10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2018

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 000-11917

THE DAVEY TREE EXPERT COMPANY

(Exact name of registrant as specified in its charter)

Ohio	34-0176110
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
1500 North Mantua Street
P.O. Box 5193
Kent, Ohio 44240
(Address of principal executive offices) (Zip code)
(330) 673-9511
(Registrant's telephone number, including area code)

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 x   No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  Yes x   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.

(Check one):	¨ Large Accelerated Filer	x Accelerated Filer	¨ Emerging Growth Company
	¨ Non-Accelerated Filer (Do not check if a smaller reporting company)	¨ Smaller Reporting 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 x

There were 24,022,304 Common Shares, $1.00 par value, outstanding as of April 27, 2018. 

The Davey Tree Expert Company

Quarterly Report on Form 10-Q

March 31, 2018

INDEX

		Page
Part I.	Financial Information
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements
	A — Basis of Financial Statement Preparation	6
	B — Seasonality of Business	8
	C — Accounts Receivable, Net and Supplemental Balance-Sheet Information	8
	D — Business Combinations	9
	E — Identified Intangible Assets and Goodwill, Net	10
	F — Long-Term Debt and Commitments Related to Letters of Credit	11
	G — Stock-Based Compensation	12
	H — Net Periodic Benefit Cost--Defined Benefit Pension Plans	16
	I —  Income Taxes	16
	J  — Accumulated Other Comprehensive Income (Loss)	18
	K — Per Share Amounts and Common and Redeemable Shares Outstanding	19
	L —  Operations by Business Segment	21
	M — Revenue Recognition	23
	N — Fair Value Measurements and Financial Instruments	25
	O — Contingencies	28
	P — The Davey 401KSOP and Employee Stock Ownership Plan	28
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
	Results of Operations	30
	Liquidity and Capital Resources	32
	Cash Flow Summary	33
	Contractual Obligations Summary and Commercial Commitments	35
	Capital Resources	36
	Recent Accounting Guidance	36
	Critical Accounting Policies and Estimates	37
	Note Regarding Forward-Looking Statements	38
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	39
Item 4.	Controls and Procedures	39
Part II.	Other Information
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 6.	Exhibits	46
Exhibit Index		47
Signatures		50

We,” “us,” “our,” “Davey” and “Davey Tree,” unless the context otherwise requires, means The Davey Tree Expert Company and its subsidiaries.

- 1 -

THE DAVEY TREE EXPERT COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands, except per share data dollar amounts)

	March 31, 2018			December 31, 2017
Assets
Current assets:
Cash	$	10,301		$	13,121
Accounts receivable, net	158,078			168,671
Operating supplies	13,706			10,069
Other current assets	15,153			17,264
Total current assets	197,238			209,125
Property and equipment	627,935			616,036
Less accumulated depreciation	427,632			422,853
	200,303			193,183
Other assets	35,284			29,156
Identified intangible assets and goodwill, net	41,375			41,671
	$	474,200		$	473,135
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	39,597		$	45,093
Accrued expenses	32,312			42,816
Other current liabilities	37,001			40,748
Total current liabilities	108,910			128,657
Long-term debt	146,402			119,210
Self-insurance accruals	46,368			43,912
Other noncurrent liabilities	19,706			19,966
	321,386			311,745
Redeemable common shares related to 401KSOP and Employee Stock Ownership Plan (ESOP); 6,645 and 6,467 shares at redemption value as of March 31, 2018 and December 31, 2017	126,924			123,520
Common shareholders' equity:
Common shares, $1.00 par value, per share; 48,000 shares authorized; 36,269 and 36,447 shares issued and outstanding before deducting treasury shares and which excludes 6,645 and 6,467 shares subject to redemption as of March 31, 2018 and December 31, 2017	36,269			36,447
Additional paid-in capital	58,132			58,554
Common shares subscribed, unissued	7,457			7,529
Retained earnings	136,229			143,835
Accumulated other comprehensive loss	(9,079		)	(8,393		)
	229,008			237,972
Less: Cost of common shares held in treasury; 18,752 shares at March 31, 2018 and 18,693 shares at December 31, 2017	201,489			198,327
Common shares subscription receivable	1,629			1,775
Total common shareholders' equity	25,890			37,870
	$	474,200		$	473,135
See notes to condensed consolidated financial statements.

- 2 -

THE DAVEY TREE EXPERT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except per share dollar amounts)

	Three Months Ended
	March 31, 2018			April 1, 2017
Revenues	$	208,651		$	192,813
Costs and expenses:
Operating	144,623			133,659
Selling	39,657			35,534
General and administrative	17,718			16,400
Depreciation and amortization	13,121			12,190
Gain on sale of assets, net	(802		)	(975		)
	214,317			196,808
Loss from operations	(5,666		)	(3,995		)
Other income (expense):
Interest expense	(1,401		)	(1,257		)
Interest income	78			70
Other, net	(1,662		)	(1,139		)
Loss before income taxes	(8,651		)	(6,321		)
Income tax benefits	(2,024		)	(2,434		)
Net loss	$	(6,627	)	$	(3,887	)
Net loss per share--basic and diluted	$	(.26	)	$	(.15	)
Weighted-average shares outstanding--basic and diluted	25,418			25,175
Dividends declared per share	$	.025		$	.025
See notes to condensed consolidated financial statements.

- 3 -

THE DAVEY TREE EXPERT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands)

	Three Months Ended
	March 31, 2018			April 1, 2017
Net loss	$	(6,627	)	$	(3,887	)
Components of other comprehensive income/(loss), net of tax:
Foreign currency translation adjustments	(832		)	322
Adjustments to defined benefit pension plans:
Reclassification to results of operations:
Amortization of defined benefit pension items:
Net actuarial loss	134			147
Prior service cost	12			10
Defined benefit pension plan adjustments	146			157
Other comprehensive (loss)/income, net of tax	(686		)	479
Comprehensive loss	$	(7,313	)	$	(3,408	)
See notes to condensed consolidated financial statements.

- 4 -

THE DAVEY TREE EXPERT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

	Three Months Ended
	March 31, 2018			April 1, 2017
Operating activities
Net loss	$	(6,627	)	$	(3,887	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	13,121			12,190
Other	3,113			(458		)
Changes in operating assets and liabilities:
Accounts receivable	10,593			1,771
Operating liabilities	(13,566		)	(8,695		)
Other, net	(11,284		)	(5,078		)
	1,977			(270		)
Net cash used in operating activities	(4,650		)	(4,157		)
Investing activities
Capital expenditures:
Equipment	(20,066		)	(21,616		)
Land and building	(126		)	(911		)
Purchases of businesses, net of cash acquired	(86		)	(7,452		)
Other	1,001			1,207
Net cash used in investing activities	(19,277		)	(28,772		)
Financing activities
Revolving credit facility proceeds, net	28,500			33,000
Purchase of common shares for treasury	(6,067		)	(2,002		)
Sale of common shares from treasury	4,460			5,340
Dividends	(623		)	(650		)
Payments of notes payable	(5,163		)	(3,123		)
Net cash provided by financing activities	21,107			32,565
Decrease in cash	(2,820		)	(364		)
Cash, beginning of period	13,121			9,006
Cash, end of period	$	10,301		$	8,642
Supplemental cash flow information follows:
Interest paid	$	1,631		$	1,482
Income taxes paid	1,449			2,506
See notes to condensed consolidated financial statements.

- 5 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

A. Basis of Financial Statement Preparation

The condensed consolidated financial statements present the financial position, results of operations and cash flows of The Davey Tree Expert Company and its subsidiaries. When we refer to “we,” “us,” “our,” “Davey,” or “Davey Tree”, we mean The Davey Tree Expert Company and its subsidiaries, unless otherwise expressly stated or the context indicates otherwise.

We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), as codified in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), and with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. The consolidated financial statements include all adjustments which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal, recurring nature. All significant intercompany accounts and transactions have been eliminated.

Certain information and disclosures required by U.S. GAAP for complete financial statements have been omitted in accordance with the rules and regulations of the SEC. We suggest that these condensed consolidated financial statements be read in conjunction with the financial statements included in our annual report on Form 10-K for the year ended December 31, 2017 (the “2017 Annual Report”).

Use of Estimates in Financial Statement Preparation--The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect reported amounts. Our consolidated financial statements include amounts that are based on management’s best estimates and judgments.  Estimates are used for, but not limited to, accounts receivable valuation, depreciable lives of fixed assets, self-insurance accruals, income taxes and revenue recognition. Actual results could differ from those estimates.

Interim Results of Operations--Interim results may not be indicative of calendar year performance because of seasonal and short-term variations.

Recent Accounting Guidance

Accounting Standards Adopted in 2018

Accounting Standards Update 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force)--In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which provides guidance on how cash receipts and cash payments related to eight specific cash flow issues are presented and classified in the statement of cash flows, with the objective of reducing the existing diversity in practice. The Company adopted ASU 2016-15 on January 1, 2018. The adoption of ASU 2016-15 did not have a material impact on our consolidated financial statements.

Accounting Standards Update 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost--In March 2017, the FASB issued ASU 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which changes the presentation of net periodic benefit cost related to employer sponsored defined benefit plans and other postretirement benefits. Under ASU 2017-07, service costs will be included within the same income statement line item as other compensation costs arising from services rendered by pertinent employees during the period. The other components of net periodic benefit pension cost will be presented separately outside of income from operations. Additionally, only

- 6 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

A. Basis of Financial Statement Preparation (continued)

the service cost component of the net periodic benefit cost may be capitalized in assets. The amendments under ASU 2017-07 also provide a practical expedient that permits the use of amounts disclosed in its pension and other postretirement benefit plan note for prior year comparative periods as the estimation basis for applying the guidance retrospectively. The Company adopted ASU 2017-07 on January 1, 2018 and chose to use the practical expedient provided when applying the guidance retrospectively. Upon adoption, service costs are recognized in our financial statements as general and administrative expenses while the remaining components of net periodic benefit cost are recognized as other income (expense). Pension expense of $347 for the first three months of 2017 has been reclassified from general and administrative expense to other income (expense).

Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606)--In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which replaces all current U.S. GAAP guidance on revenue recognition and eliminates all industry-specific guidance.

The Company adopted ASU 2014-09 and applied it to all contracts that were not completed using the modified retrospective method for those contracts that were not completed as of adoption. The cumulative effect of applying the guidance in ASU 2014-09 to contracts that were not yet completed as of January 1, 2018 was not material. Further, the adoption of ASU 2014-09 will not have a significant impact on the amount or timing of revenue recognition. Therefore, we have not disclosed the amount by which each financial statement line item is affected in the current period as a result of applying ASU 2014-09 or an explanation of significant changes between our results as reported and those that would have been reported under legacy GAAP as no significant changes were identified.

Accounting Standards Not Yet Adopted

Accounting Standards Update 2016-02, Leases (Topic 842)--In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 establishes a comprehensive new lease accounting model. The new standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and, (c) causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than twelve months. The new standard is effective for interim and annual periods beginning after December 15, 2018, which for Davey Tree would be January 1, 2019. Early adoption is permitted. The new standard requires a modified retrospective transition for capital or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it does not require transition accounting for leases that expire prior to the date of initial application. The Company plans to adopt ASU 2016-02 on January 1, 2019. Management has assembled a project team and is in the process of gathering information to evaluate real estate, personal property and other arrangements that may meet the definition of a lease and has purchased a technology solution to assist with the management of leases. Management expects that the adoption of ASU 2016-02 will have a material impact on the Company's consolidated financial statements.

Accounting Standards Update 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220)--In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220)." ASU 2018-02 provides an option to reclassify the stranded tax effects within accumulated other comprehensive income to retained earnings as a result of the Tax Cuts and Jobs Act of 2017. This standard is effective for interim and annual reporting periods beginning after December 15, 2018, which for Davey Tree would be January 1, 2019. Early adoption is permitted. Management has not yet completed its assessment of the impact of the new standard on the Company's consolidated financial statements.

- 7 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

B. Seasonality of Business

Due to the seasonality of our business, our operating results for the three months endedMarch 31, 2018 are not indicative of results that may be expected for any other interim period or for the year ending December 31, 2018. Business seasonality traditionally results in higher revenues during the second and third quarters as compared with the first and fourth quarters of the year, while the methods of accounting for fixed costs, such as depreciation expense, amortization, rent and interest expense, are not significantly impacted by business seasonality.

C. Accounts Receivable, Net and Supplemental Balance-Sheet Information

Accounts receivable, net, consisted of the following:

Accounts receivable, net	March 31, 2018		December 31, 2017
Accounts receivable	$	110,712	$	143,244
Receivables under contractual arrangements	51,852		29,895
	162,564		173,139
Less allowances for doubtful accounts	4,486		4,468
Accounts receivable, net	$	158,078	$	168,671

Receivables under contractual arrangements consist of work-in-process in accordance with the terms of contracts, primarily with utility services customers.

The following items comprise the amounts included in the balance sheets:

Other current assets	March 31, 2018		December 31, 2017
Refundable income taxes	$	1,229	$	587
Prepaid expense	13,735		15,893
Other	189		784
Total	$	15,153	$	17,264

Accrued expenses	March 31, 2018		December 31, 2017
Employee compensation	$	12,010	$	20,794
Accrued compensated absences	9,590		9,267
Self-insured medical claims	4,447		3,193
Income tax payable	623		3,443
Customer advances, deposits	72		1,672
Taxes, other than income	3,662		2,279
Other	1,908		2,168
Total	$	32,312	$	42,816

- 8 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

C. Accounts Receivable, Net and Supplemental Balance-Sheet Information (continued)

Other current liabilities	March 31, 2018		December 31, 2017
Note Payable	$	—	$	149
Current portion of:
Long-term debt	13,155		16,817
Self-insurance accruals	23,846		23,782
Total	$	37,001	$	40,748

D. Business Combinations

Our investment in businesses during the first three months of 2018 was $86, with liabilities assumed of $86 and no debt issued. Measurement-period adjustments are not complete. The measurement period for purchase price allocations ends as soon as information of the facts and circumstances becomes available, but does not exceed one year from the acquisition date. During the three months endedApril 1, 2017, our investment in businesses was $10,877, including liabilities assumed of $1,076 and $3,099 of debt issued.

The results of operations of acquired businesses have been included in the consolidated statements of operations beginning as of the effective dates of acquisition. The effect of these acquisitions on our consolidated revenues and results of operations for the period ending March 31, 2018 was not significant. Pro forma net sales and results of operations for the acquisition had it occurred at the beginning of the three months endedMarch 31, 2018 are not material and, accordingly, are not provided.

Investments in Businesses Subsequent to March 31, 2018--Subsequent to March 31, 2018 and throughout the end of April 2018, we made investments in businesses approximating $3,300.

- 9 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

E. Identified Intangible Assets and Goodwill, Net

The carrying amounts of the identified intangibles and goodwill acquired in connection with our historical investments in businesses were as follows:

	March 31, 2018				December 31, 2017
Identified Intangible Assets and Goodwill, Net	Carrying Amount		Accumulated Amortization		Carrying Amount		Accumulated Amortization
Amortized intangible assets:
Customer lists/relationships	$	21,972	$	17,186	$	21,487	$	16,846
Employment-related	7,332		6,691		7,333		6,624
Tradenames	5,978		5,193		5,978		5,134
Amortized intangible assets	35,282		$	29,070	34,798		$	28,604
Less accumulated amortization	29,070				28,604
Identified intangibles, net	6,212				6,194
Unamortized intangible assets:
Goodwill	35,163				35,477
	$	41,375			$	41,671

The changes in the carrying amounts of goodwill, by segment, for the three months endedMarch 31, 2018 follow:

	Balance at January 1, 2018		Acquisitions		Translation and Other Adjustments			Balance at March 31, 2018
Utility	$	3,424	$	—	$	—		$	3,424
Residential and Commercial	32,053		—		(314		)	31,739
Total	$	35,477	$	—	$	(314	)	$	35,163

In the first quarter of 2018, the Company finalized all purchase accounting adjustments related to the Arborguard acquisition. The Company has recorded fair value adjustments based on new information obtained during the measurement period primarily related to customer lists, and deferred taxes. These adjustments have resulted in a decrease in goodwill of $298 from the Company's initial estimate. Additionally, the change to the provisional amount resulted in an increase in amortization expense of $52 and accumulated amortization of $70, of which $52 relates to the previous year.

- 10 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

F. Long-Term Debt and Commitments Related to Letters of Credit

Our long-term debt consisted of the following:

	March 31, 2018		December 31, 2017
Revolving credit facility
Swing-line borrowings	$	13,500	$	—
LIBOR borrowings	115,000		100,000
	128,500		100,000
Senior unsecured notes	18,000		18,000
Term loans	11,651		16,242
Capital leases	2,087		2,510
	160,238		136,752
Less debt issuance costs	681		725
Less current portion	13,155		16,817
	$	146,402	$	119,210

Revolving Credit Facility --As of March 31, 2018, we had a $250,000 revolving credit facility with a group of banks, which expires in October 2022 and permits borrowings, as defined, up to $250,000, including a letter of credit sublimit of $100,000 and a swing-line commitment of $25,000. Under certain circumstances, the amount available under the revolving credit facility may be increased to $325,000. The revolving credit facility contains certain affirmative and negative covenants customary for this type of facility and includes financial covenant ratios with respect to a maximum leverage ratio (not to exceed 3.00 to 1.00 with exceptions in case of material acquisitions) and a minimum interest coverage ratio (not less than 3.00 to 1.00), in each case subject to certain further restrictions as described in the Credit Agreement. As of March 31, 2018, we had unused commitments under the facility approximating$118,587, with $131,413 committed, consisting of borrowings of$128,500 and issued letters of credit of$2,913.

Borrowings outstanding bear interest, at Davey Tree’s option, of either (a) a base rate or (b) LIBOR plus a margin adjustment ranging from .875% to 1.50%--with the margin adjustments in both instances based on the Company's leverage ratio at the time of borrowing. The base rate is the greater of (i) the agent bank’s prime rate, (ii) LIBOR plus 1.50%, or (iii) the federal funds rate plus .50%. A commitment fee ranging from .10% to .225% is also required based on the average daily unborrowed commitment.

5.09% Senior Unsecured Notes--The senior unsecured notes are due July 22, 2020 and were issued during July 2010 as 5.09% Senior Unsecured Notes, Series A (the "5.09% Senior Notes"), pursuant to a Master Note Purchase Agreement (the “Purchase Agreement”) between the Company and the purchasers of the 5.09% Senior Notes.  

The 5.09% Senior Notes are equal in right of payment with our revolving credit facility and all other senior unsecured obligations of the Company. Interest is payable semiannually and five equal, annual principal payments commenced on July 22, 2016 (thesixth anniversary of issuance).  The Purchase Agreement contains customary events of default and covenants related to limitations on indebtedness and transactions with affiliates and the maintenance of certain financial ratios.

- 11 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

F. Long-Term Debt and Commitments Related to Letters of Credit (continued)

Accounts Receivable Securitization Facility--In May 2017, the Company amended its Accounts Receivable Securitization Facility (the "AR Securitization program") to extend the scheduled termination date for an additional one-year period, to May 8, 2018 and increase the limit of the facility from $60,000 to $100,000.

As of March 31, 2018, we had issued letters of credit of $58,150 under the terms of the AR securitization program.

Under the AR securitization program, Davey Tree transfers by selling or contributing current and future trade receivables to a wholly-owned, bankruptcy-remote financing subsidiary which pledges a perfected first priority security interest in the trade receivables--equal to the issued letters of credit ("LCs") as of March 31, 2018--to the bank in exchange for the bank issuing LCs.

Fees payable to the bank include: (a) an LC issuance fee, payable on each settlement date, in the amount of .90% per annum on the aggregate amount of all LCs outstanding plus outstanding reimbursement obligations (e.g., arising from drawn LCs), if any, and (b) an unused LC fee, payable monthly, equal to (i) .35% per annum for each day on which the sum of the total LCs outstanding plus any outstanding reimbursement obligations is greater than or equal to 50% of the facility limit and (ii) .45% per annum for each day on which the sum of the total LCs outstanding plus any outstanding reimbursement obligations is less than 50% of the facility limit. If an LC is drawn and the bank is not immediately reimbursed in full for the drawn amount, any outstanding reimbursement obligation will accrue interest at a per annum rate equal to a reserve-adjusted LIBOR or, in certain circumstances, a base rate equal to the higher of (i) the bank’s prime rate and (ii) the federal funds rate plus .50% and, following any default, 2.00% plus the greater of (a) adjusted LIBOR and (b) a base rate equal to the higher of (i) the bank’s prime rate and (ii) the federal funds rate plus .50%.

The agreements underlying the AR securitization program contain various customary representations and warranties, covenants, and default provisions which provide for the termination and acceleration of the commitments under the AR securitization program in circumstances including, but not limited to, failure to make payments when due, breach of a representation, warranty or covenant, certain insolvency events or failure to maintain the security interest in the trade receivables, and defaults under other material indebtedness.

Total Commitments Related to Issued Letters of Credit--As of March 31, 2018 and December 31, 2017, total commitments related to issued letters of credit were $63,067, of which $2,913 were issued under the revolving credit facility, $58,150 were issued under the AR securitization program, and $2,004 were issued under short-term lines of credit.

G. Stock-Based Compensation

Our shareholders approved the 2014 Omnibus Stock Plan (the “2014 Stock Plan”) at our annual meeting of shareholders on May 20, 2014. The 2014 Stock Plan replaced the expired 2004 Omnibus Stock Plan (the “2004 plan”) previously approved by the shareholders in 2004. The 2014 Stock Plan is administered by the Compensation Committee of the Board of Directors and has a term of ten years. All directors of the Company and employees of the Company and its subsidiaries are eligible to participate in the 2014 Stock Plan. The 2014 Stock Plan (similar to the 2004 plan) continues the maintenance of the Employee Stock Purchase Plan, as well as provisions for the grant of stock options and other stock-based incentives. The 2014 Stock Plan provides for the grant of five percent of the number of the Company’s common shares outstanding as of the first day of each fiscal year plus the number of common shares that were available for grant of awards, but not granted, in prior years. In no event, however, may the number of common shares available for the grant of awards in any fiscal year exceed ten percent of the common shares outstanding as of the first day of that fiscal year. Common shares subject to an

- 12 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

G. Stock-Based Compensation (continued)

award that is forfeited, terminated, or canceled without having been exercised are generally added back to the number of shares available for grant under the 2014 Stock Plan.

