BRIGHTVIEW HOLDINGS, INC. The following discussion and analysis supplements our management's discussion
and analysis for the year ended
Overview
Our Company
We are the largest provider of commercial landscaping services in
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 34 U.S. states, and, through our qualified service partner network, we are able to efficiently provide nationwide coverage in all 50 U.S. states.
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.
24
--------------------------------------------------------------------------------
Table of Contents
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 3 "Revenue" to our unaudited 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.
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, and 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 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 the Company on
Interest Expense
Interest expense relates primarily to our long-term debt. See Note 7 "Long-term Debt" in the unaudited consolidated financial statements included under Part I, Item 1, "Financial Statements".
25
--------------------------------------------------------------------------------
Table of Contents Income Tax Expense (Benefit)
Income tax expense (benefit) includes
Other (Expense) Income
Other (expense) income consists primarily of losses on debt extinguishment as well as investment losses and gains related to investments held in Rabbi Trust.
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 ending
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.
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. During the nine
months ended
26
--------------------------------------------------------------------------------
Table of Contents
predictability as to occurrence and/or timing, and create a lack of comparability between periods. 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 rising inflation and fuel prices, as well as rising interest rates, have impacted and may further impact our costs and expenses, and fluctuations in labor markets, may impact our ability to identify, hire and retain employees. Increased 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 third quarter of 2021 and 2022 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, any further economic deterioration resulting from the impacts of the
COVID-19 pandemic would negatively impact our results of operations and
financial condition. Further, 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
Results of Operations
The following tables summarize key components of our results of operations for
the periods indicated.
Three Months Ended Nine Months Ended
June 30, June 30,
(in millions) 2022 2021 2022 2021
Net service revenues $ 747.4 $ 673.6 $ 2,051.2 $ 1,879.9
Cost of services provided 558.2 494.6 1,565.0 1,409.2
Gross profit 189.2 179.0 486.2 470.7
Selling, general and
administrative expense 131.3 123.1 399.5 374.4
Amortization expense 13.2 12.6 38.7 39.0
Income from operations 44.7 43.3 48.0 57.3
Other (expense) income (14.6 ) 0.8 (15.1 ) 2.8
Interest expense 14.8 9.4 34.5 32.5
Income (loss) before income
taxes 15.3 34.7 (1.6 ) 27.6
Income tax expense (benefit) 4.5 9.5 (0.3 ) 8.1
Net income (loss) $ 10.8 $ 25.2 $ (1.3 ) $ 19.5
Adjusted EBITDA(1) $ 94.3 $ 93.6 $ 196.6 $ 212.8
Adjusted Net Income(1) $ 39.8 $ 46.6 $ 66.4 $ 86.7
Earnings (loss) per Share $ 0.12 $ 0.24 $ (0.01 ) $ 0.19
Adjusted Earnings per Share(1) $ 0.43 $ 0.44 $ 0.65 $ 0.82
Cash flows from operating
activities $ 23.4 $ 50.0 $ 65.7 $ 133.4
Free Cash Flow(1) $ 2.3 $ 37.3 $ (17.0 ) $ 96.2
27--------------------------------------------------------------------------------
Table of Contents
(1) See the "Non-GAAP Financial Measures" section included below for a reconciliation to the most directly comparable GAAP measure.
Three Months Ended
Net Service Revenues
Net service revenues for the three months ended
Gross Profit
Gross profit for the three months ended
Selling, General and Administrative Expense
Selling, general and administrative expense for the three months ended
Amortization Expense
Amortization expense for the three months ended
Other (Expense) Income
Other expense was
Interest Expense
Interest expense for the three months ended
Income Tax Expense
For the three months ended
Net Income
For the three months ended
28
--------------------------------------------------------------------------------
Table of Contents Adjusted EBITDA
Adjusted EBITDA increased
Adjusted Net Income
Adjusted Net Income for the three months ended
Nine Months Ended
Net Service Revenues
Net service revenues for the nine months ended
Gross Profit
Gross profit for the nine months ended
Selling, General and Administrative Expense
Selling, general and administrative expense for the nine months ended
Amortization Expense
Amortization expense for the nine months ended
Other (Expense) Income
Other expense was
Interest Expense
Interest expense for the nine months ended
29
--------------------------------------------------------------------------------
Table of Contents Income Tax Expense (Benefit)
For the nine months ended
Net Income (Loss)
For the nine months ended
Adjusted EBITDA
Adjusted EBITDA decreased
Adjusted Net Income
Adjusted Net Income for the nine months ended
Non-GAAP Financial Measures
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 that 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 income (loss) 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 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 the sale 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.
