UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

OR

☐ 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	46-4190788
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
980 Jolly Road Blue Bell, Pennsylvania	19422
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (484) 567-7204

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of exchange on which registered
Common Stock, Par Value $0.01 Per Share	BV	New York Stock Exchange

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  ☒    No  ☐

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  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The number of shares of Registrant’s Common Stock outstanding as of April 30, 2020 was 104,926,073.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	4
Item 1.	Financial Statements (Unaudited)	4
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations	5
	Consolidated Statements of Comprehensive (Loss) Income	6
	Consolidated Statements of Stockholders’ Equity	7
	Consolidated Statements of Cash Flows	8
	Notes to Unaudited Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II.	OTHER INFORMATION	39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	41
Signatures		42

1

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”) 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-Q, 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-Q. 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-Q. 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 risks related to:

• the duration and extent of the novel coronavirus (COVID-19) pandemic and the impact of federal, state and local governmental actions and customer behavior in response to the pandemic;

• the risk that our Maintenance and Development operations may be deemed not to be an essential business or service in jurisdictions where we operate;

• customer cancellations or delays of work and any adverse impact on the timing and collectability of payments to us from customers as a result of the impact of COVID-19 on our customers;

• operational disruptions if a significant percentage of our workforce is unable to work or we experience labor shortages, including because of illness or travel or government restrictions in connection with the COVID-19 pandemic and delays in H2-B visa processing;

• contracting and challenging business, economic and financial conditions, including conditions as a result of the COVID-19 pandemic;

• competitive industry pressures;

• the failure to retain current customers, renew existing customer contracts and obtain new customer contracts;

• the failure to enter into profitable contracts, or maintaining customer contracts that are unprofitable;

• a determination by customers to reduce their outsourcing or use of preferred vendors;

• the dispersed nature of our operating structure;

• our ability to implement our business strategies and achieve our growth objectives;

• acquisition and integration risks;

• the seasonal nature of our landscape maintenance services;

• our dependence on weather conditions;

• increases in prices for raw materials and fuel;

• product shortages and the loss of key suppliers;

• any failure to accurately estimate the overall risk, requirements, or costs when we bid on or negotiate contracts that are ultimately awarded to us;

2

• the conditions and periodic fluctuations of real estate markets, including residential and commercial construction;

• our ability to retain our executive management and other key personnel;

• our ability to attract and retain trained workers and third-party contractors and re-employ seasonal workers;

• any failure to properly verify employment eligibility of our employees;

• subcontractors taking actions that harm our business;

• our recognition of future impairment charges;

• laws and governmental regulations, including those relating to employees, wage and hour, immigration, human health and safety and transportation;

• environmental, health and safety laws and regulations, including regulatory costs, claims and litigation related to the use of chemicals and pesticides by employees and related third-party claims;

• the distraction and impact caused by litigation, of adverse litigation judgments and settlements resulting from legal proceedings;

• increase in on-job accidents involving employees;

• any failure, inadequacy, interruption, security failure or breach of our information technology systems;

• any failure to protect the security of personal information about our customers, employees and third parties;

• our ability to adequately protect our intellectual property;

• occurrence of natural disasters, pandemics, terrorist attacks or other unforeseen adverse events;

• changes in generally accepted accounting principles in the United States;

• our ability to generate sufficient cash flow to satisfy our significant debt service obligations;

• our ability to obtain additional financing to fund future working capital, capital expenditures, investments or acquisitions, or other general corporate requirements;

• restrictions imposed by our debt agreements that limit our flexibility in operating our business;

• increases in interest rates governing our variable rate indebtedness increasing the cost of servicing our substantial indebtedness including proposed changes to LIBOR;

• ownership of our common stock; and

• costs and requirements imposed as a result of maintaining the requirement of being a public company.

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.

3

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

BrightView Holdings, Inc.

Consolidated Balance Sheets

(Unaudited)

(In millions, except par value and share data)