Stock-based compensation expense under all share-based payment plans -- our Employee Stock Purchase Plan, stock option plans, stock-settled stock appreciation rights and restricted stock units -- included in the results of operations follows:

	Three Months Ended
	March 31, 2018		April 1, 2017
Compensation expense, all share-based payment plans	$	1,024	$	986

Stock-based compensation consisted of the following:

Employee Stock Purchase Plan--Under the Employee Stock Purchase Plan, all full-time employees with one year of service are eligible to purchase, through payroll deduction, common shares. Employee purchases under the Employee Stock Purchase Plan are at 85% of the fair market value of the common shares--a 15% discount. We recognize compensation costs as payroll deductions are made. The 15% discount of total shares purchased under the plan resulted in compensation cost of $257 being recognized for the three months endedMarch 31, 2018 and $219for the three months endedApril 1, 2017.

Stock Option Plans--The stock options outstanding were awarded under a graded vesting schedule, measured at fair value, and have a term of ten years. Compensation costs for stock options are recognized over the requisite service period on the straight-line recognition method. Compensation cost recognized for stock options was $182 for the three months endedMarch 31, 2018 and $201 for the three months endedApril 1, 2017.

Stock-Settled Stock Appreciation Rights--During the three months endedMarch 31, 2018, the Compensation Committee awarded 121,243 stock-settled stock appreciation rights (“SSARs”) to certain management employees, which vest ratably over five years. A SSAR is an award that allows the recipient to receive common shares equal to the appreciation in the fair market value of our common shares between the date the award was granted and the conversion date of the shares vested.

- 13 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

G. Stock-Based Compensation (continued)

The following table summarizes our SSARs as of March 31, 2018.

Stock-Settled Stock Appreciation Rights	Number of Rights		Weighted- Average Award Date Value		Weighted- Average Remaining Contractual Life	Unrecognized Compensation Cost		Aggregate Intrinsic Value
Unvested, January 1, 2018	448,180		$	3.10
Granted	121,243		3.84
Forfeited	—		—
Vested	(140,340	)	3.00
Unvested, March 31, 2018	429,083		$	3.34	2.8 years	$	1,304	$	8,195

Compensation costs for SSARs are determined using a fair-value method and amortized over the requisite service period. Compensation expense for SSARs was $160 for the three months endedMarch 31, 2018 and $244 for the three months endedApril 1, 2017.

Restricted Stock Units--During the three months endedMarch 31, 2018, the Compensation Committee awarded 31,738 performance-based restricted stock units ("PRSUs") to certain management employees. The Compensation Committee made similar awards in prior periods. The awards vest over specified periods. The following table summarizes restricted stock units ("RSUs") as of March 31, 2018.

Restricted Stock Units	Number of Stock Units		Weighted- Average Grant Date Value		Weighted- Average Remaining Contractual Life	Unrecognized Compensation Cost		Aggregate Intrinsic Value
Unvested, January 1, 2018	290,666		$	14.41
Granted	31,738		18.46
Forfeited	—		—
Vested	(60,580	)	11.96
Unvested, March 31, 2018	261,824		$	15.46	2.5 years	$	2,224	$	5,001
Employee PRSUs	224,400		$	15.40	2.9 years	$	1,983	$	4,286
Nonemployee Director RSUs	37,424		$	15.85	1.2 years	$	241	$	715

Compensation cost for restricted stock awards is determined using a fair-value method and amortized on the straight-line recognition method over the requisite service period. Compensation expense on restricted stock awards totaled $425 for the three months endedMarch 31, 2018 and $322 for the three months endedApril 1, 2017.

We estimated the fair value of each stock-based award on the date of grant using a binomial option-pricing model. The binomial model considers a range of assumptions related to volatility, risk-free interest rate and employee

- 14 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

G. Stock-Based Compensation (continued)

exercise behavior. Expected volatilities utilized in the binomial model are based on historical volatility of our stock prices and other factors. Similarly, the dividend yield is based on historical experience and expected future changes. The binomial model also incorporates exercise assumptions based on an analysis of historical data. The expected life of the stock-based awards is derived from the output of the binomial model and represents the period of time that awards granted are expected to be outstanding.

The fair values of stock-based awards granted were estimated at the dates of grant with the following weighted-average assumption.

	Three Months Ended
	March 31, 2018		April 1, 2017
Volatility rate	10.1	%	10.3	%
Risk-free interest rate	2.5	%	2.3	%
Expected dividend yield	.7	%	.7	%
Expected life of awards (years)	9.0		8.5

General Stock Option Information--The following table summarizes activity under the stock option plans for the three months endedMarch 31, 2018.

Stock Options	Number of Options Outstanding		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding, January 1, 2018	1,528,615		$	13.05
Granted	—		—
Exercised	(7,300	)	14.50
Forfeited	(8,000	)	11.03
Outstanding, March 31, 2018	1,513,315		$	13.05	6.0 years	$	9,156
Exercisable, March 31, 2018	786,815		$	11.12	4.6 years	$	6,279

As of March 31, 2018, there was approximately $1,353 of unrecognized compensation cost related to stock options outstanding. The cost is expected to be recognized over a weighted-average period of 2.1 years. “Intrinsic value” is defined as the amount by which the market price of a common share exceeds the exercise price of an option. 

Common shares are issued from treasury upon the exercise of stock options, SSARs, restricted stock units or purchases under the Employee Stock Purchase Plan.

- 15 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

H. Net Periodic Benefit Expense--Defined Benefit Pension Plans

The results of operations included the following net periodic benefit expense (income) recognized related to our defined-benefit pension plans.

	Three Months Ended
	March 31, 2018			April 1, 2017
Components of pension expense (income)
Service costs--increase in benefit obligation earned	$	100		$	133
Interest cost on projected benefit obligation	180			263
Expected return on plan assets	(58		)	(169		)
Amortization of net actuarial loss	182			237
Amortization of prior service cost	16			16
Net pension expense of defined benefit pension plans	$	420		$	480

The components of net periodic benefit expense other than the service cost component are included in the line item other income (expense) in the income statement.

I. Income Taxes

Our income tax provision for interim periods is determined using an estimate of our annual effective tax rate adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate and, if our estimated annual tax rate changes, we make a cumulative adjustment. The effective tax rate for the three months endedMarch 31, 2018 is estimated to approximate 23.4%.  Our effective tax rate for the three months endedApril 1, 2017 was estimated at 38.5%. The change in rate is primarily due to the Tax Cuts and Jobs Act (the “Tax Reform Act”), that was signed into law on December 22, 2017 by the President of the United States, which reduces the federal income tax rate for 2018 and beyond from 35% to 21%.

As a result of the Tax Reform Act, the Company estimated a tax liability of $6,100 due to the transition toll tax on the deemed repatriation of deferred foreign earnings of non-U.S. operations, which the Company believes will be fully offset by foreign tax credits. The final amounts recorded in subsequent financial statements may differ from these provisional amounts due to, among other things, additional analysis related to foreign deferred earnings, changes in interpretations of the Tax Reform Act and related assumptions of the Company and additional regulatory guidance that may be issued.

On December 22, 2017, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin 118 (“SAB 118”). This guidance allows registrants a “measurement period”, not to exceed one year from the date of enactment, to complete their accounting for the tax effects of the Tax Reform Act. SAB 118 further directs that during the measurement period, registrants who are able to make reasonable estimates for the tax effects of the Tax Reform Act should include those amounts in their financial statements as “provisional” amounts. Registrants should reflect adjustments over subsequent periods as they are able to refine their estimates and complete their accounting for the tax effects of the Tax Reform Act. The provisional amounts computed by the Company are

- 16 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

I. Income Taxes (continued)

expected to be finalized when the U.S. corporate income tax return for 2017 is filed in 2018, but in no event later than one year from the enactment date.

At December 31, 2017, we had unrecognized tax benefits of $2,581, of which $1,948 would affect our effective rate if recognized, and accrued interest expense related to unrecognized benefits of $128. At March 31, 2018, there were no significant changes in the unrecognized tax benefits, including the amount that would affect our effective rate if recognized, or the accrued interest expense related to the unrecognized benefits. Unrecognized tax benefits are the differences between a tax position taken, or expected to be taken in a tax return, and the benefit recognized for financial reporting purposes.

The Company is routinely under audit by federal, state, local and Canadian authorities in the area of income tax. These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions. During the fourth quarter 2017, the U.S. Internal Revenue Service initiated an audit of the Company's U.S. income tax returns for 2015. With the exception of U.S. state jurisdictions, the Company is no longer subject to examination by tax authorities for the years through 2013. As of March 31, 2018, we believe it is reasonably possible that the total amount of unrecognized tax benefits will not significantly increase or decrease.

- 17 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

J. Accumulated Other Comprehensive Income (Loss)

Comprehensive income (or loss) is comprised of net income (or net loss) and other components, including currency translation adjustments and defined-benefit pension plan adjustments.

The following summarizes the components of other comprehensive income (loss) accumulated in shareholders’ equity for the three months endedMarch 31, 2018 and three months endedApril 1, 2017:

	Foreign Currency Translation Adjustments			Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2018	$	(3,305	)	$	(5,088	)	$	(8,393	)
Other comprehensive income (loss) before reclassifications
Unrealized losses	$	(832	)	$	—		$	(832	)
Amounts reclassified from accumulated other comprehensive income (loss)	—			198			198
Tax effect	—			(52		)	(52		)
Net of tax amount	(832		)	146			(686		)
Balance at March 31, 2018	$	(4,137	)	$	(4,942	)	$	(9,079	)

	Foreign Currency Translation Adjustments			Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2017	$	(5,500	)	$	(6,662	)	$	(12,162	)
Other comprehensive income (loss) before reclassifications
Unrealized gains	$	322		$	—		$	322
Amounts reclassified from accumulated other comprehensive income (loss)	—			253			253
Tax effect	—			(96		)	(96		)
Net of tax amount	322			157			479
Balance at April 1, 2017	$	(5,178	)	$	(6,505	)	$	(11,683	)

The change in defined benefit pension plans of $198 for the three months endedMarch 31, 2018 and the $253 for the three months endedApril 1, 2017 is included in net periodic pension expense classified in the condensed statement of operations as general and administrative or other income (expense).

- 18 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

K. Per Share Amounts and Common and Redeemable Shares Outstanding

We calculate our basic earnings per share by dividing net income or net loss by the weighted average number of common shares outstanding during the period. Diluted earnings per share are calculated in a similar manner, but include the effect of dilutive securities. To the extent these securities are antidilutive, they are excluded from the calculation of earnings per share. The per share amounts were computed as follows:

	Three Months Ended
	March 31, 2018			April 1, 2017
Income available to common shareholders:
Net loss	$	(6,627	)	$	(3,887	)
Weighted-average shares:
Basic:
Outstanding	25,229			24,967
Partially-paid share subscriptions	189			208
Basic weighted-average shares	25,418			25,175
Diluted:
Basic from above	25,418			25,175
Incremental shares from assumed:
Exercise of stock subscription purchase rights	146			145
Exercise of stock options and awards	912			896
Diluted weighted-average shares	26,476			26,216
Net loss per share--basic and diluted	$	(.26	)	$	(.15	)

- 19 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

K. Per Share Amounts and Common and Redeemable Shares Outstanding (continued)

Common and Redeemable Shares Outstanding--A summary of the activity of the common and redeemable shares outstanding for the three months endedMarch 31, 2018 follows:

	Common Shares		Redeemable
	Net of Treasury Shares		Shares		Total
Shares outstanding at January 1, 2018	17,753,832		6,467,027		24,220,859
Shares purchased	(261,959	)	(39,105	)	(301,064	)
Shares sold	—		217,325		217,325
Stock subscription offering -- cash purchases	12,670		—		12,670
Options and awards exercised	12,649		—		12,649
Shares outstanding at March 31, 2018	17,517,192		6,645,247		24,162,439

On March 31, 2018, we had 24,162,439 common and redeemable shares outstanding, employee options exercisable to purchase 786,815 common shares, partially-paid subscriptions for 757,040 common shares and purchase rights outstanding for 302,797 common shares.

Stock Subscription Offering--Beginning May 2012, the Company offered to eligible employees and nonemployee directors the right to subscribe to common shares of the Company at $9.85 per share in accordance with the provisions of The Davey Tree Expert Company 2004 Omnibus Stock Plan and the rules of the Compensation Committee of the Company's Board of Directors (collectively, the "plan"). The offering period ended on August 1, 2012 and resulted in the subscription of 1,275,428 common shares for $12,563 at $9.85 per share.

Under the plan, a participant in the offering purchasing common shares for an aggregate purchase price of less than $5 had to pay with cash. All participants (excluding Company directors and officers) purchasing $5 or more of the common shares had an option to finance their purchase through a down-payment of at least 10% of the total purchase price and a seven-year promissory note for the balance due with interest at 2%. Payments on the promissory note can be made either by payroll deductions or annual lump-sum payments of both principal and interest.

Common shares purchased under the plan have been pledged as security for the payment of the promissory note and the common shares will not be issued until the promissory note is paid-in-full. Dividends will be paid on all subscribed shares, subject to forfeiture to the extent that payment is not ultimately made for the shares.

All participants in the offering purchasing in excess of $5 of common shares were granted a "right" to purchase one additional common share at a price of $9.85 per share for every three common shares purchased under the plan. As a result of the stock subscription, employees were granted rights to purchase 423,600 common shares. Each right may be exercised at the rate of one-seventh per year and will expire seven years after the date that the right was granted. Employees may not exercise a right should they cease to be employed by the Company.

- 20 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

L. Operations by Business Segment

We provide a wide range of arboricultural, horticultural, environmental and consulting services to residential, utility, commercial and government entities throughout the United States and Canada. We have two reportable operating segments organized by type or class of customer: Residential and Commercial, and Utility.

Residential and Commercial--Residential and Commercial provides services to our residential and commercial customers including: the treatment, preservation, maintenance, removal and planting of trees, shrubs and other plant life; the practice of landscaping, grounds maintenance, tree surgery, tree feeding and tree spraying; the application of fertilizer, herbicides and insecticides; and, natural resource management and consulting, forestry research and development, and environmental planning.

Utility--Utility is principally engaged in providing services to our utility customers--investor-owned, municipal utilities, and rural electric cooperatives--including: the practice of line-clearing and vegetation management around power lines, rights-of-way and chemical brush control; and, natural resource management and consulting, forestry research and development, and environmental planning.

All other operating activities, including research, technical support and laboratory diagnostic facilities, are included in “All Other.”

Measurement of Segment Profit and Loss and Segment Assets--We evaluate performance and allocate resources based primarily on operating income and also actively manage business unit operating assets. Segment information, including reconciling adjustments, is presented consistent with the basis described in our 2017 Annual Report.    

- 21 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

L. Operations by Business Segment (continued)

Segment information reconciled to consolidated external reporting information follows:

	Utility		Residential and Commercial			All Other			Reconciling Adjustments				Consolidated
Three Months Ended March 31, 2018
Revenues	$	118,687	$	89,345		$	619		$	—			$	208,651
Income (loss) from operations	1,814		(3,105		)	(3,792		)	(583		)	(a)	(5,666		)
Interest expense									(1,401		)		(1,401		)
Interest income									78				78
Other income (expense), net									(1,662		)		(1,662		)
Loss before income taxes													$	(8,651	)
Segment assets, total	$	200,201	$	188,789		$	—		$	85,210		(b)	$	474,200
Three Months Ended April 1, 2017
Revenues	$	112,478	$	79,587		$	748		$	—			$	192,813
Income (loss) from operations	2,658		(3,582		)	(2,228		)	(843		)	(a)	(3,995		)
Interest expense									(1,257		)		(1,257		)
Interest income									70				70
Other income (expense), net									(1,139		)		(1,139		)
Loss before income taxes													$	(6,321	)
Segment assets, total	$	176,504	$	171,777		$	—		$	99,808		(b)	$	448,089

Reconciling adjustments from segment reporting to consolidated external financial reporting include unallocated corporate items:

(a) Reclassification of depreciation expense and allocation of corporate expenses.

(b) Corporate assets include cash, prepaid expenses, corporate facilities, enterprise-wide information systems and other nonoperating assets.

- 22 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

M. Revenue Recognition

We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which we adopted on January 1, 2018, using the modified retrospective method. See Note A for further discussion of the adoption, including the impact on our 2018 financial statements.

Nature of Performance Obligations and Significant Judgments

At contract inception, the company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promised good or service (or bundle of goods and services) that is distinct. To identify the performance obligations, the company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. A description of our performance obligations is included below.

• Residential and Commercial Services - We provide a wide array of services for our residential and commercial customers including the treatment, preservation, maintenance, removal and planting of trees, shrubs and other plant life, landscaping, grounds maintenance, the application of fertilizer, herbicides and insecticides, natural resource management and consulting, forestry research and development, and environmental planning. A contract with a customer may include only one of these services, all of these services, or a combination of these services. For contracts in which we provide all, or a combination of these services, we believe that the nature of our promise is to provide an integrated property management service for our customer. In these contracts, the customer has effectively outsourced the care and maintenance of its property grounds to us during the duration of the contract as we are responsible for providing a continuous delivery of outsourced maintenance activities over the contract term. As such, for contracts that contain a combination of services, we have concluded that we have a single performance obligation, which is accounted for as a series of distinct services.

• Utility Services - We provide a suite of vegetation management or arboricultural services to our utility customers (investor-owned, municipal utilities, and rural electric cooperatives) including the practice of line-clearing and vegetation management around power lines and rights-of-way, chemical brush control, natural resource management and consulting, forestry research and development, and environmental planning. A contract with a customer may include only one of these services, all of these services, or a combination of these services. For contracts in which we provide all, or a combination of these services, we believe that the nature of our promise is to provide an integrated overall vegetation management service to prevent and mitigate damages to power lines from vegetation growth and encroachment, rather than the performance of discrete activities or services for the customer. As such, for contracts that contain a combination of services, we have concluded that we have a single performance obligation, which is accounted for as a series of distinct services.

Our contracts with our customers generally originate upon the completion of a quote for services for residential and commercial customers or the receipt of a purchase order (or similar work order) for utility customers. In some cases, our contracts are governed by master services agreements, in which case our contract under ASC 606 consists of the combination of the master services agreement and the quote/purchase order. Many of our contracts have a stated duration of one year or less or contain termination clauses that allow the customer to cancel the contract after a specified notice period, which is typically less than 90 days. Due to the fact that many of our arrangements allow the customer to terminate for convenience, the duration of the contract for revenue recognition purposes generally does not extend beyond the services that we have actually transferred. As a result, many of our contracts are, in effect, day-to-day or month-to-month contracts.

- 23 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

M. Revenue Recognition (continued)

Revenue from our residential, commercial, and utility performance obligations is recognized over time as the customer simultaneously receives and consumes the benefits of our services as we perform. Many of our contracts compensate us based on an agreed upon price for each increment of service provided to the customer. Therefore, revenue is mainly recognized as each increment of service is provided to the customer at the amount that we are contractually entitled to. For contracts that contain a fixed price, we generally use a units-delivered based output method to measure progress. Revenue from our consulting services is also recognized over time and we use a cost-based input method to measure progress. Payment for our services is generally due within 30 days of such services being provided to the customer.

The transaction price for our contracts is determined upon establishment of the contract that contains the final terms of the sale, including the description, quantity, and price of each service purchased. Certain of our contracts contain variable consideration, including index-based pricing, chargebacks, and prompt payment discounts. The Company estimates variable consideration and performs a constraint analysis for these contracts on the basis of both historical information and current trends. However, these types of variable consideration do not have a material effect on the Company’s revenue, either individually or in the aggregate. In addition, although our contracts generally include fixed pricing for each increment of service, the ultimate quantity of services that will be required in order to fulfill our performance obligations is unknown at contract inception. Therefore, our total transaction price ultimately varies based on the quantity and types of services provided to our customer. However, this type of variable consideration is allocated entirely to the distinct services within the series to which it relates.

Disaggregation of Revenue

The following table disaggregates our revenue for the three months ended March 31, 2018 by major sources:

	Utility		Residential and Commercial		All Other		Consolidated
Type of service:
Tree and plant care	$	86,316	$	56,397	$	15	$	142,728
Grounds maintenance	—		22,802		—		22,802
Storm damage services	3,214		899		—		4,113
Consulting and other	29,157		9,247		604		39,008
Total revenues	$	118,687	$	89,345	$	619	$	208,651
Geography:
United States	$	110,453	$	82,478	$	619	$	193,550
Canada	8,234		6,867		—		15,101
Total revenues	$	118,687	$	89,345	$	619	$	208,651

- 24 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

M. Revenue Recognition (continued)

Contract Balances

Our contract liabilities consist of advance payments and billings in excess of costs incurred and deferred revenue. For the three months ended March 31, 2018, the Company has recognized $568 of revenue that was included in the contract liability balance at the beginning of the period. Net contract liabilities consisted of the following:

	March 31, 2018		December 31, 2017
Contract liabilities - current	$	3,989	$	2,072
Contract liabilities - noncurrent	2,042		2,020
Net contract liabilities	$	6,031	$	4,092

Practical Expedients & Accounting Policy Elections

• Remaining performance obligations - The Company’s contracts for service revenue have an original duration of one year or less. Therefore, because of the short duration of these contracts, the Company has not disclosed the transaction price for the future performance obligations as of the end of each reporting period or when the Company expects to recognize this revenue.

• Incremental costs of obtaining a contract - The Company’s contracts for service revenue have an original duration of one year or less. Therefore, the Company has elected to expense these costs as incurred.