30
--------------------------------------------------------------------------------
Table of Contents
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. Adjusted EPS is defined as Adjusted Net Income (shown below) divided by
the weighted average number of common shares outstanding for the period used in
the calculation of basic EPS and presented in Note 13 "Earnings (Loss) Per Share
of Common Stock" in the Notes to our unaudited consolidated financial
statements.
Three Months Ended Nine Months Ended
June 30, June 30,
(in millions) 2022 2021 2022 2021
Adjusted EBITDA
Net income (loss) $ 10.8 $ 25.2 $ (1.3 ) $ 19.5
Plus:
Interest expense, net 14.8 9.4 34.5 32.5
Income tax expense (benefit) 4.5 9.5 (0.3 ) 8.1
Depreciation expense 25.7 21.3 71.5 63.6
Amortization expense 13.2 12.6 38.7 39.0
Business transformation and integration
costs (a) 4.3 7.2 12.7 20.0
Offering-related expenses (b) 0.1 0.3 0.1 0.5
Equity-based compensation (c) 4.8 5.3 14.2 15.5
COVID-19 related expenses (d) 3.5 2.8 13.9 14.1
Debt extinguishment (e) 12.6 - 12.6 -
Adjusted EBITDA $ 94.3 $ 93.6 $ 196.6 $ 212.8
Adjusted Net Income
Net income (loss) $ 10.8 $ 25.2 $ (1.3 ) $ 19.5
Plus:
Amortization expense 13.2 12.6 38.7 39.0
Business transformation and integration
costs (a) 4.3 7.2 12.7 20.0
Offering-related expenses (b) 0.1 0.3 0.1 0.5
Equity-based compensation (c) 4.8 5.3 14.2 15.5
COVID-19 related expenses (d) 3.5 2.8 13.9 14.1
Debt extinguishment (e) 12.6 - 12.6 -
Income tax adjustment (f) (9.5 ) (6.8 ) (24.5 ) (21.9 )
Adjusted Net Income $ 39.8 $ 46.6 $ 66.4 $ 86.7
Free Cash Flow
Cash flows from operating activities $ 23.4 $ 50.0 $ 65.7 $ 133.4
Minus:
Capital expenditures 23.9 16.8 88.1 44.7
Plus:
Proceeds from sale of property and equipment 2.8 4.1 5.4 7.5 Free Cash Flow$ 2.3 $ 37.3 $ (17.0 ) $ 96.2 (a)
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.
Three Months Ended Nine Months Ended
June 30, June 30,
(in millions) 2022 2021 2022 2021
Severance and related costs $ 0.6 $ 0.1 $ 0.9 $ 0.3
Business integration (g) 0.3 3.4 4.8 9.2
IT infrastructure, transformation, and
other (h) 3.4 3.7 7.0 10.5
Business transformation and integration
costs $ 4.3 $ 7.2 $ 12.7 $ 20.0
(b)Represents transaction related expenses incurred for IPO related litigation and completed or contemplated subsequent registration statements.
(c)
Represents equity-based compensation expense and related taxes recognized for equity incentive plans outstanding.
(d)
Represents expenses related to the Company's response to the COVID-19 pandemic, principally temporary and incremental salary and related expenses, personal protective equipment, cleaning and supply purchases, and other.
(e)
Represents losses on the extinguishment of debt related to Amendment No. 6 to the Credit Agreement and includes the write-off of deferred finance fees and original issue discount.
31
--------------------------------------------------------------------------------
Table of Contents
(f)
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.
Three Months Ended Nine Months Ended
June 30, June 30,
(in millions) 2022 2021 2022 2021
Tax impact of pre-tax income adjustments $ 9.7 $ 6.9 $ 24.7 $ 21.6
Discrete tax items (0.2 ) (0.1 ) (0.2 ) 0.3
Income tax adjustment $ 9.5 $ 6.8 $ 24.5 $ 21.9
(g)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.
(h)
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.
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 Three Months Ended
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
Three Months Ended
June 30, Percent Change
(in millions) 2022 2021 2022 vs. 2021
Net Service Revenues $ 561.8 $ 524.6 7.1 %
Segment Adjusted EBITDA $ 89.2 $ 90.6 (1.5 )%Segment Adjusted EBITDA Margin 15.9 % 17.3 % (140) bps
Maintenance Services Net Service Revenues
Maintenance Services net service revenues for the three months ended
Maintenance Services Segment Adjusted EBITDA
Segment Adjusted EBITDA for the three months ended
32
--------------------------------------------------------------------------------
Table of Contents
match for the employee savings plan and the investment to grow our business development team, which were partially offset by increases in revenues from underlying commercial landscape services and acquisitions discussed above.