	March 31, 2020			September 30, 2019
Assets
Current assets:
Cash and cash equivalents	$	88.0		$	39.1
Accounts receivable, net		334.0			333.7
Unbilled revenue		81.3			107.6
Inventories		30.0			26.5
Other current assets		59.7			44.5
Total current assets		593.0			551.4
Property and equipment, net		278.3			272.4
Intangible assets, net		241.7			251.5
Goodwill		1,878.9			1,810.4
Operating lease assets		66.7			—
Other assets		45.3			42.9
Total assets	$	3,103.9		$	2,928.6
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	112.3		$	99.8
Current portion of long-term debt		10.4			10.4
Deferred revenue		86.1			49.1
Current portion of self-insurance reserves		45.6			37.4
Accrued expenses and other current liabilities		137.3			136.0
Current portion of operating lease liabilities		21.4			—
Total current liabilities		413.1			332.7
Long-term debt, net		1,220.8			1,134.2
Deferred tax liabilities		50.9			64.4
Self-insurance reserves		87.8			87.1
Long-term operating lease liabilities		50.6			—
Other liabilities		20.1			26.4
Total liabilities		1,843.3			1,644.8
Stockholders’ equity:
Preferred stock, $0.01 par value; 50,000,000 shares authorized; no shares    issued or outstanding as of March 31, 2020 and September 30, 2019		—			—
Common stock, $0.01 par value; 500,000,000 shares authorized; 104,900,000    and 104,700,000 shares issued and outstanding as of    March 31, 2020 and September 30, 2019, respectively		1.0			1.0
Treasury stock, at cost; 91,000 and 52,000 shares as of    March 31, 2020 and September 30, 2019, respectively		(1.7	)		(1.0	)
Additional paid-in-capital		1,457.3			1,441.8
Accumulated deficit		(179.4	)		(146.3	)
Accumulated other comprehensive loss		(16.6	)		(11.7	)
Total stockholders’ equity		1,260.6			1,283.8
Total liabilities and stockholders’ equity	$	3,103.9		$	2,928.6

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4

BrightView Holdings, Inc.

Consolidated Statements of Operations

(Unaudited)

(In millions, except per share data)

	Three Months Ended March 31,						Six Months Ended March 31,
	2020			2019			2020			2019
Net service revenues	$	559.1		$	596.6		$	1,129.8		$	1,122.7
Cost of services provided		426.8			450.5			854.5			844.7
Gross profit		132.3			146.1			275.3			278.0
Selling, general and administrative expense		126.9			119.5			257.1			229.6
Amortization expense		13.6			13.8			27.1			28.9
(Loss) income from operations		(8.2	)		12.8			(8.9	)		19.5
Other (expense) income		(1.9	)		1.2			(1.3	)		(0.3	)
Interest expense		17.1			18.9			34.5			36.1
(Loss) before income taxes		(27.2	)		(4.9	)		(44.7	)		(16.9	)
Income tax benefit		6.7			1.3			11.6			4.5
Net (loss)	$	(20.5	)	$	(3.6	)	$	(33.1	)	$	(12.4	)
(Loss) per share:
Basic and diluted	$	(0.20	)	$	(0.04	)	$	(0.32	)	$	(0.12	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

5

BrightView Holdings, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(In millions)

	Three Months Ended March 31,						Six Months Ended March 31,
	2020			2019			2020			2019
Net (loss)	$	(20.5	)	$	(3.6	)	$	(33.1	)	$	(12.4	)
Net derivative (losses) arising during the period, net of tax    benefit of $3.7, $0.3, $3.7, and $1.4, respectively		(9.9	)		(0.8	)		(9.7	)		(3.8	)
Reclassification of losses into net (loss), net of tax expense    of $1.0, $0.7, $1.8, and $1.0, respectively		2.9			1.9			4.8			2.4
Other comprehensive (loss) income		(7.0	)		1.1			(4.9	)		(1.4	)
Comprehensive (loss)	$	(27.5	)	$	(2.5	)	$	(38.0	)	$	(13.8	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

6

BrightView Holdings, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

Three and Six Months Ended March 31, 2020 and 2019

(Unaudited)

(In millions)

	Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Treasury			Total Stockholders’
	Shares		Amount		Capital		Deficit			Loss			Stock			Equity
Balance, December 31, 2019		104.9	$	1.0	$	1,452.3	$	(158.9	)	$	(9.6	)	$	(1.7	)	$	1,283.1
Net (loss)		—		—		—		(20.5	)		—			—			(20.5	)
Other comprehensive loss, net of tax		—		—		—		—			(7.0	)		—			(7.0	)
Capital contributions and issuance of common stock		—		—		0.1		—			—			—			0.1
Equity-based compensation		—		—		4.9		—			—			—			4.9
Balance, March 31, 2020		104.9	$	1.0	$	1,457.3	$	(179.4	)	$	(16.6	)	$	(1.7	)	$	1,260.6
Balance, September 30, 2019		104.7	$	1.0	$	1,441.8	$	(146.3	)	$	(11.7	)	$	(1.0	)	$	1,283.8
Net (loss)		—		—		—		(33.1	)		—			—			(33.1	)
Other comprehensive loss, net of tax		—		—		—		—			(4.9	)		—			(4.9	)
Capital contributions and issuance of common stock		0.2		—		2.4		—			—			—			2.4
Equity-based compensation		—		—		13.1		—			—			—			13.1
Repurchase of common stock and distributions		—		—		—		—			—			(0.7	)		(0.7	)
Balance, March 31, 2020		104.9	$	1.0	$	1,457.3	$	(179.4	)	$	(16.6	)	$	(1.7	)	$	1,260.6
	Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Treasury			Total Stockholders’
	Shares		Amount		Capital		Deficit			Loss			Stock			Equity
Balance, December 31, 2018		105.0	$	1.0	$	1,432.2	$	(199.5	)	$	(12.9	)	$	—		$	1,220.8
Net (loss)		—		—		—		(3.6	)		—			—			(3.6	)
Other comprehensive income, net of tax		—		—		—		—			1.1			—			1.1
Equity-based compensation		—		—		5.6		—			—			—			5.6
Balance, March 31, 2019		105.0	$	1.0	$	1,437.8	$	(203.1	)	$	(11.8	)	$	—		$	1,223.9
Balance, September 30, 2018		104.5	$	1.0	$	1,426.3	$	(189.6	)	$	(10.4	)	$	—		$	1,227.3
Net loss		—		—		—		(12.4	)		—			—			(12.4	)
Other comprehensive loss, net of tax		—		—		—		—			(1.4	)		—			(1.4	)
Capital contributions and issuance of common stock		0.5		—		—		—			—			—			—
Equity-based compensation		—		—		11.5		—			—			—			11.5
Adoption of ASU No. 2014-09 (Refer to Note 2)		—		—		—		(1.1	)		—			—			(1.1	)
Balance, March 31, 2019		105.0	$	1.0	$	1,437.8	$	(203.1	)	$	(11.8	)	$	—		$	1,223.9

The accompanying notes are an integral part of these unaudited consolidated financial statements.

7

BrightView Holdings, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(In millions)

	Six Months Ended March 31,
	2020			2019
Cash flows from operating activities:
Net (loss)	$	(33.1	)	$	(12.4	)
Adjustments to reconcile net (loss) to net cash provided by operating activities:
Depreciation		39.5			41.0
Amortization of intangible assets		27.1			28.9
Amortization of financing costs and original issue discount		1.8			1.9
Deferred taxes		(11.6	)		(7.6	)
Equity-based compensation		13.1			11.5
Other non-cash activities, net		6.3			0.8
Change in operating assets and liabilities:
Accounts receivable		8.1			(33.5	)
Unbilled and deferred revenue		63.9			31.9
Inventories		(2.9	)		(0.8	)
Other operating assets		(15.4	)		3.8
Accounts payable and other operating liabilities		(11.1	)		(0.8	)
Net cash provided by operating activities		85.7			64.7
Cash flows from investing activities:
Purchase of property and equipment		(35.1	)		(42.6	)
Proceeds from sale of property and equipment		2.7			3.0
Business acquisitions, net of cash acquired		(87.1	)		(49.3	)
Other investing activities, net		0.6			1.2
Net cash used in investing activities		(118.9	)		(87.7	)
Cash flows from financing activities:
Repayments of finance lease obligations		(3.2	)		(2.8	)
Repayments of term loan		(5.2	)		(7.8	)
Repayments of receivables financing agreement		(50.0	)		(75.0	)
Repayments of revolving credit facility		(10.0	)		(10.0	)
Proceeds from receivables financing agreement		80.0			84.6
Proceeds from revolving credit facility		70.0			10.0
Proceeds from issuance of common stock, net of share issuance costs		0.1			—
Other financing activities, net		0.4			—
Net cash provided (used) in financing activities		82.1			(1.0	)
Net change in cash and cash equivalents		48.9			(24.0	)
Cash and cash equivalents, beginning of period		39.1			35.2
Cash and cash equivalents, end of period	$	88.0		$	11.2

The accompanying notes are an integral part of these unaudited consolidated financial statements.

8

BrightView Holdings, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(In millions, except per share and share data)

1.Business and Basis of Presentation

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.

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”) for interim reporting and are unaudited.

In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments, including normal, recurring accruals that are necessary for a fair presentation of the Company’s operations for the periods presented in conformity with GAAP. All intercompany activity and balances have been eliminated from the consolidated financial statements. The consolidated results of operations for the interim periods presented are not necessarily indicative of results for the full year.

The consolidated balance sheet as of September 30, 2019, presented herein, has been derived from the Company’s audited consolidated financial statements as of and for the fiscal year ended September 30, 2019, but does not include all disclosures required by GAAP, for annual financial statements. For a more complete discussion of the Company’s accounting policies and certain other information refer to the audited consolidated financial statements and the notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2019, filed with the Securities and Exchange Commission (“SEC”).