• Right to invoice - For the Company’s contracts in which it has the right to invoice the customer on the basis of actual work performed (i.e., output), the Company has elected to measure the satisfaction of performance obligation(s) on the basis of actual work performed, as the invoiced amount directly corresponds to the value transferred to the customer.

• Sales taxes - The Company has, as an accounting policy election, decided to exclude from the measurement of the transaction price all sales taxes assessed by a governmental authority.

• Significant financing component - The Company’s contracts do not allow for payment terms which exceed one year, and thus need not account for the effects of a significant financing component.

N. Fair Value Measurements and Financial Instruments

Financial Accounting Standards Board Accounting Standard Codification 820, “Fair Value of Measurements and Disclosures (“Topic 820”)” defines fair value based on the price that would be received to sell an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers or sellers in the principal or most advantageous market for the asset or liability that are independent of the reporting entity, knowledgeable and able and willing to transact for the asset or liability.

- 25 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

N. Fair Value Measurements and Financial Instruments (continued)

Valuation Hierarchy--Topic 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value. The hierarchy prioritizes the inputs into three broad levels:

Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2 inputs are observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.

Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Our assets and liabilities measured at fair value on a recurring basis at March 31, 2018 were as follows:

			Fair Value Measurements at March 31, 2018 Using:
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	Total Carrying Value at March 31, 2018		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Assets invested for self-insurance, classified as other assets, noncurrent	$	20,905	$	20,905	$	—	$	—
Liabilities:
Deferred compensation	$	2,318	$	—	$	2,318	$	—

- 26 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

N. Fair Value Measurements and Financial Instruments (continued)

Our assets and liabilities measured at fair value on a recurring basis at December 31, 2017 were as follows:

			Fair Value Measurements at December 31, 2017 Using:
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	Total Carrying Value at December 31, 2017		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Assets invested for self-insurance, classified as other assets, noncurrent	$	19,422	$	19,422	$	—	$	—
Liabilities:
Deferred compensation	$	2,146	$	—	$	2,146	$	—

The assets invested for self-insurance are money market funds--classified as Level 1--based on quoted market prices of the identical underlying securities in active markets. The estimated fair value of the deferred compensation--classified as Level 2--is based on the value of the Company's common shares, determined by independent valuation.

Fair Value of Financial Instruments--The fair values of our current financial assets and current liabilities, including cash, accounts receivable, accounts payable, and accrued expenses, among others, approximate their reported carrying values because of their short-term nature. Financial instruments classified as noncurrent liabilities and their carrying values and fair values were as follows:

	March 31, 2018				December 31, 2017
	Carrying Value		Fair Value		Carrying Value		Fair Value
Revolving credit facility, noncurrent	$	128,500	$	128,500	$	100,000	$	100,000
Senior unsecured notes	12,000		12,291		12,000		12,389
Term loans, noncurrent	6,583		7,545		7,935		10,038
Total	$	147,083	$	148,336	$	119,935	$	122,427

The carrying value of our revolving credit facility approximates fair value--classified as Level 2--as the interest rates on the amounts outstanding are variable. The fair value of our senior unsecured notes and term loans--classified as Level 2--is determined based on expected future weighted-average interest rates with the same remaining maturities.

Market Risk--In the normal course of business, we are exposed to market risk related to changes in foreign currency exchange rates, changes in interest rates and changes in fuel prices. We do not hold or issue derivative financial instruments for trading or speculative purposes. In prior years, we have used derivative financial

- 27 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

N. Fair Value Measurements and Financial Instruments (continued)

instruments to manage risk, in part, associated with changes in interest rates and changes in fuel prices. Presently, we are not engaged in any hedging or derivative activities.

O. Contingencies

We are party to a number of lawsuits, threatened lawsuits and other claims arising out of the normal course of business. On a quarterly basis, we assess our liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that we will incur a loss and the amount of the loss can be reasonably estimated, we record a liability in our consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of the loss is not estimable, we do not accrue legal reserves, consistent with applicable accounting guidance. Based on information currently available to us, advice of counsel, and available insurance coverage, we believe that our established reserves are adequate and the liabilities arising from the legal proceedings will not have a material adverse effect on our consolidated financial condition. We note, however, that in light of the inherent uncertainty in legal proceedings there can be no assurance that the ultimate resolution of a matter will not exceed established reserves. As a result, the outcome of a particular matter or a combination of matters may be material to our results of operations for a particular period, depending upon the size of the loss or our income for that particular period.

In November 2017, a suit was filed against Davey Tree, its subsidiary, Wolf Tree, Inc., a former Davey employee, two Wolf employees, and a former Wolf employee alleging various acts of negligence and seeking compensatory and punitive damages for wrongful death and assault and battery of the plaintiff’s husband, a Wolf Tree employee in Savannah, Georgia, who was killed in August 2017. The Company has denied all liability and is vigorously defending the action. It also has retained separate counsel for three of the individual defendants, each of whom has denied all liability and also is vigorously defending the action.

P. The Davey 401KSOP and Employee Stock Ownership Plan

On March 15, 1979, the Company consummated a plan, which transferred control of the Company to its employees. As a part of this plan, the Company initially sold 120,000 common shares (presently, 23,040,000 common shares adjusted for stock splits) to its Employee Stock Ownership Trust (“ESOT”) for $2,700. The Employee Stock Ownership Plan (“ESOP”), in conjunction with the related ESOT, provided for the grant to certain employees of ownership rights in, but not possession of, the common shares held by the trustee of the ESOT. Annual allocations of shares have been made to individual accounts established for the benefit of the participants.

Defined Contribution and Savings Plans--Most employees are eligible to participate in The Davey 401KSOP and ESOP Plan. Effective January 1, 1997, the plan commenced operations and retained the existing ESOP participant accounts and incorporated a deferred savings plan (a “401(k) plan”) feature. Participants in the 401(k) plan are allowed to make before-tax contributions, within Internal Revenue Service established limits, through payroll deductions. Effective January 1, 2009 we match, in either cash or our common shares, 100% of the first one percent and 50% of the next three percent of each participant's before-tax contribution, limited to the first four percent of the employee’s compensation deferred each year. All nonbargaining domestic employees who attained age 21 and completed one year of service are eligible to participate.

- 28 -

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2018

(Amounts in thousands, except share data)

P. The Davey 401KSOP and Employee Stock Ownership Plan (continued)

Our common shares are not listed or traded on an established public trading market, and market prices are, therefore, not available. Semiannually, an independent stock valuation firm determines the fair market value of our common shares based upon our performance and financial condition. The Davey 401KSOP and ESOP Plan includes a put option for shares of the Company’s common stock distributed from the plan. Shares are distributed from the Davey 401KSOP and ESOP Plan to former participants of the plan, their beneficiaries, donees or heirs (each, a “participant”). Since our common stock is not currently traded on an established securities market, if the owners of distributed shares desire to sell their shares, the Company is required to purchase the shares at fair value for two60-day periods after distribution of the shares from the Davey 401KSOP and ESOP. The fair value of distributed shares subject to the put option totaled $3,279 and $3,843 as of March 31, 2018 and December 31, 2017, respectively. The fair value of the shares held in the Davey 401KSOP and ESOP totaled $123,645 and $119,677 as of March 31, 2018 and December 31, 2017, respectively. Due to the Company’s obligation under the put option, the distributed shares subject to the put option and the shares held in the Davey 401KSOP and ESOP (collectively referred to as 401KSOP and ESOP related shares) are recorded at fair value, classified as temporary equity in the mezzanine section of the consolidated balance sheets and totaled $126,924 and $123,520 as of March 31, 2018 and December 31, 2017, respectively. Changes in the fair value of the 401KSOP and ESOP Plan related shares are reflected in retained earnings while net share activity associated with 401KSOP and ESOP Plan related shares are first reflected in additional paid-in capital and then retained earnings if additional paid-in capital is insufficient.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

(Amounts in thousands, except share data)

Management’s Discussion and Analysis of Financial Condition and Results of Operations is provided as a supplement to the accompanying condensed consolidated financial statements and notes to help provide an understanding of our financial condition, cash flows and results of operations.

We provide a wide range of arboricultural, horticultural, environmental and consulting services to residential, utility, commercial and government entities throughout the United States and Canada.

Our Business--Our operating results are reported in two segments: Residential and Commercial, and Utility. Residential and Commercial provides services to our residential and commercial customers including: the treatment, preservation, maintenance, removal and planting of trees, shrubs and other plant life; the practice of landscaping, grounds maintenance, tree surgery, tree feeding and tree spraying; the application of fertilizer, herbicides and insecticides; and, natural resource management and consulting, forestry research and development, and environmental planning. Utility is principally engaged in providing services to our utility customers--investor-owned, municipal utilities, and rural electric cooperatives--including: the practice of line-clearing and vegetation management around power lines and rights-of-way, chemical brush control, natural resource management and consulting, forestry research and development, and environmental planning. All other operating activities, including research, technical support and laboratory diagnostic facilities, are included in "All Other."

- 29 -

RESULTS OF OPERATIONS

The following table sets forth our consolidated results of operations as a percentage of revenues and the percentage change in dollar amounts of the results of operations for the periods presented.

	Three Months Ended
	March 31, 2018		April 1, 2017		Percentage Change
Revenues	100.0	%	100.0	%	—	%
Costs and expenses:
Operating	69.3		69.3		—
Selling	19.0		18.4		.6
General and administrative	8.5		8.5		—
Depreciation and amortization	6.3		6.4		(.1	)
Gain on sale of assets, net	(.4	)	(.5	)	.1
Loss from operations	(2.7	)	(2.1	)	(.6	)
Other income (expense):
Interest expense	(.7	)	(.6	)	(.1	)
Interest income	—		—		—
Other, net	(.8	)	(.6	)	(.2	)
Loss before income taxes	(4.1	)	(3.3	)	(.8	)
Income tax benefits	(1.0	)	(1.3	)	.3
Net loss	(3.2	)%	(2.0	)%	(1.2	)%

- 30 -

First Three Months—Three Months EndedMarch 31, 2018 Compared to Three Months EndedApril 1, 2017

Our results of operations for the three months endedMarch 31, 2018 compared to the three months endedApril 1, 2017 follows:

	Three Months Ended
	March 31, 2018			April 1, 2017			Change			Percentage Change
Revenues	$	208,651		$	192,813		$	15,838		8.2	%
Costs and expenses:
Operating	144,623			133,659			10,964			8.2
Selling	39,657			35,534			4,123			11.6
General and administrative	17,718			16,400			1,318			8.0
Depreciation and amortization	13,121			12,190			931			7.6
Gain on sale of assets, net	(802		)	(975		)	173			(17.7	)
	214,317			196,808			17,509			8.9
Loss from operations	(5,666		)	(3,995		)	(1,671		)	41.8
Other income (expense):
Interest expense	(1,401		)	(1,257		)	(144		)	11.5
Interest income	78			70			8			11.4
Other, net	(1,662		)	(1,139		)	(523		)	45.9
Loss before income taxes	(8,651		)	(6,321		)	(2,330		)	36.9
Income tax benefit	(2,024		)	(2,434		)	410			(16.8	)
Net loss	$	(6,627	)	$	(3,887	)	$	(2,740	)	70.5	%

Revenues--Revenues of $208,651 increased $15,838 compared with $192,813 in the first three months of 2017. Utility Services increased $6,209 or 5.5% compared with the first three months of 2017. The increase is attributable to new accounts as well as increased work year-over-year and price increases on existing accounts. Residential and Commercial Services increased $9,758 or 12.3% from the first three months of 2017. Increases in tree surgery, snow removal, landscape and consulting revenues were partially offset by decreases in mowing, lawn and spray services as a result of protracted winter weather in the northern areas of the U.S. Total revenues of $208,651 included no production incentive revenue during the first three months of 2018 compared with $22 during the first three months of 2017.

Operating Expenses--Operating expenses of $144,623 increased $10,964 compared with the first three months of 2017. Utility Services increased $5,209 or 6.1% compared with the first three months of 2017 and, as a percentage of revenue, increased .4% to 76.8%. The increase is attributable to additional expenses for labor, fuel, equipment maintenance, subcontractors and tools and saws associated with the increased revenue.Residential and Commercial Services increased $5,605 or 12.0% compared with the first three months of 2017 but, as a percentage of revenue, decreased .2% to 58.3%. Increases in labor expense, equipment maintenance expense, materials expense, fuel expense, subcontractor expense and tool and parts expense were partially offset by reductions in disposal expense and damage expenses

Fuel costs of $6,942 increased $1,331, or 23.7%, from the $5,611 incurred in the first three months of 2017 and impacted operating expenses within all segments. The $1,331 increase included price increases approximating $182 and usage increases approximating $1,149.

Selling Expenses--Selling expenses of $39,657 increased $4,123 compared with the first three months of 2017 and, as a percentage of revenues, increased .6% to 19.0%. Utility Services increased $1,056 or 8.8% over the first

- 31 -

three months of 2017 and, as a percentage of revenue, increased .4% to 11.0%. Increases in field management wages and incentive expense, field management travel expense, office rent expense, communication expense and computer expense were partially offset by decreases in office support wages, field management auto expense, and employee development expense. Residential and Commercial Services experienced an increase of $3,060 or 12.5% over the first three months of 2017 and as a percentage of revenue, increased .1% to 30.8%. Increases in field management wages and incentive expense, office support wages, field management auto expense, communication expense, field management travel expense, computer expense and promotion and marketing expenses primarily account for the increase associated with the increased revenues.

General and Administrative Expenses--General and administrative expenses of $17,718 increased $1,318 from $16,400 in the first three months of 2017. Increases in salary and incentive expense, computer expense, office rent expense, office expenses, travel and living expenses and general insurance expense were partially offset by reductions in pension expense, director fee expense and communication expense.

Depreciation and Amortization Expense--Depreciation and amortization expense of $13,121 increased $931 from $12,190 incurred in the first three months of 2017, primarily due to increased capital expenditures and purchases of businesses in recent years.

Gain on the Sale of Assets, Net--Gain on the sale of assets of $802 for the first three months of 2018 decreased $173 from the $975 gain in the first three months of 2017. Reductions in the quantity of units sold in the first three months of 2018 as compared with the first three months of 2017 was partially offset by higher average sales prices on units sold.

Interest Expense--Interest expense of $1,401 increased $144 from the $1,257 incurred in the first three months of 2017.The increase is attributable to higher-average debt levels necessary to fund operations and capital expenditures during the first three months of 2018, as compared with the first three months of 2017.

Other, Net--Other, net, of $1,662 increased $523 from the $1,139 incurred in the first three months of 2017 and consisted of nonoperating income and expense, including foreign currency transaction gains/losses on the intercompany account balances of our Canadian operations.

Income Tax Benefits--Income tax benefits for the first three months of 2018 was $2,024, as compared to $2,434 for the first three months of 2017. Our tax provision for interim periods is determined using an estimate of our annual effective tax rate adjusted for discrete items, if any, that are taken into account in the relevant period. The 2018 effective tax rate for the first three months of 2018 is estimated to approximate 23.4%, as compared with the first three months of 2017 of 38.5%. The decrease is attributable to the reduction in federal income tax rate with the passage of the Tax Cuts and Jobs Act that was signed into law in December, 2017.

Net Loss--Net loss of $6,627 for the first three months of 2018 was $2,740 more than the $3,887 experienced in the first three months of 2017.

LIQUIDITY AND CAPITAL RESOURCES

Our principal financial requirements are for capital spending, working capital and business acquisitions.

- 32 -

Cash Flow Summary

Our cash flows from operating, investing and financing activities for the three months endedMarch 31, 2018 and April 1, 2017 follow:

	Three Months Ended
	March 31, 2018			April 1, 2017
Cash provided by (used in):
Operating activities	$	(4,650	)	$	(4,157	)
Investing activities	(19,277		)	(28,772		)
Financing activities	21,107			32,565
Decrease in cash	$	(2,820	)	$	(364	)

Cash Used By Operating Activities--Cash used by operating activities was $4,650 for the first three months of 2018, or $493 more than the $4,157 used in the first three months of 2017. The $493 increase in operating cash flow used was primarily attributable to a $2,740 decrease in net income, and a $11,077 increase in cash used by operating assets and liabilities, excluding accounts receivable, partially offset by an increase of $931 in depreciation and amortization and $8,822 more cash provided by accounts receivable.

Overall, accounts receivable decreased $10,593 during the first three months of 2018, as compared to a decrease of $1,771 during the first three months of 2017. With respect to the change in accounts receivable arising from business levels, the “days-sales-outstanding” in accounts receivable (sometimes referred to as “DSO”) at the end of the first three months of 2018 remained the same at 69 days, when compared to the end of the first three months of 2017.

Operating liabilities decreased $13,566 in the first three months of 2018, or $4,871 more than the $8,695 decrease in the first three months of 2017. Accounts payable and accrued expenses decreased $16,086 during the first three months of 2018 as compared with a decrease of $12,547 for the first three months of 2017. Decreases in employee compensation accruals, trade payables, 401KSOP liabilities, income taxes payable and advance payments from customers were partially offset by increases in self-insured medical accruals, compensated absence accruals, stock purchase withholdings and non-income taxes payable. Self-insurance accruals increased $2,520 in the first three months of 2018, which was $1,332 less than the increase of $3,852 experienced in the first three months of 2017.

The change in operating assets and liabilities other, net, decreased $11,284 for the first three months of 2018 as compared with a decrease of $5,078 for the first three months of 2017, with the $6,206 net change related primarily to increases in operating supplies, deposits and a decrease in pension and post-retirement benefits.

Cash Used In Investing Activities--Cash used in investing activities for the first three months of 2018 was $19,277, or $9,495 less than the $28,772 used during the first three months of 2017. Reductions in purchases of capital expenditures for equipment, land and buildings and businesses account for the decrease.

Cash Provided By Financing Activities--Cash provided by financing activities of $21,107 decreased $11,458 during the first three months of 2018 as compared with $32,565 of cash provided during the first three months of 2017. During the first three months of 2018, our revolving credit facility provided $28,500 in cash as compared with $33,000 provided during the first three months of 2017. We use the credit facility primarily for capital expenditures and payments of notes payable related to acquisitions. Payments of notes payable used $5,163 during the first three months of 2018, an increase of $2,040 when compared to the $3,123 used in the first three months of 2017. Treasury share transactions (purchases and sales) used $1,607 for the first three months of 2018, $4,945 more than the $3,338 provided in the first three months of 2017, and included $143 of cash received fromour common share subscriptions. Dividends paid of $623 during the first three months of 2018 decreased $27 as compared with $650 paid in the first three months of 2017.

The Company currently repurchases common shares at the shareholders’ request in accordance with the terms of the Davey 401KSOP and ESOP Plan and also repurchases common shares from time to time at the Company’s

- 33 -

discretion. The amount of common shares offered to the Company for repurchase by the holders of shares distributed from the Davey 401KSOP and ESOP Plan is not within the control of the Company, but is at the discretion of the shareholders. The Company expects to continue to repurchase its common shares, as offered by its shareholders from time to time, at their then current fair value. However, other than for repurchases pursuant to the put option under The Davey 401KSOP and ESOP Plan, as described in Note P, such purchases are not required, and the Company retains the right to discontinue them at any time. Repurchases of redeemable common shares at the shareholders' request approximated $456 during the three months ended March 31, 2018 and there were no repurchases during the three months ended April 1, 2017. Share repurchases, other than redeemable common shares, approximated $5,611 and $2,002 during the three months ended March 31, 2018 and April 1, 2017, respectively.

Revolving Credit Facility--In October 2017, we amended our revolving credit facility. The Amended and Restated Credit Agreement provides for a revolving credit facility with a group of banks under which up to an aggregate of $250,000 is available, with a letter of credit sublimit of $100,000 and a swing-line commitment of $25,000. Under certain circumstances, the amount available under the revolving credit facility may be increased to $325,000.  

The Amended and Restated Credit Agreement extended the term of the revolving credit facility to October 6, 2022. The revolving credit facility contains certain affirmative and negative covenants customary for this type of facility and includes financial covenant ratios with respect to a maximum leverage ratio (not to exceed 3.00 to 1.00 with exceptions in case of material acquisitions) and a minimum interest coverage ratio (not less than 3.00 to 1.00), in each case subject to certain further restrictions as described in the Credit Agreement.

As of March 31, 2018, we had unused commitments under the facility approximating$118,587, with $131,413 committed, consisting of borrowings of$128,500 and issued letters of credit of$2,913.

Borrowings outstanding bear interest, at Davey Tree’s option, of either (a) a base rate or (b) LIBOR plus a margin adjustment ranging from .875% to 1.50%--with the margin adjustments in both instances based on the Company's leverage ratio at the time of borrowing. The base rate was the greater of (i) the agent bank’s prime rate, (ii) LIBOR plus 1.50%, or (iii) the federal funds rate plus .50%. A commitment fee ranging from .10% to .225% was also required based on the average daily unborrowed commitment.

5.09% Senior Unsecured Notes--The senior unsecured notes are due July 22, 2020 and were issued during July 2010 as 5.09% Senior Unsecured Notes, Series A (the "5.09% Senior Notes"), pursuant to a Master Note Purchase Agreement (the “Purchase Agreement”) between the Company and the purchasers of the 5.09% Senior Notes.  

The 5.09% Senior Notes are equal in right of payment with our revolving credit facility and all other senior unsecured obligations of the Company. Interest is payable semiannually and five equal, annual principal payments commenced on July 22, 2016 (thesixth anniversary of issuance).  The Purchase Agreement contains customary events of default and covenants related to limitations on indebtedness and transactions with affiliates and the maintenance of certain financial ratios.

Accounts Receivable Securitization Facility--In May 2017, the Company amended its accounts receivable securitization facility to extend the scheduled termination date for an additional one-year period, to May 8, 2018 and increase the limit of the facility from $60,000 to $100,000.

As of March 31, 2018, we had issued letters of credit of $58,150 under the terms of the AR securitization program.

Under the AR securitization program, Davey Tree transfers by selling or contributing current and future trade receivables to a wholly-owned, bankruptcy-remote financing subsidiary which pledges a perfected first priority security interest in the trade receivables--equal to the issued letters of credit as of March 31, 2018--to the bank in exchange for the bank issuing letters of credit ("LCs").

