsequent to the nine months ended June 30, 2018, the Company used proceeds in connection with the IPO to reduce outstanding debt. This event did not have a material impact on the hedge position for the nine months ended June 30, 2018 and is not expected to have an impact on the hedge position for the remainder of fiscal 2018. See Note 1 “Business and Basis of Presentation” for additional details on transactions in connection with the IPO.

The effects on the consolidated financial statements of the interest rate swaps which were designated as cash flow hedges were as follows:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2018			2017			2018			2017
Income (loss) recognized in Other comprehensive income (effective portion)	$	2,047		$	(2,794	)	$	9,127		$	5,529
Loss recognized in Interest expense (ineffective portion)		(2	)		(4	)		(1	)		(3	)
Net loss reclassified from Accumulated other comprehensive loss into Interest expense		(2,513	)		(2,966	)		(7,344	)		(6,770	)

Fuel Swap Contracts

The Company operates a large fleet of vehicles and mowers and has entered into gasoline and diesel hedge contracts in an effort to reduce its exposure to volatility in the fuel markets. As of December 31, 2017, all fuel hedge contracts have expired.

The effects on the consolidated financial statements of the fuel swaps which were designated as cash flow hedges were as follows:

	Three Months Ended June 30,					Nine Months Ended June 30,
	2018		2017			2018		2017
(Loss) income recognized in Other comprehensive income (effective portion)	$	—	$	(201	)	$	57	$	(1,100	)
Income (loss) recognized in Cost of services provided (ineffective portion)		—		23			—		(22	)
Net (loss) income reclassified from Accumulated other comprehensive loss into Cost of services provided		—		(90	)		7		(2,146	)