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.Recent Accounting Pronouncements

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases. The updated accounting guidance requires lessees to recognize all leases on their balance sheet as a right-of-use asset and a lease liability with the exception of short-term leases. For income statement purposes, the criteria for recognition, measurement and presentation of expense is largely similar to previous guidance, but without the requirement to use bright-line tests in the determination of lease classification. In July 2018, the FASB issued ASU No. 2018-11, Leases: Targeted Improvements, which allows entities the option to adopt this standard using the modified retrospective transition method and include required disclosures for prior periods. This update added a transition option which allows for the recognition of a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption without recasting the consolidated financial statements in periods prior to adoption.

On October 1, 2019, the Company elected to adopt the standard using the modified retrospective approach applied to lease arrangements that were in place on the date of initial adoption. Results for reporting periods beginning October 1, 2019 are presented under the new standard, while prior-period amounts are not adjusted and continue to be reported in accordance with historical accounting under ASC 840, Leases.

9

The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification.As an accounting policy election, the Company excluded short-term leases (term of 12 months or less) from the balance sheet and accounts for non-lease and leasecomponents in a contract as a single component for all asset classes.

The Company recorded a lease liability of $76.3 and a corresponding right-of-use asset of $70.6 upon adoption of the new lease standard at October 1, 2019. The right-of-use asset and lease liability recorded as of October 1, 2019 include, respectively, amounts previously classified as deferred rent obligations and exit/disposal liabilities, and prepaid rent, totaling approximately $5.7. The Company’s finance lease assets and liabilities, which are disclosed in Note 11 “Leases”, remain largely unchanged under the lease accounting standard. The standard did not have a material impact on the Company’s results of operations or liquidity. The guidance did not have a material impact on its debt covenant compliance.

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 guidance is effective for the Company in the first quarter of fiscal 2021 and early adoption is permitted.  The Company is currently evaluating the impact of the updated guidance on its consolidated financial statements.

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 guidance is effective for the Company in the first quarter of fiscal 2021.  Early adoption is permitted for any removed or modified disclosures and adoption of the additional disclosures can be delayed until the effective date. The Company does not currently expect the adoption of ASU 2018-13 to have a material impact on its 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 simplifies the accounting for income taxes. The ASU 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 is currently evaluating the impact of the updated guidance 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 Company is currently evaluating the impact of the updated guidance on its consolidated financial statements.

3.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.

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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 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 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. As noted in the business segment reporting information in Note 14 “Segments”, the Company’s reportable segments are Maintenance Services and Development Services.

	Three Months Ended March 31,						Six Months Ended March 31,
	2020			2019			2020			2019
Landscape Maintenance	$	313.7		$	281.8		$	677.0		$	626.1
Snow Removal		102.5			191.5			158.1			239.7
Maintenance Services		416.2			473.3			835.1			865.8
Development Services		143.6			124.0			296.4			258.4
Eliminations		(0.7	)		(0.7	)		(1.7	)		(1.5	)
Net service revenues	$	559.1		$	596.6		$	1,129.8		$	1,122.7

Remaining Performance Obligations

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 March 31, 2020, 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 $364.1. The Company expects to recognize revenue on 56% of the remaining performance obligations over the next 12 months and an additional 44% over the 12 months thereafter.

In accordance with the disclosure provisions of ASU 2014-09, the paragraph above excludes the following, 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.

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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.

Changes in deferred revenue for the six month period ended March 31, 2020 were as follows:

	Deferred Revenue
Balance, October 1, 2019	$	49.1
Recognition of revenue		(446.9	)
Deferral of revenue		483.9
Balance, March 31, 2020	$	86.1

There were $80.2 of amounts billed during the period and $53.9 of additions to our unbilled revenue balance during the six month period from October 1, 2019 to March 31, 2020.

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.

4.Accounts Receivable

Accounts receivable of $334.0 and $333.7, is net of an allowance for doubtful accounts of $6.0 and $5.0 and includes $43.9 and $43.2 of retention on incomplete projects to be completed within one year at March 31, 2020 and September 30, 2019, respectively.

5. Inventories

Inventories consist of the following:

	March 31, 2020		September 30, 2019
Finished products	$	5.3	$	6.8
Semi-finished products		12.6		11.0
Raw materials and supplies		12.1		8.7
Inventories	$	30.0	$	26.5

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6.Property and Equipment, net

Property and equipment, net consists of the following:

	Useful Life	March 31, 2020		September 30, 2019
Land	—	$	54.5	$	54.1
Buildings and leasehold improvements	2-40 yrs.		42.2		40.1
Operating equipment	2-7 yrs.		204.3		199.8
Transportation vehicles	3-7 yrs.		259.1		236.5
Office equipment and software	3-10 yrs.		62.4		63.3
Construction in progress	—		9.2		8.2
Property and equipment			631.7		602.0
Less: Accumulated depreciation			353.4		329.6
Property and equipment, net		$	278.3	$	272.4