Fees payable to the bank include: (a) an LC issuance fee, payable on each settlement date, in the amount of .90% per annum on the aggregate amount of all LCs outstanding plus outstanding reimbursement obligations (e.g.,

- 34 -

arising from drawn LCs), if any, and (b) an unused LC fee, payable monthly, equal to (i) .35% per annum for each day on which the sum of the total LCs outstanding plus any outstanding reimbursement obligations is greater than or equal to 50% of the facility limit and (ii) .45% per annum for each day on which the sum of the total LCs outstanding plus any outstanding reimbursement obligations is less than 50% of the facility limit. If an LC is drawn and the bank is not immediately reimbursed in full for the drawn amount, any outstanding reimbursement obligation will accrue interest at a per annum rate equal to a reserve-adjusted LIBOR or, in certain circumstances, a base rate equal to the higher of (i) the bank’s prime rate and (ii) the federal funds rate plus .50% and, following any default, 2.00% plus the greater of (a) adjusted LIBOR and (b) a base rate equal to the higher of (i) the bank’s prime rate and (ii) the federal funds rate plus .50%.

The agreements underlying the AR securitization program contain various customary representations and warranties, covenants, and default provisions which provide for the termination and acceleration of the commitments under the AR securitization program in circumstances including, but not limited to, failure to make payments when due, breach of a representation, warranty or covenant, certain insolvency events or failure to maintain the security interest in the trade receivables, and defaults under other material indebtedness.

Contractual Obligations Summary and Commercial Commitments

The following summarizes our long-term contractual obligations, as of March 31, 2018, to make future payments for the periods indicated:

			Nine Months Ending December 31, 2018
					Year Ending December 31,
Description	Total				2019		2020		2021		2022		Thereafter
Revolving credit facility	$	128,500	$	—	$	—	$	—	$	—	$	128,500	$	—
Senior unsecured notes	18,000		6,000		6,000		6,000		—		—		—
Term loans	11,651		6,466		766		4,419		—		—		—
Capital lease obligations	2,087		660		669		621		137		—		—
Operating lease obligations	20,726		5,432		3,994		2,959		1,766		1,346		5,229
Self-insurance accruals	70,214		21,106		13,929		9,082		5,607		4,900		15,590
Purchase obligations	16,149		16,149		—		—		—		—		—
Other liabilities	19,534		4,609		6,413		1,999		2,386		1,794		2,333
	$	286,861	$	60,422	$	31,771	$	25,080	$	9,896	$	136,540	$	23,152

The self-insurance accruals in the summary above reflect the total of the undiscounted amount accrued, for which amounts estimated to be due each year may differ from actual payments required to fund claims. Purchase obligations in the summary above represent open purchase-order amounts that we anticipate will become payable for goods and services that we have negotiated for delivery as of March 31, 2018. Other liabilities include estimates of future expected funding requirements related to retirement plans and other sundry items. Because their future cash outflows are uncertain, accrued income tax liabilities for uncertain tax positions, as of March 31, 2018, have not been included in the summary above. Noncurrent deferred taxes and payments related to defined benefit pension plans are also not included in the summary.

As of March 31, 2018, total commitments related to issued letters of credit were $63,067, of which $2,913 were issued under the revolving credit facility, $58,150 were issued under the AR securitization program, and $2,004 were issued under short-term lines of credit. As of December 31, 2017, total commitments related to issued letters of credit were $64,225, of which $4,071 were issued under the revolving credit facility, $58,150 were issued under the AR securitization facility, and $2,004 were issued under short-term lines of credit.

Also, as is common in our industry, we have performance obligations that are supported by surety bonds, which expire during 2018 through 2023. We intend to renew the surety bonds where appropriate and as necessary.

- 35 -

Capital Resources

Cash generated from operations and our revolving credit facility are our primary sources of capital.

Business seasonality traditionally results in higher revenues during the second and third quarters as compared with the first and fourth quarters of the year, while our methods of accounting for fixed costs, such as depreciation and amortization expense, rent and interest expense, are not significantly impacted by business seasonality. Capital resources during these periods are equally affected. We satisfy seasonal working capital needs and other financing requirements with the revolving credit facility and other short-term lines of credit. We are continually reviewing our existing sources of financing and evaluating alternatives. At March 31, 2018, we had working capital of $88,328, and short-term lines of credit approximating $7,160 and $118,587 available under our revolving credit facility.

We believe our sources of capital, at this time, provide us with the financial flexibility to meet our capital-spending plans and to continue to complete business acquisitions for at least the next twelve months and for the reasonably foreseeable future.

Recent Accounting Guidance

Accounting Standards Adopted in 2018

Accounting Standards Update 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force)--In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which provides guidance on how cash receipts and cash payments related to eight specific cash flow issues are presented and classified in the statement of cash flows, with the objective of reducing the existing diversity in practice. The Company adopted ASU 2016-15 on January 1, 2018. The adoption of ASU 2016-15 did not have a material impact on our consolidated financial statements.

Accounting Standards Update 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost--In March 2017, the FASB issued ASU 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which changes the presentation of net periodic benefit cost related to employer sponsored defined benefit plans and other postretirement benefits. Under ASU 2017-07, service costs will be included within the same income statement line item as other compensation costs arising from services rendered by pertinent employees during the period. The other components of net periodic benefit pension cost will be presented separately outside of income from operations. Additionally, only the service cost component of the net periodic benefit cost may be capitalized in assets. The amendments under ASU 2017-07 also provide a practical expedient that permits the use of amounts disclosed in its pension and other postretirement benefit plan note for prior year comparative periods as the estimation basis for applying the guidance retrospectively. The Company adopted ASU 2017-07 on January 1, 2018 and chose to use the practical expedient provided when applying the guidance retrospectively. Upon adoption, service costs are recognized in our financial statements as general and administrative expenses while the remaining components of net periodic benefit cost are recognized as other income (expense). Pension expense of $347 for the first three months of 2017 has been reclassified from general and administrative expense to other income (expense).

Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606)--In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which replaces all current U.S. GAAP guidance on revenue recognition and eliminates all industry-specific guidance. The Company adopted ASU 2014-09 and applied it to all contracts that were not completed using the modified retrospective method. The cumulative effect of applying the guidance in ASU 2014-09 to contracts that were not yet completed as of January 1, 2018 was not material. Further, the adoption of ASU 2014-09 will not have a significant impact on the amount or timing of revenue recognition. Therefore, we have not disclosed the amount by which each financial

- 36 -

statement line item is affected in the current period as a result of applying ASU 2014-09 or an explanation of significant changes between our results as reported and those that would have been reported under legacy GAAP as no significant changes were identified.

Accounting Standards Not Yet Adopted

Accounting Standards Update 2016-02, Leases (Topic 842)--In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 establishes a comprehensive new lease accounting model. The new standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and, (c) causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than twelve months. The new standard is effective for interim and annual periods beginning after December 15, 2018, which for Davey Tree would be January 1, 2019. Early adoption is permitted. The new standard requires a modified retrospective transition for capital or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it does not require transition accounting for leases that expire prior to the date of initial application. The Company plans to adopt ASU 2016-02 on January 1, 2019. Management has assembled a project team and is in the process of gathering information to evaluate real estate, personal property and other arrangements that may meet the definition of a lease and has purchased a technology solution to assist with the management of leases. Management expects that the adoption of ASU 2016-02 will have a material impact on the Company's consolidated financial statements.

Accounting Standards Update 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220)--In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220)." ASU 2018-02 provides an option to reclassify the stranded tax effects within accumulated other comprehensive income to retained earnings as a result of the Tax Cuts and Jobs Act of 2017. This standard is effective for interim and annual reporting periods beginning after December 15, 2018, which for Davey Tree would be January 1, 2019. Early adoption is permitted. Management has not yet completed its assessment of the impact of the new standard on the Company's consolidated financial statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented.

As discussed in our annual report on Form 10-K for the year ended December 31, 2017, we believe that our policies related to revenue recognition, the allowance for doubtful accounts and self-insurance accruals are our “critical accounting policies and estimates”--those most important to the financial presentations and those that require the most difficult, subjective or complex judgments. During the first quarter 2018, we updated our revenue recognition policies in conjunction with our adoption of Accounting Standards Codification 606, "Revenue from Contracts with Customers" as further described in Note M Revenue Recognition of the Notes to Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

On an ongoing basis, we evaluate our estimates and assumptions, including those related to accounts receivable, specifically those receivables under contractual arrangements primarily with Utility customers; allowance for doubtful accounts; and self-insurance accruals. We base our estimates on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.

- 37 -

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These statements relate to future events or our future financial performance.  In some cases, forward-looking statements may be identified by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to differ materially from what is expressed or implied in these forward-looking statements. Some important factors that could cause actual results to differ materially from those in the forward-looking statements include:

• Our business, other than tree services to utility customers, is highly seasonal and weather dependent.

• Various economic factors may adversely impact our customers’ spending and pricing for our services, and impede our collection of accounts receivable.

• Significant customers, particularly utilities, may experience financial difficulties, resulting in payment delays or delinquencies.

• The seasonal nature of our business and changes in general and local economic conditions, among other factors, may cause our quarterly results to fluctuate, and our prior performance is not necessarily indicative of future results.

• The uncertainties in the credit and financial markets may limit our access to capital.

• Significant increases in fuel prices for extended periods of time will increase our operating expenses.

• Fluctuations in foreign currency exchange rates may have a material adverse impact on our operating results.

• We have significant contracts with our utility, commercial and government customers that include liability risk exposure as part of those contracts. Consequently, we have substantial excess-umbrella liability insurance, and increases in the cost of obtaining adequate insurance, or the inadequacy of our self-insurance accruals or insurance coverages, could negatively impact our liquidity and financial condition.

• Because no public market exists for our common shares, the ability of shareholders to sell their common shares is limited.

• Significant increases in health care costs could negatively impact our results of operations or financial position.

• We are subject to intense competition.

• Our failure to comply with environmental laws could result in significant liabilities, fines and/or penalties.

• The impact of regulations initiated as a response to possible changing climate conditions could have a negative effect on our results of operations or our financial condition.

• We may encounter difficulties obtaining surety bonds or letters of credit necessary to support our operations.

• We are dependent, in part, on our reputation of quality, integrity and performance.  If our reputation is damaged, we may be adversely affected.

• We may be unable to attract and retain a sufficient number of qualified employees for our field operations, and we may be unable to attract and retain qualified management personnel.

• Our facilities could be damaged or our operations could be disrupted, or our customers or vendors may be adversely affected, by events such as natural disasters, pandemics, terrorist attacks or other external events.

- 38 -

• A disruption in our information technology systems, including a disruption related to cybersecurity, could adversely affect our financial performance.

• We are subject to third-party and governmental regulatory claims and litigation that may have an adverse effect on us.

• We may misjudge a competitive bid and be contractually bound to an unprofitable contract.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this quarterly report on Form 10-Q to conform these statements to actual future results.

The factors described above, as well as other factors that may adversely impact our actual results, are discussed in "Part II - Item 1A. Risk Factors." of this quarterly report on Form 10-Q and in our annual report on Form 10-K for the year ended December 31, 2017 in “Part I - Item 1A. Risk Factors.”

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

During the quarter ended March 31, 2018, there have been no material changes in the market risk previously presented in our annual report on Form 10-K for the year ended December 31, 2017.

Item 4. Controls and Procedures.

(a) Management’s Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report in ensuring that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The Davey Tree Expert Company

Part II. Other Information

Items 3, 4 and 5 are not applicable.

- 39 -

Item 1. Legal Proceedings.

In November 2017, a suit was filed against Davey Tree, its subsidiary, Wolf Tree, Inc., a former Davey employee, two Wolf employees, and a former Wolf employee alleging various acts of negligence and seeking compensatory and punitive damages for wrongful death and assault and battery of the plaintiff’s husband, a Wolf Tree employee in Savannah, Georgia, who was killed in August 2017. The Company has denied all liability and is vigorously defending the action. It also has retained separate counsel for three of the individual defendants, each of whom has denied all liability and also is vigorously defending the action.

On a quarterly basis, we assess our liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that we will incur a loss and the amount of the loss can be reasonably estimated, we record a liability in our consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of the loss is not estimable, we do not accrue legal reserves, consistent with applicable accounting guidance. Based on information currently available to us, advice of counsel, and available insurance coverage, we believe that our established reserves are adequate and the liabilities arising from the legal proceedings will not have a material adverse effect on our consolidated financial condition. We note, however, that in light of the inherent uncertainty in legal proceedings there can be no assurance that the ultimate resolution of a matter will not exceed established reserves. As a result, the outcome of a particular matter or a combination of matters may be material to our results of operations for a particular period, depending upon the size of the loss or our income for that particular period.

Item 1A. Risk Factors.

The factors described below represent the principal risks we face. Except as otherwise indicated, these factors may or may not occur and we are not in a position to express a view on the likelihood of any such factor occurring. Other factors may exist that we do not consider to be significant based on information that is currently available or that we are not currently able to anticipate.

Our business is highly seasonal and weather dependent.

Our business, other than tree services to utility customers, is highly seasonal and weather dependent, primarily due to fluctuations in horticultural services provided to Residential and Commercial customers. We have historically incurred losses in the first quarter, while revenue and operating income are generally highest in the second and third quarters of the calendar year. Inclement weather, such as uncharacteristically low or high (drought) temperatures, in the second and third quarters could dampen the demand for our horticultural services, resulting in reduced revenues that would have an adverse effect on our results of operations.

Economic conditions may adversely impact our customers’ future spending as well as pricing and payment for our services, thus negatively impacting our operations and growth.

Various economic factors may adversely impact the demand for our services and potentially result in depressed prices for our services and the delay or cancellation of projects. That may make it difficult to estimate our customers' requirements for our services and, therefore, add uncertainty to customer demand. Various economic factors and customers' confidence in future economic conditions may cause a reduction in our customers' spending for our services and may also impact the ability of our customers to pay amounts owed, which could reduce our cash flow and adversely impact our debt or equity financing. These events could have a material adverse effect on our operations and our ability to grow at historical levels.

Financial difficulties or the bankruptcy of one or more of our major customers could adversely affect our results.

Our ability to collect our accounts receivable and future sales depends, in part, on the financial strength of our customers. We grant credit, generally without collateral, to our customers. Consequently, we are subject to credit risk related to changes in business and economic factors throughout the United States and Canada. In the event customers experience financial difficulty, and particularly if bankruptcy results, our profitability may be adversely

- 40 -

impacted by our failure to collect our accounts receivable in excess of our estimated allowance for uncollectible accounts. Additionally, our future revenues could be reduced by the loss of a customer due to bankruptcy. Our failure to collect accounts receivable and/or the loss of one or more major customers could have an adverse effect on our net income and financial condition.

Our business is dependent upon service to our utility customers and we may be affected by developments in the utility industry.

We derive approximately 51% of our total annual revenues from our Utility segment, including approximately 50% of our total annual revenues from Pacific Gas & Electric Company. Significant adverse developments in the utility industry generally, or specifically for our major utility customers, could result in pressure to reduce costs by utility industry service providers (such as us), delays in payments of our accounts receivable, or increases in uncollectible accounts receivable, among other things. As a result, such developments could have an adverse effect on our results of operations.

Our quarterly results may fluctuate.

We have experienced and expect to continue to experience quarterly variations in revenues and operating income as a result of many factors, including:

▪ the seasonality of our business;

▪ the timing and volume of customers' projects;

▪ budgetary spending patterns of customers;

▪ the commencement or termination of service agreements;

▪ costs incurred to support growth internally or through acquisitions;

▪ changes in our mix of customers, contracts and business activities;

▪ fluctuations in insurance expense due to changes in claims experience and actuarial assumptions; and

▪ general and local economic conditions.

Accordingly, our operating results in any particular quarter may not be indicative of the results that you can expect for any other quarter or for the entire year.

We may not have access to capital in the future due to uncertainties in the financial and credit markets.

We may need new or additional financing in the future to conduct our operations, expand our business or refinance existing indebtedness. Future changes in the general economic conditions and/or financial markets in the United States or globally could affect adversely our ability to raise capital on favorable terms or at all. From time-to-time we have relied, and may also rely in the future, on access to financial markets as a source of liquidity for working capital requirements, acquisitions and general corporate purposes. Our access to funds under our revolving credit facility is dependent on the ability of the financial institutions that are parties to the facility to meet their funding commitments. Those financial institutions may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period of time. Economic disruptions and any resulting limitations on future funding, including any restrictions on access to funds under our revolving credit facility, could have a material adverse effect on us.

We are subject to the risk of changes in fuel costs.

The cost of fuel is a major operating expense of our business. Significant increases in fuel prices for extended periods of time will cause our operating expenses to fluctuate. An increase in cost with partial or no corresponding compensation from customers would lead to lower margins that would have an adverse effect on our results of operations.

- 41 -

We are subject to the effect of foreign currency exchange rate fluctuations, which may have a material adverse impact on us.

We are exposed to foreign currency exchange rate risk resulting from our operations in Canada, where we provide a comprehensive range of horticultural services. Fluctuations in foreign currency exchange rates may make our services more expensive for others to purchase or increase our operating costs, affecting our competitiveness and our profitability. Our financial results could be affected by factors such as changes in the foreign currency exchange rate or differing economic conditions in the Canadian markets as compared with the markets for our services in the United States. Our earnings are affected by translation exposures from currency fluctuations in the value of the U.S. dollar as compared to the Canadian dollar.

Revenues from customers in Canada are subject to foreign currency exchange. Thus, certain revenues and expenses have been, and are expected to be, subject to the effect of foreign currency fluctuations, and these fluctuations may have a material adverse impact on our operating results, asset values and could reduce shareholders’ equity. In addition, if we expand our Canadian operations, exposures to gains and losses on foreign currency transactions may increase.

We could be negatively impacted if our self-insurance accruals or our insurance coverages prove to be inadequate.

We are generally self-insured for losses and liabilities related to workers' compensation, vehicle liability and general liability claims (including any wildfire-related claims, up to certain retained coverage limits). A liability for unpaid claims and associated expenses, including incurred but not reported losses, is actuarially determined and reflected in our consolidated balance sheet as an accrued liability. The determination of such claims and expenses, and the extent of the need for accrued liabilities, are continually reviewed and updated. If we were to experience insurance claims or costs above our estimates and were unable to offset such increases with earnings, our business could be adversely affected. Also, where we self-insure, a deterioration in claims management, whether by our management or by a third-party claims administrator, could lead to delays in settling claims, thereby increasing claim costs, particularly as it relates to workers’ compensation. In addition, catastrophic uninsured claims filed against us or the inability of our insurance carriers to pay otherwise-insured claims would have an adverse effect on our financial condition.

Furthermore, many customers, particularly utilities, prefer to do business with contractors with significant financial resources, who can provide substantial insurance coverage. Should we be unable to renew our excess liability insurance and other commercial insurance policies at competitive rates, this loss would have an adverse effect on our financial condition and results of operations.

Increases in our health insurance costs and uncertainty about federal health care policies could adversely affect our results of operations and cash flows.

The costs of employee health care insurance have been increasing in recent years due to rising health care costs, legislative changes, and general economic conditions. We cannot predict what other health care programs and regulations will ultimately be implemented at the federal or state level or the effect of any future legislation or regulations on our business, results of operations and cash flows. In addition, we cannot predict when and if Congress will repeal and/or replace certain health care programs and regulations at the federal level and the impact that such changes would have on our business. A continued increase in health care costs or additional costs incurred as a result of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 or other future health care reform laws imposed by Congress or state legislatures could have a negative impact on our financial position, results of operations and cash flows.

The unavailability or cancellation of third-party insurance coverage may have a material adverse effect on our financial condition and results of operations as well as disrupt our operations.

Any of our existing excess insurance coverage may not be renewed upon the expiration of the coverage period or future coverage may not be available at competitive rates for the required limits. In addition, our third-party

- 42 -

insurers could fail, suddenly cancel our coverage or otherwise be unable to provide us with adequate insurance coverage. If any of these events occur, they may have a material adverse effect on our financial condition and results of operations as well as disrupt our operations. For example, we have operations in California, which has an environment prone to wildfires. Should our third-party insurers determine to exclude coverage for wildfires in the future, we could be exposed to significant liabilities, having a material adverse effect on our financial condition and results of operations and potentially disrupting our California operations.

Because no public market exists for our common shares, your ability to sell your common shares may be limited.

Our common shares are not traded on any national exchange, market system or over-the-counter bulletin board. Because no public market exists for our common shares, your ability to sell these shares is limited.

We are subject to intense competition.

We believe that each aspect of our business is highly competitive. Principal methods of competition in our operating segments are customer service, marketing, image, performance and reputation. Pricing is not always a critical factor in a customer’s decision with respect to our Residential and Commercial segment; however, pricing is generally the principal method of competition for our Utility segment, although in most instances consideration is given to reputation and past production performance. On a national level, our competition is primarily landscape construction and maintenance companies as well as residential and commercial lawn care companies. At a local and regional level, our competition comes mainly from small, local companies which are engaged primarily in tree care and lawn services. Our Utility segment competes principally with one major national competitor, as well as several smaller regional firms. Furthermore, competitors may have lower costs because privately-owned companies operating in a limited geographic area may have significantly lower labor and overhead costs. Our competitors may develop the expertise, experience and resources to provide services that are superior in both price and quality to our services. These strong competitive pressures could inhibit our success in bidding for profitable business and may have a material adverse effect on our business, financial condition and results of operations.

Our failure to comply with environmental laws could result in significant liabilities.

Our facilities and operations are subject to governmental regulations designed to protect the environment, particularly with respect to our services regarding insect and tree, shrub and lawn disease management, because these services involve to a considerable degree the blending and application of spray materials, which require formal licensing in most areas. Continual changes in environmental laws, regulations and licensing requirements, environmental conditions, environmental awareness, technology and social attitudes make it necessary for us to maintain a high degree of awareness of the impact such changes have on our compliance programs and the market for our services. We are subject to existing federal, state and local laws, regulations and licensing requirements regulating the use of materials in our spraying operations as well as certain other aspects of our business. If we fail to comply with such laws, regulations or licensing requirements, we may become subject to significant liabilities, fines and/or penalties, which could adversely affect our financial condition and results of operations.

