INVESTMENT IN UNCONSOLIDATED AFFILIATES

As of March 31, 2018, the Company held a minority equity interest of approximately 30% in the TruGreen Joint Venture. In addition, the Company and TruGreen Holdings are parties to a limited liability company agreement (the “LLC Agreement”) governing the management of the TruGreen Joint Venture, as well as certain ancillary agreements including a transition services agreement. The LLC Agreement provides the Company with minority representation on the board of directors of the TruGreen Joint Venture. The Company’s interest had an initial fair value of $294.0 million and was previously accounted for using the equity method of accounting, with the Company’s proportionate share of the TruGreen Joint Venture earnings reflected in the Condensed Consolidated Statements of Operations. In the first quarter of fiscal 2018, the Company discontinued applying the equity method of accounting for the TruGreen Joint Venture as the Company’s net investment and advances were reduced to a liability. The Company does not have any contractual obligations to fund losses of the TruGreen Joint Venture.

In connection with the closing of the transactions contemplated by the Contribution Agreement on April 13, 2016, the Company invested $18.0 million in second lien term loan financing to the TruGreen Joint Venture. The second lien term loan receivable had a carrying value of $18.1 million and $18.0 million at March 31, 2018 and April 1, 2017, respectively, and is recorded in the “Other assets” line in the Condensed Consolidated Balance Sheets. The Company was reimbursed $0.1 million and $0.6 million during the three and six months ended March 31, 2018, respectively, and had accounts receivable of $0.5 million at March 31, 2018 for expenses incurred pursuant to a short-term transition services agreement. The Company did not receive distributions from unconsolidated affiliates during the three and six months ended March 31, 2018. The Company was reimbursed $14.7 million and $33.7 million during the three and six months ended April 1, 2017, respectively, and had accounts receivable of $8.3 million at April 1, 2017 for expenses incurred pursuant to a short-term transition services agreement and an employee leasing agreement. The Company received distributions from unconsolidated affiliates intended to cover required tax payments of zero and $2.2 million during the three and six months ended April 1, 2017, respectively. The Company also had an indemnification asset of $4.2 million and $7.4 million at March 31, 2018 and April 1, 2017, respectively, for future payments on claims associated with insurance programs. The Company has received cumulative distributions from the TruGreen Joint Venture in excess of its investment balance, which resulted in an amount recorded in the “Distributions in excess of investment in unconsolidated affiliate” line in the Condensed Consolidated Balance Sheets of $21.9 million at March 31, 2018. In accordance with the applicable accounting guidance, the Company reclassified the negative balance to the liability section of the Condensed Consolidated Balance Sheet.

During the fourth quarter of fiscal 2017, the Company made a $29.4 million investment in an unconsolidated subsidiary whose products support the professional U.S. industrial, turf and ornamental market (the “IT&O Joint Venture”). During the three and six months ended March 31, 2018, respectively, the Company invested $2.1 million and $7.4 million in line of credit financing to the IT&O Joint Venture, which is recorded in the “Other assets” line in the Condensed Consolidated Balance Sheets.

The following table presents summarized financial information of the Company’s unconsolidated affiliates:



	THREE MONTHS ENDED						SIX MONTHS ENDED
	MARCH 31, 2018			APRIL 1, 2017			MARCH 31, 2018			APRIL 1, 2017
	(In millions)
Revenue	$	175.7		$	154.7		$	447.9		$	406.8
Gross margin	8.4			9.7			84.4			70.8
Selling and administrative expenses	52.4			51.5			116.4			92.9
Amortization expense	10.3			21.7			22.4			41.9
Interest expense	18.0			16.6			35.5			33.5
Restructuring and other charges	8.3			—			11.9			26.6
Net income (loss)	$	(80.6	)	$	(80.1	)	$	(101.8	)	$	(124.1	)

Due to the seasonal nature of the lawn, tree and shrub care business, the TruGreen Joint Venture anticipates a net loss during the Company’s first and second fiscal quarters. Net income (loss) does not include income taxes, which are recognized and paid by the partners of the unconsolidated affiliates. The income taxes associated with the Company’s share of net income (loss) have been recorded in the “Income tax expense (benefit) from continuing operations” line in the Condensed Consolidated Statements of Operations.

The Company recognized equity in (income) loss of unconsolidated affiliates of $(1.5) million and $(2.1) million for the three and six months ended March 31, 2018, respectively, as compared to $24.1 million and $37.3 million and for the three and six months ended April 1, 2017, respectively. The Company’s share of restructuring and other charges incurred by the TruGreen Joint Venture was $2.1 million and $11.7 million for the three and six months ended April 1, 2017, respectively. For the three and six months ended April 1, 2017, these charges included zero and $7.9 million, respectively, for nonrecurring integration and separation costs and $2.1 million and $3.8 million, respectively, for a non-cash purchase accounting fair value write-down adjustment related to deferred revenue and advertising.