Development Services Segment Results
Three Months Ended
June 30, Percent Change
(in millions) 2022 2021 2022 vs. 2021
Net Service Revenues $ 186.4 $ 150.3 24.0 %
Segment Adjusted EBITDA $ 20.9 $ 18.7 11.8 %Segment Adjusted EBITDA Margin 11.2 % 12.4 % (120) bps
Development Services Net Service Revenues
Development Services net service revenues for the three months ended
Development Services Segment Adjusted EBITDA
Segment Adjusted EBITDA for the three months ended
Segment Results for the Nine Months Ended
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
Nine Months Ended
June 30, Percent Change
(in millions) 2022 2021 2022 vs. 2021
Net Service Revenues $ 1,553.4 $ 1,478.4 5.1 %
Segment Adjusted EBITDA $ 197.4 $ 212.5 (7.1 )%Segment Adjusted EBITDA Margin 12.7 % 14.4 % (170) bps
Maintenance Services Net Service Revenues
Maintenance Services net service revenues for the nine months ended
Maintenance Services Segment Adjusted EBITDA
Segment Adjusted EBITDA for the nine months ended
33
--------------------------------------------------------------------------------
Table of Contents
Development Services Segment Results
Nine Months Ended
June 30, Percent Change
(in millions) 2022 2021 2022 vs. 2021
Net Service Revenues $ 500.8 $ 404.7 23.7 %
Segment Adjusted EBITDA $ 48.2 $ 46.6 3.4 %Segment Adjusted EBITDA Margin 9.6 % 11.5 % (190) bps
Development Services Net Service Revenues
Development Services net service revenues for the nine months ended
Development Services Segment Adjusted EBITDA
Segment Adjusted EBITDA for the nine months ended
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 and the
Receivables Financing Agreement. Our principal uses of cash are to provide
working capital, meet debt service requirements, fund capital expenditures and
finance strategic plans, including acquisitions and share repurchases under the
share repurchase program announced in
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, will provide sufficient liquidity to fund our current obligations, projected working capital requirements, debt service requirements, capital spending requirements and share repurchases 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.
June 30, September 30,
(in millions) 2022 2021
Cash and cash equivalents $ 26.3 $ 123.7
Short-term borrowings and current maturities of
long-term debt $ 12.0 $ 10.4
Long-term debt 1,336.4 1,130.6
Total debt, net $ 1,348.4 $ 1,141.0 The Company is party to a credit agreement dated
We can increase the borrowing availability under the Credit Agreement or
increase the term loans outstanding under the Credit Agreement by up to
34
--------------------------------------------------------------------------------
Table of Contents
long as we do not exceed a specified senior secured leverage ratio and, in the case of second lien indebtedness, a specified senior 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 7 "Long-term Debt" to our unaudited consolidated financial statements included under Part I, Item 1, "Financial Statements".
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. 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:
Nine Months Ended
June 30,
(in millions) 2022 2021
Operating activities $ 65.7 $ 133.4
Investing activities $ (172.1 ) $ (143.0 )
Financing activities $ 9.0 $ (22.5 )
Free Cash Flow (1) $ (17.0 ) $ 96.2
(1)See the "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 nine months ended
Cash Flows provided (used) in Investing Activities
Net cash used in investing activities increased
Cash Flows provided (used) in Financing Activities
Net cash flows provided by financing activities of
Free Cash Flow
Free Cash Flow decreased
35
--------------------------------------------------------------------------------
Table of Contents
Working Capital
June 30, September 30,
(in millions) 2022 2021
Net Working Capital :
Current assets $ 683.8 $ 710.8
Less: Current liabilities 529.7 496.1
Net working capital $ 154.1 $ 214.7
Net working capital is defined as current assets less current liabilities. Net
working capital decreased
Description of Indebtedness
As of
Contractual Obligations and Commercial Commitments
As of
Critical Accounting Policies and Estimates
Management has evaluated the accounting policies used in the preparation of the
Company's consolidated financial statements and related notes and believe those
policies to be reasonable and appropriate. Certain of these accounting policies
require the application of significant judgment by management in selecting
appropriate assumptions for calculating financial estimates. By their nature,
these judgments are subject to an inherent degree of uncertainty. These
judgments are based on historical experience, trends in the industry,
information provided by customers and information available from other outside
sources, as appropriate. The most significant areas involving management
judgments and estimates may be found in the Annual Report on Form 10-K, in the
"Critical Accounting Policies and Estimates" section of "Management's Discussion
and Analysis of Financial Condition and Results of Operations." There have been
no material changes to our critical accounting policies as compared to the
critical accounting policies described in the Annual Report on Form 10-K for the
year ended
Recently Issued Accounting Policies
The information set forth in Note 2 "Recent Accounting Pronouncements" to our unaudited consolidated financial statements under Part I, Item 1, "Financial Statements" is incorporated herein by reference.
36
--------------------------------------------------------------------------------
Table of Contents
© Edgar Online, source