We cannot predict the impact that the policies regarding changing climate conditions, including legal, regulatory and social responses thereto, may have on our business.

Many scientists, environmentalists, international organizations, political activists, regulators and other commentators believe that global climate change has added, and will continue to add, to the unpredictability, frequency and severity of natural disasters in certain parts of the world. In response, a number of legal and regulatory measures and social initiatives have been introduced in an effort to reduce greenhouse gas and other carbon emissions that these parties believe may be contributors to global climate change. These proposals, if enacted, could result in a variety of regulatory programs, including potential new regulations, additional charges and taxes to fund energy efficiency activities, or other regulatory actions. Any of these actions could result in increased costs associated with our operations and impact the prices we charge our customers.

- 43 -

We cannot predict the impact, if any, that changing climate conditions will have on us or our customers. However, it is possible that the legal, regulatory and social responses to real or perceived climate change could have a negative effect on our results of operations or our financial condition.

We may be adversely affected if we are unable to obtain necessary surety bonds or letters of credit.

Surety market conditions are currently difficult as a result of significant losses incurred by many sureties in recent years, both in the construction industry as well as in certain larger corporate bankruptcies. As a result, less bonding capacity is available in the market and terms have become more expensive and restrictive. Further, under standard terms in the surety market, sureties issue or continue bonds on a project-by-project basis and can decline to issue bonds at any time or require the posting of collateral as a condition to issuing or renewing any bonds. If surety providers were to limit or eliminate our access to bonding, we would need to post other forms of collateral for project performance, such as letters of credit or cash. We may be unable to secure sufficient letters of credit on acceptable terms, or at all. Accordingly, if we were to experience an interruption or reduction in the availability of bonding capacity, our liquidity may be adversely affected.

We may be adversely affected if our reputation is damaged.

We are dependent, in part, upon our reputation of quality, integrity and performance. If our reputation were damaged in some way, it may impact our ability to grow or maintain our business.

We may be unable to employ a sufficient workforce for our field operations.

Our industry operates in an environment that requires heavy manual labor. We may experience slower growth in the labor force for this type of work than in the past. As a result, we may experience labor shortages or the need to pay more to attract and retain qualified employees.

We may be unable to attract and retain skilled management.

Our success depends, in part, on our ability to attract and retain key managers. Competition for the best people can be intense and we may not be able to promote, hire or retain skilled managers. The loss of services of one or more of our key managers could have a material adverse impact on our business because of the loss of the manager's skills, knowledge of our industry and years of industry experience, and the difficulty of promptly finding qualified replacement personnel.

Natural disasters, pandemics, terrorist attacks and other external events could adversely affect our business.

Natural disasters, pandemics, 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 vendors. The occurrence of any such event could adversely affect our business, financial condition and results of operations.

A disruption in our information technology systems, including a disruption related to cybersecurity, could adversely affect our financial performance.

We rely on the accuracy, capacity and security of our information technology systems. Despite the security measures that we have implemented, including those measures related to cybersecurity, our systems could be breached or damaged by computer viruses, natural or man-made incidents or disasters or unauthorized physical or electronic access. A breach could result in business disruption, theft of our intellectual property, trade secrets or customer information and unauthorized access to personnel information. To the extent that our business is interrupted or data is lost, destroyed or inappropriately used or disclosed, such disruptions could adversely affect our competitive position, reputation, relationships with our customers, financial condition, operating results and cash flows. In addition, we may be required to incur significant costs to protect against the damage caused by these disruptions or security breaches in the future.

- 44 -

We are subject to third-party and governmental regulatory claims and litigation.

From time-to-time, customers, vendors, employees, governmental regulatory authorities and others may make claims and take legal action against us. Whether these claims and legal actions are founded or unfounded, if such claims and legal actions are not resolved in our favor, they may result in significant financial liability. Any such financial liability could have a material adverse effect on our financial condition and results of operations. Any such claims and legal actions may also require significant management attention and may detract from management's focus on our operations.

We may be adversely affected if we enter into a major unprofitable contract.

Our Residential and Commercial segment and our Utility segment frequently operate in a competitive bid contract environment. As a result, we may misjudge a bid and be contractually bound to an unprofitable contract, which could adversely affect our results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table provides information on purchases of our common shares outstanding made by us during the first three months of 2018.

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
Fiscal 2018
January 1 to January 27	1,052	$	18.30	—	129,761
January 28 to February 24	213	18.30		—	129,761
February 25 to March 31	299,799	19.10		—	129,761
Total First Quarter	301,064	19.10		—
Total Year-to-Date	301,064	$	19.10	—

Our common shares are not listed or traded on an established public trading market and market prices are, therefore, not available. Semiannually, for purposes of the Davey 401KSOP and ESOP, the fair market value of our common shares is determined by an independent stock valuation firm, based upon our performance and financial condition, using a peer group of comparable companies selected by that firm. The peer group currently consists of: ABM Industries Incorporated; Comfort Systems USA, Inc.; Dycom Industries, Inc.; MYR Group, Inc.; Quanta Services, Inc.; Rollins, Inc.; and Scotts Miracle-Gro Company. The semiannual valuations are effective for a period of six months and the per-share price established by those valuations is the price at which our Board of Directors has determined our common shares will be bought and sold during that six-month period in transactions involving Davey Tree or one of its employee benefit or stock purchase plans. Since 1979, we have provided a ready market for all shareholders through our direct purchase of their common shares, although we are under no obligation to do so (other than for repurchases pursuant to the put option under The Davey 401KSOP and ESOP Plan, as described in Note P, The Davey 401KSOP and Employee Stock Ownership Plan). The purchases described above were added to our treasury stock.

At the Annual Meeting of Shareholders of the Company held on May 16, 2017, the shareholders of the Company approved proposals to amend the Company's Articles of Incorporation to (i) expand the Company's current right of first refusal with respect to proposed transfers of shares of the Company's common shares, (ii) clarify provisions regarding when the Company may provide notice of its decision to exercise its right of first refusal with respect to proposed transfers of common shares by the estate or personal representative of a deceased

- 45 -

shareholder, and (iii) grant the Company a right to repurchase common shares held by certain shareholders of the Company.

On May 10, 2017, the Board of Directors of the Company adopted a policy regarding the Company's exercise of the repurchase right granted to the Company through amendments to the Company's Articles of Incorporation, as approved by shareholders on May 16, 2017.

Until further action by the Board, it will be the policy of the Company not to exercise its repurchase rights under the amended Articles with respect to shares of the Company's common shares held by current and retired employees and current and former directors of the Company (subject to exceptions set forth in the policy) (collectively, "Active Shareholders"), their spouses, their first-generation descendants and trusts established exclusively for their benefit.

Until further action by the Board, it will also be the policy of the Company not to exercise its rights under the amended Articles to repurchase shares of the Company's common shares proposed to be transferred by an Active Shareholder to his or her spouse, a first-generation descendant, or a trust established exclusively for the benefit of one or more of an Active Shareholder, his or her spouse and first-generation descendants of an Active Shareholder, or upon the death of an Active Shareholder, such transfers from the estate or personal representative of a deceased Active Shareholder. The Board may suspend, change or discontinue the policy at any time without prior notice.

On May 17, 2017, in accordance with the amendments to the Articles approved by the Company's shareholders at the Annual Meeting, the Company's Board of Directors authorized the Company to repurchase up to 200,000 common shares, of which 129,761 remain available under the program. Share repurchases may be made from time to time and the timing of any repurchases and the actual number of shares repurchased will depend on a variety of factors. The Company is not obligated to purchase any shares, and repurchases may be commenced, suspended or discontinued from time to time without prior notice. The repurchase program does not have an expiration date.

Item 6. Exhibits.

See Exhibit Index page below.

- 46 -

Exhibit Index

Exhibit No.	Description
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed Herewith
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed Herewith
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.	Furnished Herewith
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.	Furnished Herewith
101	The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets (unaudited), (ii) the Condensed Consolidated Statements of Operations (unaudited), (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited), (iv) the Condensed Consolidated Statements of Cash Flows (unaudited), and (v) Notes to Condensed Consolidated Financial Statements (unaudited).	Filed Herewith

- 47 -

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			THE DAVEY TREE EXPERT COMPANY
Date:	May 4, 2018	By:	/s/ Joseph R. Paul
			Joseph R. Paul
			Executive Vice President, Chief Financial Officer and Secretary
			(Principal Financial Officer)
Date:	May 4, 2018	By:	/s/ Thea R. Sears
			Thea R. Sears
			Vice President and Controller
			(Principal Accounting Officer)

- 48 -

EX-31.1

Exhibit 31.1

Certification

Certification of Chief Executive Officer

I, Patrick M. Covey, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Davey Tree Expert Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 4, 2018	/s/ Patrick M. Covey
		Patrick M. Covey
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification

Certification of Chief Financial Officer

I, Joseph R. Paul, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Davey Tree Expert Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 4, 2018	/s/ Joseph R. Paul
		Joseph R. Paul
		Executive Vice President, Chief Financial Officer and Secretary

EX-32.1

Exhibit 32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Certification of Chief Executive Officer

I, Patrick M. Covey, President and Chief Executive Officer of The Davey Tree Expert Company (the "Company"), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1.) The Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2018 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)), as applicable; and

(2.) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	May 4, 2018	/s/ Patrick M. Covey
		Patrick M. Covey
		President and Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Certification of Chief Financial Officer

I, Joseph R. Paul, Executive Vice President, Chief Financial Officer and Secretary of The Davey Tree Expert Company (the "Company"), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1.) The Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2018  (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)), as applicable; and

(2.) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	May 4, 2018	/s/ Joseph R. Paul
		Joseph R. Paul
		Executive Vice President, Chief Financial Officer and Secretary

XML

Document and Entity Information Document - shares	3 Months Ended
	Mar. 31, 2018	Apr. 27, 2018
Entity Information [Line Items]
Entity registrant name	DAVEY TREE EXPERT CO
Entity central index key	0000277638
Current fiscal year end date	--12-31
Entity filer category	Accelerated Filer
Document type	10-Q
Document period end date	Mar. 31, 2018
Document fiscal year focus	2018
Document fiscal period focus	Q1
Amendment flag	false
Entity common stock, shares outstanding		24,022,304

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Current assets:
Cash	$ 10,301	$ 13,121
Accounts receivable, net	158,078	168,671
Operating supplies	13,706	10,069
Other current assets	15,153	17,264
Total current assets	197,238	209,125
Property and equipment	627,935	616,036
Less accumulated depreciation	427,632	422,853
Property and equipment, net	200,303	193,183
Other assets	35,284	29,156
Identified intangible assets and goodwill, net	41,375	41,671
Total assets	474,200	473,135
Current liabilities:
Accounts payable	39,597	45,093
Accrued expenses	32,312	42,816
Other current liabilities	37,001	40,748
Total current liabilities	108,910	128,657
Long-term debt	146,402	119,210
Self-insurance accruals	46,368	43,912
Other noncurrent liabilities	19,706	19,966
Total liabilities	321,386	311,745
Redeemable common shares related to 401KSOP and Employee Stock Ownership Plan (ESOP); 6,645 and 6,467 shares at redemption value as of March 31, 2018 and December 31, 2017	126,924	123,520
Common shareholders' equity:
Common shares, $1.00 par value, per share; 48,000 shares authorized; 36,269 and 36,447 shares issued and outstanding before deducting treasury shares and which excludes 6,645 and 6,467 shares subject to redemption as of March 31, 2018 and December 31, 2017	36,269	36,447
Additional paid-in capital	58,132	58,554
Common shares subscribed, unissued	7,457	7,529
Retained earnings	136,229	143,835
Accumulated other comprehensive loss	(9,079)	(8,393)
Shareholders' equity before treasury stock	229,008	237,972
Less: Cost of common shares held in treasury; 18,752 shares at March 31, 2018 and 18,693 shares at December 31, 2017	201,489	198,327
Common shares subscription receivable	1,629	1,775
Total common shareholders' equity	25,890	37,870
Total liabilities and shareholders' equity	$ 474,200	$ 473,135

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Common shares, par value	$ 1.00	$ 1.00
Common shares, authorized	48,000,000	48,000,000
Common shares, issued	36,269,000	36,447,000
Common stock, shares, outstanding, before treasury shares	36,269,000	36,447,000
Common shares held in treasury	18,752,000	18,693,000
Reedemable common shares	6,645,000	6,467,000

XML

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Income Statement [Abstract]
Revenues	$ 208,651	$ 192,813
Costs and expenses:
Operating	144,623	133,659
Selling	39,657	35,534
General and administrative	17,718	16,400
Depreciation and amortization	13,121	12,190
Gain on sale of assets, net	(802)	(975)
Costs and expenses	214,317	196,808
Loss from operations	(5,666)	(3,995)
Other income (expense):
Interest expense	(1,401)	(1,257)
Interest income	78	70
Other, net	(1,662)	(1,139)
Loss before income taxes	(8,651)	(6,321)
Income tax benefits	(2,024)	(2,434)
Net loss	$ (6,627)	$ (3,887)
Net income per share:
Net loss per share--basic and diluted	$ (0.26)	$ (0.15)
Weighted-average shares outstanding:
Weighted-average shares outstanding--basic and diluted	25,418	25,175
Basic	25,418	25,175
Diluted	26,476	26,216
Dividends declared per share	$ 0.025	$ 0.025

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Statement of Comprehensive Income [Abstract]
Net loss	$ (6,627)	$ (3,887)
Components of other comprehensive income/(loss), net of tax:
Foreign currency translation adjustments	(832)	322
Amortization of defined benefit pension items:
Net actuarial loss	134	147
Prior service cost	12	10
Defined benefit pension plan adjustments	146	157
Other comprehensive (loss)/income, net of tax	(686)	479
Comprehensive loss	$ (7,313)	$ (3,408)

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Operating activities
Net loss	$ (6,627)	$ (3,887)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	13,121	12,190
Other	3,113	(458)
Changes in operating assets and liabilities:
Accounts receivable	10,593	1,771
Operating liabilities	(13,566)	(8,695)
Other, net	(11,284)	(5,078)
Adjustments to reconcile net loss to net cash provided by operating activities:	1,977	(270)
Net cash used in operating activities	(4,650)	(4,157)
Capital expenditures:
Equipment	(20,066)	(21,616)
Land and building	(126)	(911)
Purchases of businesses, net of cash acquired	(86)	(7,452)
Other	1,001	1,207
Net cash used in investing activities	(19,277)	(28,772)
Financing activities
Revolving credit facility proceeds, net	28,500	33,000
Purchase of common shares for treasury	(6,067)	(2,002)
Sale of common shares from treasury	4,460	5,340
Dividends	(623)	(650)
Payments of notes payable	(5,163)	(3,123)
Net cash provided by financing activities	21,107	32,565
Decrease in cash	(2,820)	(364)
Cash, beginning of period	13,121	9,006
Cash, end of period	10,301	8,642
Supplemental cash flow information follows:
Interest paid	1,631	1,482
Income taxes paid	$ 1,449	$ 2,506

XML

Basis of Financial Statement Preparation

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Basis of financial statement preparation [Text Block]

Basis of Financial Statement Preparation

The condensed consolidated financial statements present the financial position, results of operations and cash flows of The Davey Tree Expert Company and its subsidiaries. When we refer to “we,” “us,” “our,” “Davey,” or “Davey Tree”, we mean The Davey Tree Expert Company and its subsidiaries, unless otherwise expressly stated or the context indicates otherwise.

We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), as codified in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), and with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. The consolidated financial statements include all adjustments which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal, recurring nature. All significant intercompany accounts and transactions have been eliminated.

Certain information and disclosures required by U.S. GAAP for complete financial statements have been omitted in accordance with the rules and regulations of the SEC. We suggest that these condensed consolidated financial statements be read in conjunction with the financial statements included in our annual report on Form 10-K for the year ended December 31, 2017 (the “2017 Annual Report”).

Use of Estimates in Financial Statement Preparation--The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect reported amounts. Our consolidated financial statements include amounts that are based on management’s best estimates and judgments.  Estimates are used for, but not limited to, accounts receivable valuation, depreciable lives of fixed assets, self-insurance accruals, income taxes and revenue recognition. Actual results could differ from those estimates.

Interim Results of Operations--Interim results may not be indicative of calendar year performance because of seasonal and short-term variations.

Recent Accounting Guidance

Accounting Standards Adopted in 2018

Accounting Standards Update 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force)--In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which provides guidance on how cash receipts and cash payments related to eight specific cash flow issues are presented and classified in the statement of cash flows, with the objective of reducing the existing diversity in practice. The Company adopted ASU 2016-15 on January 1, 2018. The adoption of ASU 2016-15 did not have a material impact on our consolidated financial statements.

Accounting Standards Update 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost--In March 2017, the FASB issued ASU 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which changes the presentation of net periodic benefit cost related to employer sponsored defined benefit plans and other postretirement benefits. Under ASU 2017-07, service costs will be included within the same income statement line item as other compensation costs arising from services rendered by pertinent employees during the period. The other components of net periodic benefit pension cost will be presented separately outside of income from operations. Additionally, only

A. Basis of Financial Statement Preparation (continued)

the service cost component of the net periodic benefit cost may be capitalized in assets. The amendments under ASU 2017-07 also provide a practical expedient that permits the use of amounts disclosed in its pension and other postretirement benefit plan note for prior year comparative periods as the estimation basis for applying the guidance retrospectively. The Company adopted ASU 2017-07 on January 1, 2018 and chose to use the practical expedient provided when applying the guidance retrospectively. Upon adoption, service costs are recognized in our financial statements as general and administrative expenses while the remaining components of net periodic benefit cost are recognized as other income (expense). Pension expense of $347 for the first three months of 2017 has been reclassified from general and administrative expense to other income (expense).

Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606)--In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which replaces all current U.S. GAAP guidance on revenue recognition and eliminates all industry-specific guidance.

The Company adopted ASU 2014-09 and applied it to all contracts that were not completed using the modified retrospective method for those contracts that were not completed as of adoption. The cumulative effect of applying the guidance in ASU 2014-09 to contracts that were not yet completed as of January 1, 2018 was not material. Further, the adoption of ASU 2014-09 will not have a significant impact on the amount or timing of revenue recognition. Therefore, we have not disclosed the amount by which each financial statement line item is affected in the current period as a result of applying ASU 2014-09 or an explanation of significant changes between our results as reported and those that would have been reported under legacy GAAP as no significant changes were identified.

Accounting Standards Not Yet Adopted

Accounting Standards Update 2016-02, Leases (Topic 842)--In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 establishes a comprehensive new lease accounting model. The new standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and, (c) causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than twelve months. The new standard is effective for interim and annual periods beginning after December 15, 2018, which for Davey Tree would be January 1, 2019. Early adoption is permitted. The new standard requires a modified retrospective transition for capital or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it does not require transition accounting for leases that expire prior to the date of initial application. The Company plans to adopt ASU 2016-02 on January 1, 2019. Management has assembled a project team and is in the process of gathering information to evaluate real estate, personal property and other arrangements that may meet the definition of a lease and has purchased a technology solution to assist with the management of leases. Management expects that the adoption of ASU 2016-02 will have a material impact on the Company's consolidated financial statements.

Accounting Standards Update 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220)--In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220)." ASU 2018-02 provides an option to reclassify the stranded tax effects within accumulated other comprehensive income to retained earnings as a result of the Tax Cuts and Jobs Act of 2017. This standard is effective for interim and annual reporting periods beginning after December 15, 2018, which for Davey Tree would be January 1, 2019. Early adoption is permitted. Management has not yet completed its assessment of the impact of the new standard on the Company's consolidated financial statements.

XML

Seasonality of Business

3 Months Ended

Mar. 31, 2018

Quarterly Financial Information Disclosure [Abstract]

Quarterly financial information, explanatory disclosure

Seasonality of Business

Due to the seasonality of our business, our operating results for the three months endedMarch 31, 2018 are not indicative of results that may be expected for any other interim period or for the year ending December 31, 2018. Business seasonality traditionally results in higher revenues during the second and third quarters as compared with the first and fourth quarters of the year, while the methods of accounting for fixed costs, such as depreciation expense, amortization, rent and interest expense, are not significantly impacted by business seasonality.

XML

Accounts Receivable, Net and Supplemental Balance-Sheet Information

3 Months Ended

Mar. 31, 2018

Accounts Receivable, Net and Supplemental Balance-Sheet Information [Abstract] [Abstract]

Accounts receivable net and supplemental balance-sheet information [Text Block]

Accounts Receivable, Net and Supplemental Balance-Sheet Information

Accounts receivable, net, consisted of the following:

Accounts receivable, net	March 31, 2018		December 31, 2017
Accounts receivable	$	110,712	$	143,244
Receivables under contractual arrangements	51,852		29,895
	162,564		173,139
Less allowances for doubtful accounts	4,486		4,468
Accounts receivable, net	$	158,078	$	168,671

Receivables under contractual arrangements consist of work-in-process in accordance with the terms of contracts, primarily with utility services customers.

The following items comprise the amounts included in the balance sheets:

Other current assets	March 31, 2018		December 31, 2017
Refundable income taxes	$	1,229	$	587
Prepaid expense	13,735		15,893
Other	189		784
Total	$	15,153	$	17,264

Accrued expenses	March 31, 2018		December 31, 2017
Employee compensation	$	12,010	$	20,794
Accrued compensated absences	9,590		9,267
Self-insured medical claims	4,447		3,193
Income tax payable	623		3,443
Customer advances, deposits	72		1,672
Taxes, other than income	3,662		2,279
Other	1,908		2,168
Total	$	32,312	$	42,816

C. Accounts Receivable, Net and Supplemental Balance-Sheet Information (continued)

Other current liabilities	March 31, 2018		December 31, 2017
Note Payable	$	—	$	149
Current portion of:
Long-term debt	13,155		16,817
Self-insurance accruals	23,846		23,782
Total	$	37,001	$	40,748

XML

Business Combinations (Notes)

3 Months Ended

Mar. 31, 2018

Business Combinations [Abstract]

Business Combinations

Business Combinations

Our investment in businesses during the first three months of 2018 was $86, with liabilities assumed of $86 and no debt issued. Measurement-period adjustments are not complete. The measurement period for purchase price allocations ends as soon as information of the facts and circumstances becomes available, but does not exceed one year from the acquisition date. During the three months endedApril 1, 2017, our investment in businesses was $10,877, including liabilities assumed of $1,076 and $3,099 of debt issued.

The results of operations of acquired businesses have been included in the consolidated statements of operations beginning as of the effective dates of acquisition. The effect of these acquisitions on our consolidated revenues and results of operations for the period ending March 31, 2018 was not significant. Pro forma net sales and results of operations for the acquisition had it occurred at the beginning of the three months endedMarch 31, 2018 are not material and, accordingly, are not provided.

Investments in Businesses Subsequent to March 31, 2018--Subsequent to March 31, 2018 and throughout the end of April 2018, we made investments in businesses approximating $3,300.

XML

Identified Intangible Assets and Goodwill, Net

3 Months Ended

Mar. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Identified intangible assets and goodwill, net [Text Block]

Identified Intangible Assets and Goodwill, Net

The carrying amounts of the identified intangibles and goodwill acquired in connection with our historical investments in businesses were as follows:

	March 31, 2018				December 31, 2017
Identified Intangible Assets and Goodwill, Net	Carrying Amount		Accumulated Amortization		Carrying Amount		Accumulated Amortization
Amortized intangible assets:
Customer lists/relationships	$	21,972	$	17,186	$	21,487	$	16,846
Employment-related	7,332		6,691		7,333		6,624
Tradenames	5,978		5,193		5,978		5,134
Amortized intangible assets	35,282		$	29,070	34,798		$	28,604
Less accumulated amortization	29,070				28,604
Identified intangibles, net	6,212				6,194
Unamortized intangible assets:
Goodwill	35,163				35,477
	$	41,375			$	41,671

The changes in the carrying amounts of goodwill, by segment, for the three months endedMarch 31, 2018 follow:

	Balance at January 1, 2018		Acquisitions		Translation and Other Adjustments			Balance at March 31, 2018
Utility	$	3,424	$	—	$	—		$	3,424
Residential and Commercial	32,053		—		(314		)	31,739
Total	$	35,477	$	—	$	(314	)	$	35,163

In the first quarter of 2018, the Company finalized all purchase accounting adjustments related to the Arborguard acquisition. The Company has recorded fair value adjustments based on new information obtained during the measurement period primarily related to customer lists, and deferred taxes. These adjustments have resulted in a decrease in goodwill of $298 from the Company's initial estimate. Additionally, the change to the provisional amount resulted in an increase in amortization expense of $52 and accumulated amortization of $70, of which $52 relates to the previous year.

XML

Long-Term Debt and Commitments Related to Letters of Credit

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Long-term debt and commitments related to letters of credit [Text Block]

Long-Term Debt and Commitments Related to Letters of Credit

Our long-term debt consisted of the following:

	March 31, 2018		December 31, 2017
Revolving credit facility
Swing-line borrowings	$	13,500	$	—
LIBOR borrowings	115,000		100,000
	128,500		100,000
Senior unsecured notes	18,000		18,000
Term loans	11,651		16,242
Capital leases	2,087		2,510
	160,238		136,752
Less debt issuance costs	681		725
Less current portion	13,155		16,817
	$	146,402	$	119,210

Revolving Credit Facility --As of March 31, 2018, we had a $250,000 revolving credit facility with a group of banks, which expires in October 2022 and permits borrowings, as defined, up to $250,000, including a letter of credit sublimit of $100,000 and a swing-line commitment of $25,000. Under certain circumstances, the amount available under the revolving credit facility may be increased to $325,000. The revolving credit facility contains certain affirmative and negative covenants customary for this type of facility and includes financial covenant ratios with respect to a maximum leverage ratio (not to exceed 3.00 to 1.00 with exceptions in case of material acquisitions) and a minimum interest coverage ratio (not less than 3.00 to 1.00), in each case subject to certain further restrictions as described in the Credit Agreement. As of March 31, 2018, we had unused commitments under the facility approximating$118,587, with $131,413 committed, consisting of borrowings of$128,500 and issued letters of credit of$2,913.

Borrowings outstanding bear interest, at Davey Tree’s option, of either (a) a base rate or (b) LIBOR plus a margin adjustment ranging from .875% to 1.50%--with the margin adjustments in both instances based on the Company's leverage ratio at the time of borrowing. The base rate is the greater of (i) the agent bank’s prime rate, (ii) LIBOR plus 1.50%, or (iii) the federal funds rate plus .50%. A commitment fee ranging from .10% to .225% is also required based on the average daily unborrowed commitment.

5.09% Senior Unsecured Notes--The senior unsecured notes are due July 22, 2020 and were issued during July 2010 as 5.09% Senior Unsecured Notes, Series A (the "5.09% Senior Notes"), pursuant to a Master Note Purchase Agreement (the “Purchase Agreement”) between the Company and the purchasers of the 5.09% Senior Notes.  

The 5.09% Senior Notes are equal in right of payment with our revolving credit facility and all other senior unsecured obligations of the Company. Interest is payable semiannually and five equal, annual principal payments commenced on July 22, 2016 (thesixth anniversary of issuance).  The Purchase Agreement contains customary events of default and covenants related to limitations on indebtedness and transactions with affiliates and the maintenance of certain financial ratios.

F. Long-Term Debt and Commitments Related to Letters of Credit (continued)

Accounts Receivable Securitization Facility--In May 2017, the Company amended its Accounts Receivable Securitization Facility (the "AR Securitization program") to extend the scheduled termination date for an additional one-year period, to May 8, 2018 and increase the limit of the facility from $60,000 to $100,000.

As of March 31, 2018, we had issued letters of credit of $58,150 under the terms of the AR securitization program.

Under the AR securitization program, Davey Tree transfers by selling or contributing current and future trade receivables to a wholly-owned, bankruptcy-remote financing subsidiary which pledges a perfected first priority security interest in the trade receivables--equal to the issued letters of credit ("LCs") as of March 31, 2018--to the bank in exchange for the bank issuing LCs.

Fees payable to the bank include: (a) an LC issuance fee, payable on each settlement date, in the amount of .90% per annum on the aggregate amount of all LCs outstanding plus outstanding reimbursement obligations (e.g., arising from drawn LCs), if any, and (b) an unused LC fee, payable monthly, equal to (i) .35% per annum for each day on which the sum of the total LCs outstanding plus any outstanding reimbursement obligations is greater than or equal to 50% of the facility limit and (ii) .45% per annum for each day on which the sum of the total LCs outstanding plus any outstanding reimbursement obligations is less than 50% of the facility limit. If an LC is drawn and the bank is not immediately reimbursed in full for the drawn amount, any outstanding reimbursement obligation will accrue interest at a per annum rate equal to a reserve-adjusted LIBOR or, in certain circumstances, a base rate equal to the higher of (i) the bank’s prime rate and (ii) the federal funds rate plus .50% and, following any default, 2.00% plus the greater of (a) adjusted LIBOR and (b) a base rate equal to the higher of (i) the bank’s prime rate and (ii) the federal funds rate plus .50%.

The agreements underlying the AR securitization program contain various customary representations and warranties, covenants, and default provisions which provide for the termination and acceleration of the commitments under the AR securitization program in circumstances including, but not limited to, failure to make payments when due, breach of a representation, warranty or covenant, certain insolvency events or failure to maintain the security interest in the trade receivables, and defaults under other material indebtedness.

Total Commitments Related to Issued Letters of Credit--As of March 31, 2018 and December 31, 2017, total commitments related to issued letters of credit were $63,067, of which $2,913 were issued under the revolving credit facility, $58,150 were issued under the AR securitization program, and $2,004 were issued under short-term lines of credit.

XML

Stock-Based Compensation

3 Months Ended

Mar. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-based compensation[Text Block]

Stock-Based Compensation

Our shareholders approved the 2014 Omnibus Stock Plan (the “2014 Stock Plan”) at our annual meeting of shareholders on May 20, 2014. The 2014 Stock Plan replaced the expired 2004 Omnibus Stock Plan (the “2004 plan”) previously approved by the shareholders in 2004. The 2014 Stock Plan is administered by the Compensation Committee of the Board of Directors and has a term of ten years. All directors of the Company and employees of the Company and its subsidiaries are eligible to participate in the 2014 Stock Plan. The 2014 Stock Plan (similar to the 2004 plan) continues the maintenance of the Employee Stock Purchase Plan, as well as provisions for the grant of stock options and other stock-based incentives. The 2014 Stock Plan provides for the grant of five percent of the number of the Company’s common shares outstanding as of the first day of each fiscal year plus the number of common shares that were available for grant of awards, but not granted, in prior years. In no event, however, may the number of common shares available for the grant of awards in any fiscal year exceed ten percent of the common shares outstanding as of the first day of that fiscal year. Common shares subject to an

G. Stock-Based Compensation (continued)

award that is forfeited, terminated, or canceled without having been exercised are generally added back to the number of shares available for grant under the 2014 Stock Plan.

Stock-based compensation expense under all share-based payment plans -- our Employee Stock Purchase Plan, stock option plans, stock-settled stock appreciation rights and restricted stock units -- included in the results of operations follows:

	Three Months Ended
	March 31, 2018		April 1, 2017
Compensation expense, all share-based payment plans	$	1,024	$	986

Stock-based compensation consisted of the following:

Employee Stock Purchase Plan--Under the Employee Stock Purchase Plan, all full-time employees with one year of service are eligible to purchase, through payroll deduction, common shares. Employee purchases under the Employee Stock Purchase Plan are at 85% of the fair market value of the common shares--a 15% discount. We recognize compensation costs as payroll deductions are made. The 15% discount of total shares purchased under the plan resulted in compensation cost of $257 being recognized for the three months endedMarch 31, 2018 and $219for the three months endedApril 1, 2017.

Stock Option Plans--The stock options outstanding were awarded under a graded vesting schedule, measured at fair value, and have a term of ten years. Compensation costs for stock options are recognized over the requisite service period on the straight-line recognition method. Compensation cost recognized for stock options was $182 for the three months endedMarch 31, 2018 and $201 for the three months endedApril 1, 2017.

Stock-Settled Stock Appreciation Rights--During the three months endedMarch 31, 2018, the Compensation Committee awarded 121,243 stock-settled stock appreciation rights (“SSARs”) to certain management employees, which vest ratably over five years. A SSAR is an award that allows the recipient to receive common shares equal to the appreciation in the fair market value of our common shares between the date the award was granted and the conversion date of the shares vested.

G. Stock-Based Compensation (continued)

The following table summarizes our SSARs as of March 31, 2018.

Stock-Settled Stock Appreciation Rights	Number of Rights		Weighted- Average Award Date Value		Weighted- Average Remaining Contractual Life	Unrecognized Compensation Cost		Aggregate Intrinsic Value
Unvested, January 1, 2018	448,180		$	3.10
Granted	121,243		3.84
Forfeited	—		—
Vested	(140,340	)	3.00
Unvested, March 31, 2018	429,083		$	3.34	2.8 years	$	1,304	$	8,195

Compensation costs for SSARs are determined using a fair-value method and amortized over the requisite service period. Compensation expense for SSARs was $160 for the three months endedMarch 31, 2018 and $244 for the three months endedApril 1, 2017.

Restricted Stock Units--During the three months endedMarch 31, 2018, the Compensation Committee awarded 31,738 performance-based restricted stock units ("PRSUs") to certain management employees. The Compensation Committee made similar awards in prior periods. The awards vest over specified periods. The following table summarizes restricted stock units ("RSUs") as of March 31, 2018.

Restricted Stock Units	Number of Stock Units		Weighted- Average Grant Date Value		Weighted- Average Remaining Contractual Life	Unrecognized Compensation Cost		Aggregate Intrinsic Value
Unvested, January 1, 2018	290,666		$	14.41
Granted	31,738		18.46
Forfeited	—		—
Vested	(60,580	)	11.96
Unvested, March 31, 2018	261,824		$	15.46	2.5 years	$	2,224	$	5,001
Employee PRSUs	224,400		$	15.40	2.9 years	$	1,983	$	4,286
Nonemployee Director RSUs	37,424		$	15.85	1.2 years	$	241	$	715

Compensation cost for restricted stock awards is determined using a fair-value method and amortized on the straight-line recognition method over the requisite service period. Compensation expense on restricted stock awards totaled $425 for the three months endedMarch 31, 2018 and $322 for the three months endedApril 1, 2017.

We estimated the fair value of each stock-based award on the date of grant using a binomial option-pricing model. The binomial model considers a range of assumptions related to volatility, risk-free interest rate and employee

G. Stock-Based Compensation (continued)

exercise behavior. Expected volatilities utilized in the binomial model are based on historical volatility of our stock prices and other factors. Similarly, the dividend yield is based on historical experience and expected future changes. The binomial model also incorporates exercise assumptions based on an analysis of historical data. The expected life of the stock-based awards is derived from the output of the binomial model and represents the period of time that awards granted are expected to be outstanding.

The fair values of stock-based awards granted were estimated at the dates of grant with the following weighted-average assumption.

	Three Months Ended
	March 31, 2018		April 1, 2017
Volatility rate	10.1	%	10.3	%
Risk-free interest rate	2.5	%	2.3	%
Expected dividend yield	.7	%	.7	%
Expected life of awards (years)	9.0		8.5

General Stock Option Information--The following table summarizes activity under the stock option plans for the three months endedMarch 31, 2018.

Stock Options	Number of Options Outstanding		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding, January 1, 2018	1,528,615		$	13.05
Granted	—		—
Exercised	(7,300	)	14.50
Forfeited	(8,000	)	11.03
Outstanding, March 31, 2018	1,513,315		$	13.05	6.0 years	$	9,156
Exercisable, March 31, 2018	786,815		$	11.12	4.6 years	$	6,279

As of March 31, 2018, there was approximately $1,353 of unrecognized compensation cost related to stock options outstanding. The cost is expected to be recognized over a weighted-average period of 2.1 years. “Intrinsic value” is defined as the amount by which the market price of a common share exceeds the exercise price of an option. 

Common shares are issued from treasury upon the exercise of stock options, SSARs, restricted stock units or purchases under the Employee Stock Purchase Plan.

XML

Net Periodic Benefit Expense - Defined Benefit Pension Plans

3 Months Ended

Mar. 31, 2018

Defined Benefit Plan, Net Periodic Benefit Cost [Abstract]

Net periodic benefit expense--defined benefit pension plans [Text Block]

Net Periodic Benefit Expense--Defined Benefit Pension Plans

The results of operations included the following net periodic benefit expense (income) recognized related to our defined-benefit pension plans.

	Three Months Ended
	March 31, 2018			April 1, 2017
Components of pension expense (income)
Service costs--increase in benefit obligation earned	$	100		$	133
Interest cost on projected benefit obligation	180			263
Expected return on plan assets	(58		)	(169		)
Amortization of net actuarial loss	182			237
Amortization of prior service cost	16			16
Net pension expense of defined benefit pension plans	$	420		$	480

The components of net periodic benefit expense other than the service cost component are included in the line item other income (expense) in the income statement.

XML

Income Taxes

3 Months Ended

Mar. 31, 2018

Income Tax Disclosure [Abstract]

Income taxes [Text Block]

Income Taxes

Our income tax provision for interim periods is determined using an estimate of our annual effective tax rate adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate and, if our estimated annual tax rate changes, we make a cumulative adjustment. The effective tax rate for the three months endedMarch 31, 2018 is estimated to approximate 23.4%.  Our effective tax rate for the three months endedApril 1, 2017 was estimated at 38.5%. The change in rate is primarily due to the Tax Cuts and Jobs Act (the “Tax Reform Act”), that was signed into law on December 22, 2017 by the President of the United States, which reduces the federal income tax rate for 2018 and beyond from 35% to 21%.

As a result of the Tax Reform Act, the Company estimated a tax liability of $6,100 due to the transition toll tax on the deemed repatriation of deferred foreign earnings of non-U.S. operations, which the Company believes will be fully offset by foreign tax credits. The final amounts recorded in subsequent financial statements may differ from these provisional amounts due to, among other things, additional analysis related to foreign deferred earnings, changes in interpretations of the Tax Reform Act and related assumptions of the Company and additional regulatory guidance that may be issued.

On December 22, 2017, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin 118 (“SAB 118”). This guidance allows registrants a “measurement period”, not to exceed one year from the date of enactment, to complete their accounting for the tax effects of the Tax Reform Act. SAB 118 further directs that during the measurement period, registrants who are able to make reasonable estimates for the tax effects of the Tax Reform Act should include those amounts in their financial statements as “provisional” amounts. Registrants should reflect adjustments over subsequent periods as they are able to refine their estimates and complete their accounting for the tax effects of the Tax Reform Act. The provisional amounts computed by the Company are

I. Income Taxes (continued)

expected to be finalized when the U.S. corporate income tax return for 2017 is filed in 2018, but in no event later than one year from the enactment date.

At December 31, 2017, we had unrecognized tax benefits of $2,581, of which $1,948 would affect our effective rate if recognized, and accrued interest expense related to unrecognized benefits of $128. At March 31, 2018, there were no significant changes in the unrecognized tax benefits, including the amount that would affect our effective rate if recognized, or the accrued interest expense related to the unrecognized benefits. Unrecognized tax benefits are the differences between a tax position taken, or expected to be taken in a tax return, and the benefit recognized for financial reporting purposes.

The Company is routinely under audit by federal, state, local and Canadian authorities in the area of income tax. These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions. During the fourth quarter 2017, the U.S. Internal Revenue Service initiated an audit of the Company's U.S. income tax returns for 2015. With the exception of U.S. state jurisdictions, the Company is no longer subject to examination by tax authorities for the years through 2013. As of March 31, 2018, we believe it is reasonably possible that the total amount of unrecognized tax benefits will not significantly increase or decrease.

XML

Accumulated Other Comprehensive Income (Loss)

3 Months Ended

Mar. 31, 2018

Equity [Abstract]

Accumulated other comprehensive income (loss) [Text Block]

Accumulated Other Comprehensive Income (Loss)

Comprehensive income (or loss) is comprised of net income (or net loss) and other components, including currency translation adjustments and defined-benefit pension plan adjustments.

The following summarizes the components of other comprehensive income (loss) accumulated in shareholders’ equity for the three months endedMarch 31, 2018 and three months endedApril 1, 2017:

	Foreign Currency Translation Adjustments			Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2018	$	(3,305	)	$	(5,088	)	$	(8,393	)
Other comprehensive income (loss) before reclassifications
Unrealized losses	$	(832	)	$	—		$	(832	)
Amounts reclassified from accumulated other comprehensive income (loss)	—			198			198
Tax effect	—			(52		)	(52		)
Net of tax amount	(832		)	146			(686		)
Balance at March 31, 2018	$	(4,137	)	$	(4,942	)	$	(9,079	)

	Foreign Currency Translation Adjustments			Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2017	$	(5,500	)	$	(6,662	)	$	(12,162	)
Other comprehensive income (loss) before reclassifications
Unrealized gains	$	322		$	—		$	322
Amounts reclassified from accumulated other comprehensive income (loss)	—			253			253
Tax effect	—			(96		)	(96		)
Net of tax amount	322			157			479
Balance at April 1, 2017	$	(5,178	)	$	(6,505	)	$	(11,683	)

The change in defined benefit pension plans of $198 for the three months endedMarch 31, 2018 and the $253 for the three months endedApril 1, 2017 is included in net periodic pension expense classified in the condensed statement of operations as general and administrative or other income (expense).

XML

Per Share Amounts and Common Shares Outstanding

3 Months Ended

Mar. 31, 2018

Equity [Abstract]

Per share amounts and common shares outstanding [Text Block]

Per Share Amounts and Common and Redeemable Shares Outstanding

We calculate our basic earnings per share by dividing net income or net loss by the weighted average number of common shares outstanding during the period. Diluted earnings per share are calculated in a similar manner, but include the effect of dilutive securities. To the extent these securities are antidilutive, they are excluded from the calculation of earnings per share. The per share amounts were computed as follows:

	Three Months Ended
	March 31, 2018			April 1, 2017
Income available to common shareholders:
Net loss	$	(6,627	)	$	(3,887	)
Weighted-average shares:
Basic:
Outstanding	25,229			24,967
Partially-paid share subscriptions	189			208
Basic weighted-average shares	25,418			25,175
Diluted:
Basic from above	25,418			25,175
Incremental shares from assumed:
Exercise of stock subscription purchase rights	146			145
Exercise of stock options and awards	912			896
Diluted weighted-average shares	26,476			26,216
Net loss per share--basic and diluted	$	(.26	)	$	(.15	)

K. Per Share Amounts and Common and Redeemable Shares Outstanding (continued)

Common and Redeemable Shares Outstanding--A summary of the activity of the common and redeemable shares outstanding for the three months endedMarch 31, 2018 follows:

	Common Shares		Redeemable
	Net of Treasury Shares		Shares		Total
Shares outstanding at January 1, 2018	17,753,832		6,467,027		24,220,859
Shares purchased	(261,959	)	(39,105	)	(301,064	)
Shares sold	—		217,325		217,325
Stock subscription offering -- cash purchases	12,670		—		12,670
Options and awards exercised	12,649		—		12,649
Shares outstanding at March 31, 2018	17,517,192		6,645,247		24,162,439

On March 31, 2018, we had 24,162,439 common and redeemable shares outstanding, employee options exercisable to purchase 786,815 common shares, partially-paid subscriptions for 757,040 common shares and purchase rights outstanding for 302,797 common shares.

Stock Subscription Offering--Beginning May 2012, the Company offered to eligible employees and nonemployee directors the right to subscribe to common shares of the Company at $9.85 per share in accordance with the provisions of The Davey Tree Expert Company 2004 Omnibus Stock Plan and the rules of the Compensation Committee of the Company's Board of Directors (collectively, the "plan"). The offering period ended on August 1, 2012 and resulted in the subscription of 1,275,428 common shares for $12,563 at $9.85 per share.

Under the plan, a participant in the offering purchasing common shares for an aggregate purchase price of less than $5 had to pay with cash. All participants (excluding Company directors and officers) purchasing $5 or more of the common shares had an option to finance their purchase through a down-payment of at least 10% of the total purchase price and a seven-year promissory note for the balance due with interest at 2%. Payments on the promissory note can be made either by payroll deductions or annual lump-sum payments of both principal and interest.

Common shares purchased under the plan have been pledged as security for the payment of the promissory note and the common shares will not be issued until the promissory note is paid-in-full. Dividends will be paid on all subscribed shares, subject to forfeiture to the extent that payment is not ultimately made for the shares.

All participants in the offering purchasing in excess of $5 of common shares were granted a "right" to purchase one additional common share at a price of $9.85 per share for every three common shares purchased under the plan. As a result of the stock subscription, employees were granted rights to purchase 423,600 common shares. Each right may be exercised at the rate of one-seventh per year and will expire seven years after the date that the right was granted. Employees may not exercise a right should they cease to be employed by the Company.

XML

Operations by Business Segment

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Operations by business segment [Text Block]

Operations by Business Segment

We provide a wide range of arboricultural, horticultural, environmental and consulting services to residential, utility, commercial and government entities throughout the United States and Canada. We have two reportable operating segments organized by type or class of customer: Residential and Commercial, and Utility.

Residential and Commercial--Residential and Commercial provides services to our residential and commercial customers including: the treatment, preservation, maintenance, removal and planting of trees, shrubs and other plant life; the practice of landscaping, grounds maintenance, tree surgery, tree feeding and tree spraying; the application of fertilizer, herbicides and insecticides; and, natural resource management and consulting, forestry research and development, and environmental planning.

Utility--Utility is principally engaged in providing services to our utility customers--investor-owned, municipal utilities, and rural electric cooperatives--including: the practice of line-clearing and vegetation management around power lines, rights-of-way and chemical brush control; and, natural resource management and consulting, forestry research and development, and environmental planning.

All other operating activities, including research, technical support and laboratory diagnostic facilities, are included in “All Other.”

Measurement of Segment Profit and Loss and Segment Assets--We evaluate performance and allocate resources based primarily on operating income and also actively manage business unit operating assets. Segment information, including reconciling adjustments, is presented consistent with the basis described in our 2017 Annual Report.    

L. Operations by Business Segment (continued)

Segment information reconciled to consolidated external reporting information follows:

	Utility		Residential and Commercial			All Other			Reconciling Adjustments				Consolidated
Three Months Ended March 31, 2018
Revenues	$	118,687	$	89,345		$	619		$	—			$	208,651
Income (loss) from operations	1,814		(3,105		)	(3,792		)	(583		)	(a)	(5,666		)
Interest expense									(1,401		)		(1,401		)
Interest income									78				78
Other income (expense), net									(1,662		)		(1,662		)
Loss before income taxes													$	(8,651	)
Segment assets, total	$	200,201	$	188,789		$	—		$	85,210		(b)	$	474,200
Three Months Ended April 1, 2017
Revenues	$	112,478	$	79,587		$	748		$	—			$	192,813
Income (loss) from operations	2,658		(3,582		)	(2,228		)	(843		)	(a)	(3,995		)
Interest expense									(1,257		)		(1,257		)
Interest income									70				70
Other income (expense), net									(1,139		)		(1,139		)
Loss before income taxes													$	(6,321	)
Segment assets, total	$	176,504	$	171,777		$	—		$	99,808		(b)	$	448,089

Reconciling adjustments from segment reporting to consolidated external financial reporting include unallocated corporate items:

(a) Reclassification of depreciation expense and allocation of corporate expenses.

(b) Corporate assets include cash, prepaid expenses, corporate facilities, enterprise-wide information systems and other nonoperating assets

XML

Revenue Recognition (Notes)

3 Months Ended

Mar. 31, 2018

Revenue Recognition [Abstract]

Revenue from contract from customer [Text Block]

Revenue Recognition

We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which we adopted on January 1, 2018, using the modified retrospective method. See Note A for further discussion of the adoption, including the impact on our 2018 financial statements.

Nature of Performance Obligations and Significant Judgments

At contract inception, the company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promised good or service (or bundle of goods and services) that is distinct. To identify the performance obligations, the company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. A description of our performance obligations is included below.

• Residential and Commercial Services - We provide a wide array of services for our residential and commercial customers including the treatment, preservation, maintenance, removal and planting of trees, shrubs and other plant life, landscaping, grounds maintenance, the application of fertilizer, herbicides and insecticides, natural resource management and consulting, forestry research and development, and environmental planning. A contract with a customer may include only one of these services, all of these services, or a combination of these services. For contracts in which we provide all, or a combination of these services, we believe that the nature of our promise is to provide an integrated property management service for our customer. In these contracts, the customer has effectively outsourced the care and maintenance of its property grounds to us during the duration of the contract as we are responsible for providing a continuous delivery of outsourced maintenance activities over the contract term. As such, for contracts that contain a combination of services, we have concluded that we have a single performance obligation, which is accounted for as a series of distinct services.

• Utility Services - We provide a suite of vegetation management or arboricultural services to our utility customers (investor-owned, municipal utilities, and rural electric cooperatives) including the practice of line-clearing and vegetation management around power lines and rights-of-way, chemical brush control, natural resource management and consulting, forestry research and development, and environmental planning. A contract with a customer may include only one of these services, all of these services, or a combination of these services. For contracts in which we provide all, or a combination of these services, we believe that the nature of our promise is to provide an integrated overall vegetation management service to prevent and mitigate damages to power lines from vegetation growth and encroachment, rather than the performance of discrete activities or services for the customer. As such, for contracts that contain a combination of services, we have concluded that we have a single performance obligation, which is accounted for as a series of distinct services.

Our contracts with our customers generally originate upon the completion of a quote for services for residential and commercial customers or the receipt of a purchase order (or similar work order) for utility customers. In some cases, our contracts are governed by master services agreements, in which case our contract under ASC 606 consists of the combination of the master services agreement and the quote/purchase order. Many of our contracts have a stated duration of one year or less or contain termination clauses that allow the customer to cancel the contract after a specified notice period, which is typically less than 90 days. Due to the fact that many of our arrangements allow the customer to terminate for convenience, the duration of the contract for revenue recognition purposes generally does not extend beyond the services that we have actually transferred. As a result, many of our contracts are, in effect, day-to-day or month-to-month contracts.

M. Revenue Recognition (continued)

Revenue from our residential, commercial, and utility performance obligations is recognized over time as the customer simultaneously receives and consumes the benefits of our services as we perform. Many of our contracts compensate us based on an agreed upon price for each increment of service provided to the customer. Therefore, revenue is mainly recognized as each increment of service is provided to the customer at the amount that we are contractually entitled to. For contracts that contain a fixed price, we generally use a units-delivered based output method to measure progress. Revenue from our consulting services is also recognized over time and we use a cost-based input method to measure progress. Payment for our services is generally due within 30 days of such services being provided to the customer.

The transaction price for our contracts is determined upon establishment of the contract that contains the final terms of the sale, including the description, quantity, and price of each service purchased. Certain of our contracts contain variable consideration, including index-based pricing, chargebacks, and prompt payment discounts. The Company estimates variable consideration and performs a constraint analysis for these contracts on the basis of both historical information and current trends. However, these types of variable consideration do not have a material effect on the Company’s revenue, either individually or in the aggregate. In addition, although our contracts generally include fixed pricing for each increment of service, the ultimate quantity of services that will be required in order to fulfill our performance obligations is unknown at contract inception. Therefore, our total transaction price ultimately varies based on the quantity and types of services provided to our customer. However, this type of variable consideration is allocated entirely to the distinct services within the series to which it relates.

Disaggregation of Revenue

The following table disaggregates our revenue for the three months ended March 31, 2018 by major sources:

	Utility		Residential and Commercial		All Other		Consolidated
Type of service:
Tree and plant care	$	86,316	$	56,397	$	15	$	142,728
Grounds maintenance	—		22,802		—		22,802
Storm damage services	3,214		899		—		4,113
Consulting and other	29,157		9,247		604		39,008
Total revenues	$	118,687	$	89,345	$	619	$	208,651
Geography:
United States	$	110,453	$	82,478	$	619	$	193,550
Canada	8,234		6,867		—		15,101
Total revenues	$	118,687	$	89,345	$	619	$	208,651

M. Revenue Recognition (continued)

Contract Balances

Our contract liabilities consist of advance payments and billings in excess of costs incurred and deferred revenue. For the three months ended March 31, 2018, the Company has recognized $568 of revenue that was included in the contract liability balance at the beginning of the period. Net contract liabilities consisted of the following:

	March 31, 2018		December 31, 2017
Contract liabilities - current	$	3,989	$	2,072
Contract liabilities - noncurrent	2,042		2,020
Net contract liabilities	$	6,031	$	4,092

Practical Expedients & Accounting Policy Elections

• Remaining performance obligations - The Company’s contracts for service revenue have an original duration of one year or less. Therefore, because of the short duration of these contracts, the Company has not disclosed the transaction price for the future performance obligations as of the end of each reporting period or when the Company expects to recognize this revenue.

• Incremental costs of obtaining a contract - The Company’s contracts for service revenue have an original duration of one year or less. Therefore, the Company has elected to expense these costs as incurred.

• Right to invoice - For the Company’s contracts in which it has the right to invoice the customer on the basis of actual work performed (i.e., output), the Company has elected to measure the satisfaction of performance obligation(s) on the basis of actual work performed, as the invoiced amount directly corresponds to the value transferred to the customer.

• Sales taxes - The Company has, as an accounting policy election, decided to exclude from the measurement of the transaction price all sales taxes assessed by a governmental authority.

• Significant financing component - The Company’s contracts do not allow for payment terms which exceed one year, and thus need not account for the effects of a significant financing component.

XML

Fair Value Measurements and Financial Instruments

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Fair value measurements and financial instruments

Fair Value Measurements and Financial Instruments

Financial Accounting Standards Board Accounting Standard Codification 820, “Fair Value of Measurements and Disclosures (“Topic 820”)” defines fair value based on the price that would be received to sell an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers or sellers in the principal or most advantageous market for the asset or liability that are independent of the reporting entity, knowledgeable and able and willing to transact for the asset or liability.

N. Fair Value Measurements and Financial Instruments (continued)

Valuation Hierarchy--Topic 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value. The hierarchy prioritizes the inputs into three broad levels:

Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2 inputs are observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.

Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Our assets and liabilities measured at fair value on a recurring basis at March 31, 2018 were as follows:

			Fair Value Measurements at March 31, 2018 Using:
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	Total Carrying Value at March 31, 2018		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Assets invested for self-insurance, classified as other assets, noncurrent	$	20,905	$	20,905	$	—	$	—
Liabilities:
Deferred compensation	$	2,318	$	—	$	2,318	$	—

N. Fair Value Measurements and Financial Instruments (continued)

Our assets and liabilities measured at fair value on a recurring basis at December 31, 2017 were as follows:

			Fair Value Measurements at December 31, 2017 Using:
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	Total Carrying Value at December 31, 2017		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Assets invested for self-insurance, classified as other assets, noncurrent	$	19,422	$	19,422	$	—	$	—
Liabilities:
Deferred compensation	$	2,146	$	—	$	2,146	$	—

The assets invested for self-insurance are money market funds--classified as Level 1--based on quoted market prices of the identical underlying securities in active markets. The estimated fair value of the deferred compensation--classified as Level 2--is based on the value of the Company's common shares, determined by independent valuation.

Fair Value of Financial Instruments--The fair values of our current financial assets and current liabilities, including cash, accounts receivable, accounts payable, and accrued expenses, among others, approximate their reported carrying values because of their short-term nature. Financial instruments classified as noncurrent liabilities and their carrying values and fair values were as follows:

	March 31, 2018				December 31, 2017
	Carrying Value		Fair Value		Carrying Value		Fair Value
Revolving credit facility, noncurrent	$	128,500	$	128,500	$	100,000	$	100,000
Senior unsecured notes	12,000		12,291		12,000		12,389
Term loans, noncurrent	6,583		7,545		7,935		10,038
Total	$	147,083	$	148,336	$	119,935	$	122,427

The carrying value of our revolving credit facility approximates fair value--classified as Level 2--as the interest rates on the amounts outstanding are variable. The fair value of our senior unsecured notes and term loans--classified as Level 2--is determined based on expected future weighted-average interest rates with the same remaining maturities.

Market Risk--In the normal course of business, we are exposed to market risk related to changes in foreign currency exchange rates, changes in interest rates and changes in fuel prices. We do not hold or issue derivative financial instruments for trading or speculative purposes. In prior years, we have used derivative financial

N. Fair Value Measurements and Financial Instruments (continued)

instruments to manage risk, in part, associated with changes in interest rates and changes in fuel prices. Presently, we are not engaged in any hedging or derivative activities.

XML

Contingencies

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Contingencies [Text Block]

Contingencies

We are party to a number of lawsuits, threatened lawsuits and other claims arising out of the normal course of business. On a quarterly basis, we assess our liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that we will incur a loss and the amount of the loss can be reasonably estimated, we record a liability in our consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of the loss is not estimable, we do not accrue legal reserves, consistent with applicable accounting guidance. Based on information currently available to us, advice of counsel, and available insurance coverage, we believe that our established reserves are adequate and the liabilities arising from the legal proceedings will not have a material adverse effect on our consolidated financial condition. We note, however, that in light of the inherent uncertainty in legal proceedings there can be no assurance that the ultimate resolution of a matter will not exceed established reserves. As a result, the outcome of a particular matter or a combination of matters may be material to our results of operations for a particular period, depending upon the size of the loss or our income for that particular period.

In November 2017, a suit was filed against Davey Tree, its subsidiary, Wolf Tree, Inc., a former Davey employee, two Wolf employees, and a former Wolf employee alleging various acts of negligence and seeking compensatory and punitive damages for wrongful death and assault and battery of the plaintiff’s husband, a Wolf Tree employee in Savannah, Georgia, who was killed in August 2017. The Company has denied all liability and is vigorously defending the action. It also has retained separate counsel for three of the individual defendants, each of whom has denied all liability and also is vigorously defending the action.

XML

The Davey 401KSOP and Employee Stock Ownership Plan (Notes)

3 Months Ended

Mar. 31, 2018

The Davey 401KSOP and Employee Stock Ownership Plan [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

The Davey 401KSOP and Employee Stock Ownership Plan

On March 15, 1979, the Company consummated a plan, which transferred control of the Company to its employees. As a part of this plan, the Company initially sold 120,000 common shares (presently, 23,040,000 common shares adjusted for stock splits) to its Employee Stock Ownership Trust (“ESOT”) for $2,700. The Employee Stock Ownership Plan (“ESOP”), in conjunction with the related ESOT, provided for the grant to certain employees of ownership rights in, but not possession of, the common shares held by the trustee of the ESOT. Annual allocations of shares have been made to individual accounts established for the benefit of the participants.

Defined Contribution and Savings Plans--Most employees are eligible to participate in The Davey 401KSOP and ESOP Plan. Effective January 1, 1997, the plan commenced operations and retained the existing ESOP participant accounts and incorporated a deferred savings plan (a “401(k) plan”) feature. Participants in the 401(k) plan are allowed to make before-tax contributions, within Internal Revenue Service established limits, through payroll deductions. Effective January 1, 2009 we match, in either cash or our common shares, 100% of the first one percent and 50% of the next three percent of each participant's before-tax contribution, limited to the first four percent of the employee’s compensation deferred each year. All nonbargaining domestic employees who attained age 21 and completed one year of service are eligible to participate.

P. The Davey 401KSOP and Employee Stock Ownership Plan (continued)

Our common shares are not listed or traded on an established public trading market, and market prices are, therefore, not available. Semiannually, an independent stock valuation firm determines the fair market value of our common shares based upon our performance and financial condition. The Davey 401KSOP and ESOP Plan includes a put option for shares of the Company’s common stock distributed from the plan. Shares are distributed from the Davey 401KSOP and ESOP Plan to former participants of the plan, their beneficiaries, donees or heirs (each, a “participant”). Since our common stock is not currently traded on an established securities market, if the owners of distributed shares desire to sell their shares, the Company is required to purchase the shares at fair value for two60-day periods after distribution of the shares from the Davey 401KSOP and ESOP. The fair value of distributed shares subject to the put option totaled $3,279 and $3,843 as of March 31, 2018 and December 31, 2017, respectively. The fair value of the shares held in the Davey 401KSOP and ESOP totaled $123,645 and $119,677 as of March 31, 2018 and December 31, 2017, respectively. Due to the Company’s obligation under the put option, the distributed shares subject to the put option and the shares held in the Davey 401KSOP and ESOP (collectively referred to as 401KSOP and ESOP related shares) are recorded at fair value, classified as temporary equity in the mezzanine section of the consolidated balance sheets and totaled $126,924 and $123,520 as of March 31, 2018 and December 31, 2017, respectively. Changes in the fair value of the 401KSOP and ESOP Plan related shares are reflected in retained earnings while net share activity associated with 401KSOP and ESOP Plan related shares are first reflected in additional paid-in capital and then retained earnings if additional paid-in capital is insufficient.

XML

Basis of Financial Statement Preparation (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Basis of financial statement preparation, policy [Policy Text Block]

The condensed consolidated financial statements present the financial position, results of operations and cash flows of The Davey Tree Expert Company and its subsidiaries. When we refer to “we,” “us,” “our,” “Davey,” or “Davey Tree”, we mean The Davey Tree Expert Company and its subsidiaries, unless otherwise expressly stated or the context indicates otherwise.

We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), as codified in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), and with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. The consolidated financial statements include all adjustments which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal, recurring nature. All significant intercompany accounts and transactions have been eliminated.

Certain information and disclosures required by U.S. GAAP for complete financial statements have been omitted in accordance with the rules and regulations of the SEC. We suggest that these condensed consolidated financial statements be read in conjunction with the financial statements included in our annual report on Form 10-K for the year ended December 31, 2017 (the “2017 Annual Report”).

Use of estimates, policy [Policy Text Block]

Use of Estimates in Financial Statement Preparation--The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect reported amounts. Our consolidated financial statements include amounts that are based on management’s best estimates and judgments.  Estimates are used for, but not limited to, accounts receivable valuation, depreciable lives of fixed assets, self-insurance accruals, income taxes and revenue recognition. Actual results could differ from those estimates.

Income tax, policy [Policy Text Block]

Our income tax provision for interim periods is determined using an estimate of our annual effective tax rate adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate and, if our estimated annual tax rate changes, we make a cumulative adjustment.

Earnings per share, policy [Policy Text Block]

We calculate our basic earnings per share by dividing net income or net loss by the weighted average number of common shares outstanding during the period. Diluted earnings per share are calculated in a similar manner, but include the effect of dilutive securities. To the extent these securities are antidilutive, they are excluded from the calculation of earnings per share.

Segment reporting, policy [Policy Text Block]

Measurement of Segment Profit and Loss and Segment Assets--We evaluate performance and allocate resources based primarily on operating income and also actively manage business unit operating assets. Segment information, including reconciling adjustments, is presented consistent with the basis described in our 2017 Annual Report.

XML

Accounts Receivable, Net and Supplemental Balance-Sheet Information (Tables)

3 Months Ended

Mar. 31, 2018

Accounts Receivable, Net and Supplemental Balance-Sheet Information [Abstract] [Abstract]

Accounts receivable, net [Table Text Block]

Accounts receivable, net, consisted of the following:

Accounts receivable, net	March 31, 2018		December 31, 2017
Accounts receivable	$	110,712	$	143,244
Receivables under contractual arrangements	51,852		29,895
	162,564		173,139
Less allowances for doubtful accounts	4,486		4,468
Accounts receivable, net	$	158,078	$	168,671

Schedule of Other Current Assets [Table Text Block]

The following items comprise the amounts included in the balance sheets:

Other current assets	March 31, 2018		December 31, 2017
Refundable income taxes	$	1,229	$	587
Prepaid expense	13,735		15,893
Other	189		784
Total	$	15,153	$	17,264

Accrued expenses [Table Text Block]

Accrued expenses	March 31, 2018		December 31, 2017
Employee compensation	$	12,010	$	20,794
Accrued compensated absences	9,590		9,267
Self-insured medical claims	4,447		3,193
Income tax payable	623		3,443
Customer advances, deposits	72		1,672
Taxes, other than income	3,662		2,279
Other	1,908		2,168
Total	$	32,312	$	42,816

Other current liabilities [Table Text Block]

Other current liabilities	March 31, 2018		December 31, 2017
Note Payable	$	—	$	149
Current portion of:
Long-term debt	13,155		16,817
Self-insurance accruals	23,846		23,782
Total	$	37,001	$	40,748

XML

Identified Intangible Assets and Goodwill, Net (Tables)

3 Months Ended

Mar. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of identified intangible assets and goodwill, net [Table Text Block]

The carrying amounts of the identified intangibles and goodwill acquired in connection with our historical investments in businesses were as follows:

	March 31, 2018				December 31, 2017
Identified Intangible Assets and Goodwill, Net	Carrying Amount		Accumulated Amortization		Carrying Amount		Accumulated Amortization
Amortized intangible assets:
Customer lists/relationships	$	21,972	$	17,186	$	21,487	$	16,846
Employment-related	7,332		6,691		7,333		6,624
Tradenames	5,978		5,193		5,978		5,134
Amortized intangible assets	35,282		$	29,070	34,798		$	28,604
Less accumulated amortization	29,070				28,604
Identified intangibles, net	6,212				6,194
Unamortized intangible assets:
Goodwill	35,163				35,477
	$	41,375			$	41,671

Schedule of Goodwill [Table Text Block]

The changes in the carrying amounts of goodwill, by segment, for the three months endedMarch 31, 2018 follow:

	Balance at January 1, 2018		Acquisitions		Translation and Other Adjustments			Balance at March 31, 2018
Utility	$	3,424	$	—	$	—		$	3,424
Residential and Commercial	32,053		—		(314		)	31,739
Total	$	35,477	$	—	$	(314	)	$	35,163

XML

Long-Term Debt and Commitments Related to Letters of Credit (Tables)

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Schedule of long-term debt [Table Text Block]

Our long-term debt consisted of the following:

	March 31, 2018		December 31, 2017
Revolving credit facility
Swing-line borrowings	$	13,500	$	—
LIBOR borrowings	115,000		100,000
	128,500		100,000
Senior unsecured notes	18,000		18,000
Term loans	11,651		16,242
Capital leases	2,087		2,510
	160,238		136,752
Less debt issuance costs	681		725
Less current portion	13,155		16,817
	$	146,402	$	119,210

XML

Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of stock-based compensation expense under all share-based payment plans [Table Text Block]

Stock-based compensation expense under all share-based payment plans -- our Employee Stock Purchase Plan, stock option plans, stock-settled stock appreciation rights and restricted stock units -- included in the results of operations follows:

	Three Months Ended
	March 31, 2018		April 1, 2017
Compensation expense, all share-based payment plans	$	1,024	$	986

Schedule of share-based compensation, stock-settled stock appreciation rights award activity [Table Text Block]

The following table summarizes our SSARs as of March 31, 2018.

Stock-Settled Stock Appreciation Rights	Number of Rights		Weighted- Average Award Date Value		Weighted- Average Remaining Contractual Life	Unrecognized Compensation Cost		Aggregate Intrinsic Value
Unvested, January 1, 2018	448,180		$	3.10
Granted	121,243		3.84
Forfeited	—		—
Vested	(140,340	)	3.00
Unvested, March 31, 2018	429,083		$	3.34	2.8 years	$	1,304	$	8,195

Schedule of share-based compensation, restricted stock units award activity [Table Text Block]

The following table summarizes restricted stock units ("RSUs") as of March 31, 2018.

Restricted Stock Units	Number of Stock Units		Weighted- Average Grant Date Value		Weighted- Average Remaining Contractual Life	Unrecognized Compensation Cost		Aggregate Intrinsic Value
Unvested, January 1, 2018	290,666		$	14.41
Granted	31,738		18.46
Forfeited	—		—
Vested	(60,580	)	11.96
Unvested, March 31, 2018	261,824		$	15.46	2.5 years	$	2,224	$	5,001
Employee PRSUs	224,400		$	15.40	2.9 years	$	1,983	$	4,286
Nonemployee Director RSUs	37,424		$	15.85	1.2 years	$	241	$	715

Schedule of share-based payment award, stock options, valuation assumptions [Table Text Block]

The fair values of stock-based awards granted were estimated at the dates of grant with the following weighted-average assumption.

	Three Months Ended
	March 31, 2018		April 1, 2017
Volatility rate	10.1	%	10.3	%
Risk-free interest rate	2.5	%	2.3	%
Expected dividend yield	.7	%	.7	%
Expected life of awards (years)	9.0		8.5

Schedule of share-based compensation, stock options activity [Table Text Block]

The following table summarizes activity under the stock option plans for the three months endedMarch 31, 2018.

Stock Options	Number of Options Outstanding		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding, January 1, 2018	1,528,615		$	13.05
Granted	—		—
Exercised	(7,300	)	14.50
Forfeited	(8,000	)	11.03
Outstanding, March 31, 2018	1,513,315		$	13.05	6.0 years	$	9,156
Exercisable, March 31, 2018	786,815		$	11.12	4.6 years	$	6,279

XML

Net Periodic Benefit Expense - Defined Benefit Pension Plans (Tables)

3 Months Ended

Mar. 31, 2018

Defined Benefit Plan, Net Periodic Benefit Cost [Abstract]

Schedule of defined benefit pension plans, components of pension expense [Table Text Block]

The results of operations included the following net periodic benefit expense (income) recognized related to our defined-benefit pension plans.

	Three Months Ended
	March 31, 2018			April 1, 2017
Components of pension expense (income)
Service costs--increase in benefit obligation earned	$	100		$	133
Interest cost on projected benefit obligation	180			263
Expected return on plan assets	(58		)	(169		)
Amortization of net actuarial loss	182			237
Amortization of prior service cost	16			16
Net pension expense of defined benefit pension plans	$	420		$	480

XML

Accumulated Other Comprehensive Income (Loss) (Tables)

3 Months Ended

Mar. 31, 2018

Equity [Abstract]

Schedule of other comprehensive income (loss) [Table Text Block]

The following summarizes the components of other comprehensive income (loss) accumulated in shareholders’ equity for the three months endedMarch 31, 2018 and three months endedApril 1, 2017:

	Foreign Currency Translation Adjustments			Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2018	$	(3,305	)	$	(5,088	)	$	(8,393	)
Other comprehensive income (loss) before reclassifications
Unrealized losses	$	(832	)	$	—		$	(832	)
Amounts reclassified from accumulated other comprehensive income (loss)	—			198			198
Tax effect	—			(52		)	(52		)
Net of tax amount	(832		)	146			(686		)
Balance at March 31, 2018	$	(4,137	)	$	(4,942	)	$	(9,079	)

	Foreign Currency Translation Adjustments			Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2017	$	(5,500	)	$	(6,662	)	$	(12,162	)
Other comprehensive income (loss) before reclassifications
Unrealized gains	$	322		$	—		$	322
Amounts reclassified from accumulated other comprehensive income (loss)	—			253			253
Tax effect	—			(96		)	(96		)
Net of tax amount	322			157			479
Balance at April 1, 2017	$	(5,178	)	$	(6,505	)	$	(11,683	)

XML

Per Share Amounts and Common Shares Outstanding (Tables)

3 Months Ended

Mar. 31, 2018

Equity [Abstract]

Schedule of earnings per share, basic and diluted [Table Text Block]

The per share amounts were computed as follows:

	Three Months Ended
	March 31, 2018			April 1, 2017
Income available to common shareholders:
Net loss	$	(6,627	)	$	(3,887	)
Weighted-average shares:
Basic:
Outstanding	25,229			24,967
Partially-paid share subscriptions	189			208
Basic weighted-average shares	25,418			25,175
Diluted:
Basic from above	25,418			25,175
Incremental shares from assumed:
Exercise of stock subscription purchase rights	146			145
Exercise of stock options and awards	912			896
Diluted weighted-average shares	26,476			26,216
Net loss per share--basic and diluted	$	(.26	)	$	(.15	)

Schedule of common shares outstanding [Table Text Block]

A summary of the activity of the common and redeemable shares outstanding for the three months endedMarch 31, 2018 follows:

	Common Shares		Redeemable
	Net of Treasury Shares		Shares		Total
Shares outstanding at January 1, 2018	17,753,832		6,467,027		24,220,859
Shares purchased	(261,959	)	(39,105	)	(301,064	)
Shares sold	—		217,325		217,325
Stock subscription offering -- cash purchases	12,670		—		12,670
Options and awards exercised	12,649		—		12,649
Shares outstanding at March 31, 2018	17,517,192		6,645,247		24,162,439

XML

Operations by Business Segment (Tables)

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Schedule of segment reporting information, by segment [Table Text Block]

Segment information reconciled to consolidated external reporting information follows:

	Utility		Residential and Commercial			All Other			Reconciling Adjustments				Consolidated
Three Months Ended March 31, 2018
Revenues	$	118,687	$	89,345		$	619		$	—			$	208,651
Income (loss) from operations	1,814		(3,105		)	(3,792		)	(583		)	(a)	(5,666		)
Interest expense									(1,401		)		(1,401		)
Interest income									78				78
Other income (expense), net									(1,662		)		(1,662		)
Loss before income taxes													$	(8,651	)
Segment assets, total	$	200,201	$	188,789		$	—		$	85,210		(b)	$	474,200
Three Months Ended April 1, 2017
Revenues	$	112,478	$	79,587		$	748		$	—			$	192,813
Income (loss) from operations	2,658		(3,582		)	(2,228		)	(843		)	(a)	(3,995		)
Interest expense									(1,257		)		(1,257		)
Interest income									70				70
Other income (expense), net									(1,139		)		(1,139		)
Loss before income taxes													$	(6,321	)
Segment assets, total	$	176,504	$	171,777		$	—		$	99,808		(b)	$	448,089

Reconciling adjustments from segment reporting to consolidated external financial reporting include unallocated corporate items:

(a) Reclassification of depreciation expense and allocation of corporate expenses.

(b) Corporate assets include cash, prepaid expenses, corporate facilities, enterprise-wide information systems and other nonoperating assets

XML

Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2018

Revenue Recognition [Abstract]

Disaggregation of revenue [Table Text Block]

The following table disaggregates our revenue for the three months ended March 31, 2018 by major sources:

	Utility		Residential and Commercial		All Other		Consolidated
Type of service:
Tree and plant care	$	86,316	$	56,397	$	15	$	142,728
Grounds maintenance	—		22,802		—		22,802
Storm damage services	3,214		899		—		4,113
Consulting and other	29,157		9,247		604		39,008
Total revenues	$	118,687	$	89,345	$	619	$	208,651
Geography:
United States	$	110,453	$	82,478	$	619	$	193,550
Canada	8,234		6,867		—		15,101
Total revenues	$	118,687	$	89,345	$	619	$	208,651

Contract with customer, asset and liability [Table Text Block]

Net contract liabilities consisted of the following:

	March 31, 2018		December 31, 2017
Contract liabilities - current	$	3,989	$	2,072
Contract liabilities - noncurrent	2,042		2,020
Net contract liabilities	$	6,031	$	4,092

XML

Fair Value Measurements and Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Assets and liabilities measured at fair value on a recurring basis [Table Text Block]

Our assets and liabilities measured at fair value on a recurring basis at March 31, 2018 were as follows:

			Fair Value Measurements at March 31, 2018 Using:
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	Total Carrying Value at March 31, 2018		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Assets invested for self-insurance, classified as other assets, noncurrent	$	20,905	$	20,905	$	—	$	—
Liabilities:
Deferred compensation	$	2,318	$	—	$	2,318	$	—

N. Fair Value Measurements and Financial Instruments (continued)

Our assets and liabilities measured at fair value on a recurring basis at December 31, 2017 were as follows:

			Fair Value Measurements at December 31, 2017 Using:
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	Total Carrying Value at December 31, 2017		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Assets invested for self-insurance, classified as other assets, noncurrent	$	19,422	$	19,422	$	—	$	—
Liabilities:
Deferred compensation	$	2,146	$	—	$	2,146	$	—

Financial instruments recorded at historical carrying value [Table Text Block]

Financial instruments classified as noncurrent liabilities and their carrying values and fair values were as follows:

	March 31, 2018				December 31, 2017
	Carrying Value		Fair Value		Carrying Value		Fair Value
Revolving credit facility, noncurrent	$	128,500	$	128,500	$	100,000	$	100,000
Senior unsecured notes	12,000		12,291		12,000		12,389
Term loans, noncurrent	6,583		7,545		7,935		10,038
Total	$	147,083	$	148,336	$	119,935	$	122,427

XML

Basis of Financial Statement Preparation Recent accounting guidance (Details) $ in Thousands	3 Months Ended
	Apr. 01, 2017 USD ($)
Accounting Standards Update 2017-07 [Member]
Pension expense	$ 347

XML

Accounts Receivable, Net and Supplemental Balance-Sheet Information (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Accounts receivable, net
Accounts receivable	$ 110,712	$ 143,244
Receivables under contractual arrangements	51,852	29,895
Accounts receivable, gross	162,564	173,139
Less allowances for doubtful accounts	4,486	4,468
Accounts receivable, net	158,078	168,671
Other current assets
Refundable income taxes	1,229	587
Prepaid expense	13,735	15,893
Other	189	784
Total	15,153	17,264
Accrued expenses
Employee compensation	12,010	20,794
Accrued compensated absences	9,590	9,267
Self-insured medical claims	4,447	3,193
Income tax payable	623	3,443
Customer advances, deposits	72	1,672
Taxes, other than income	3,662	2,279
Other	1,908	2,168
Total	32,312	42,816
Other current liabilities
Short-term Non-bank Loans and Notes Payable	0	149
Current portion of long-term debt	13,155	16,817
Current portion of self-insurance accruals	23,846	23,782
Total	$ 37,001	$ 40,748

XML

Business Combinations (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended
	Apr. 30, 2018	Mar. 31, 2018	Apr. 01, 2017
Investment in businesses		$ 86	$ 10,877
Liabilities assumed		86	1,076
Debt issued		0	$ 3,099
Goodwill		$ 0
Subsequent event [Member]
Investment in businesses	$ 3,300

XML

Identified Intangible Assets and Goodwill, Net (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, gross	$ 35,282	$ 34,798
Accumulated amortization	29,070	28,604
Identified intangible assets, net	6,212	6,194
Goodwill	35,163	35,477
Identified intangible assets and goodwill, net	41,375	41,671
Goodwill, Purchase Accounting Adjustments	298
Amortization of Intangible Assets	52
Finite-Lived Intangible Assets, Purchase Accounting Adjustments	70
Customer lists/relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, gross	21,972	21,487
Accumulated amortization	17,186	16,846
Employment-related [Member]
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, gross	7,332	7,333
Accumulated amortization	6,691	6,624
Tradenames [Member]
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, gross	5,978	5,978
Accumulated amortization	$ 5,193	$ 5,134

XML

Identified Intangible Assets and Goodwill, Net Schedule of Goodwill (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($)
Goodwill [Line Items]
Goodwill	$ 35,477
Goodwill, acquisitions	0
Goodwill, translation and other adjustments	(314)
Goodwill	35,163
Utility [Member]
Goodwill [Line Items]
Goodwill	3,424
Goodwill, acquisitions	0
Goodwill, translation and other adjustments	0
Goodwill	3,424
Residential commercial [Member]
Goodwill [Line Items]
Goodwill	32,053
Goodwill, acquisitions	0
Goodwill, translation and other adjustments	(314)
Goodwill	$ 31,739

XML

Long-Term Debt and Commitments Related to Letters of Credit Long-Term Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Revolving credit facility, noncurrent	$ 128,500	$ 100,000
Senior unsecured notes	18,000	18,000
Term loans	11,651	16,242
Capital leases	2,087	2,510
Long-term debt	160,238	136,752
Less debt issuance costs	681	725
Less current portion	13,155	16,817
Long-term debt, excluding current maturities	146,402	119,210
Swing-line borrowings [Member]
Revolving credit facility, noncurrent	13,500	0
London Interbank Offered Rate (LIBOR) [Member]
Revolving credit facility, noncurrent	$ 115,000	$ 100,000

XML

Long-Term Debt and Commitments Related to Letters of Credit (Narrative) (Details)	3 Months Ended
	Mar. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	May 07, 2017 USD ($)
Debt Instrument [Line Items]
Revolving credit facility, current borrowing capacity	$ 250,000,000
Revolving credit facility, maximum borrowing capacity	325,000,000
Unused commitments under credit facility	118,587,000
Revolving credit facility borrowings	$ 128,500,000	$ 100,000,000
Number of principal payments	5
Anniversary when principal payments begin	6
Minimum [Member]
Debt Instrument [Line Items]
Line of credit facility, unused capacity, commitment fee percentage	0.10%
Maximum [Member]
Debt Instrument [Line Items]
Line of credit facility, unused capacity, commitment fee percentage	0.225%
Swing-line borrowings [Member]
Debt Instrument [Line Items]
Revolving credit facility, current borrowing capacity	$ 25,000,000
Revolving credit facility borrowings	$ 13,500,000	$ 0
Unsecured debt [Member]
Debt Instrument [Line Items]
Interest rate	5.09%
Accounts receivable securitization [Member]
Debt Instrument [Line Items]
Interest rate	0.90%
Unused commitment fee threshold percent	0.50
Debt instrument variable rate base rate calculation, default rate	2.00%
Accounts receivable securitization [Member] | Base Rate, Federal Funds [Member]
Debt Instrument [Line Items]
Debt instrument, variable rate, base rate calculation	0.50%
Line of credit [Member]
Debt Instrument [Line Items]
Revolving credit facility borrowings	$ 131,413,000
Line of credit [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Debt instrument, variable rate, base rate calculation	1.50%
Line of credit [Member] | Base Rate, Federal Funds [Member]
Debt Instrument [Line Items]
Debt instrument, variable rate, base rate calculation	0.50%
Line of credit [Member] | Minimum [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Outstanding borrowings interest rate margin adjustment, range	0.875%
Line of credit [Member] | Maximum [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Outstanding borrowings interest rate margin adjustment, range	1.50%
Letter of credit [Member]
Debt Instrument [Line Items]
Letters of credit issued	$ 63,067,000
Letter of credit [Member] | Revolving credit facility [Member]
Debt Instrument [Line Items]
Letters of credit issued	2,913,000
Letter of credit [Member] | Accounts receivable securitization [Member]
Debt Instrument [Line Items]
Revolving credit facility, maximum borrowing capacity	100,000,000		$ 60,000,000
Letters of credit issued	$ 58,150,000
Debt Instrument, Term	1 year
Letter of credit [Member] | Accounts receivable securitization [Member] | Minimum [Member]
Debt Instrument [Line Items]
Letter of credit, unused capacity, commitment fee percentage	0.0035
Letter of credit [Member] | Accounts receivable securitization [Member] | Maximum [Member]
Debt Instrument [Line Items]
Letter of credit, unused capacity, commitment fee percentage	0.0045
Letter of credit [Member] | Line of credit [Member]
Debt Instrument [Line Items]
Letters of credit issued	$ 2,004,000
Letter of credit [Member]
Debt Instrument [Line Items]
Revolving credit facility, maximum borrowing capacity	$ 100,000,000

XML

Stock-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, percentage of outstanding stock maximum	5.00%
Share-based compensation arrangement by share-based payment award, percentage of outstanding and available for grant, maximum	10.00%
Compensation expense, share-based payment plans	$ 1,024	$ 986
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Volatility rate	10.10%	10.30%
Risk-free interest rate	2.50%	2.30%
Expected dividend yield	0.70%	0.70%
Expected life of awards (years)	9 years	8 years 6 months
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding, beginning balance	1,528,615
Granted	0
Exercised	(7,300)
Forfeited	(8,000)
Outstanding, ending balance	1,513,315
Exercisable, ending balance	786,815
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
Outstanding, weighted average exercise price, beginning balance	$ 13.05
Granted, weighted average exercise price	0
Exercised, weighted average exercise price	14.50
Forfeited, weighted average exercise price	11.03
Outstanding, weighted average exercise price, ending balance	13.05
Exercisable, weighted average exercise price, ending balance	$ 11.12
Exercisable, weighted average remaining contractual life (years)	4 years 7 months 6 days
Outstanding, aggregate intrinsic value	$ 9,156
Exercisable, aggregate intrinsic value	6,279
Outstanding, unrecognized compensation cost	$ 1,353
Employee service share-based compensation, nonvested awards, total compensation cost not yet recognized, period for recognition	2 years 1 month 6 days
Stock option plans [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense, share-based payment plans	$ 182	$ 201
Stock options awarded, term (years)	10 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
Outstanding, weighted average remaining contractual life (years)	6 years
Stock-settled stock appreciation rights (SSARs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense, share-based payment plans	$ 160	244
Share-based compensation arrangement by share-based payment award, award vesting period	5 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested [Roll Forward]
Unvested, beginning balance	448,180
Granted	121,243
Forfeited	0
Vested	(140,340)
Unvested, ending balance	429,083
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Unvested, weighted average award date value, beginning balance	$ 3.10
Granted, weighted average award date value	3.84
Forfeited, weighted average award date value	0
Vested, weighted average award date value	3.00
Unvested, weighted average award date value, ending balance	$ 3.34
Weighted average remaining contractual life (years)	2 years 9 months 18 days
Unrecognized compensation cost	$ 1,304
Aggregate intrinsic value	8,195
Restricted stock units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense, share-based payment plans	$ 425	322
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested [Roll Forward]
Unvested, beginning balance	290,666
Granted	31,738
Forfeited	0
Vested	(60,580)
Unvested, ending balance	261,824
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Unvested, weighted average award date value, beginning balance	$ 14.41
Granted, weighted average award date value	18.46
Forfeited, weighted average award date value	0
Vested, weighted average award date value	11.96
Unvested, weighted average award date value, ending balance	$ 15.46
Weighted average remaining contractual life (years)	2 years 6 months
Unrecognized compensation cost	$ 2,224
Aggregate intrinsic value	$ 5,001
Employee PRSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested [Roll Forward]
Unvested, ending balance	224,400
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Unvested, weighted average award date value, ending balance	$ 15.40
Weighted average remaining contractual life (years)	2 years 10 months 24 days
Unrecognized compensation cost	$ 1,983
Aggregate intrinsic value	$ 4,286
Nonemployee Director PRSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested [Roll Forward]
Unvested, ending balance	37,424
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Unvested, weighted average award date value, ending balance	$ 15.85
Weighted average remaining contractual life (years)	1 year 2 months 12 days
Unrecognized compensation cost	$ 241
Aggregate intrinsic value	715
The Davey Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense, share-based payment plans	$ 257	$ 219
Employee stock purchase plan, service period	1 year
Employee stock purchase plan, percentage of market price, purchase date	85.00%
Employee stock purchase plan, discount from market price, purchase date	15.00%

XML

Net Periodic Benefit Expense - Defined Benefit Pension Plans (Details) - Pension plans, defined benefit [Member] - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Defined Benefit Plan Disclosure [Line Items]
Service costs--increase in benefit obligation earned	$ 100	$ 133
Interest cost on projected benefit obligation	180	263
Expected return on plan assets	(58)	(169)
Amortization of net actuarial loss	182	237
Amortization of prior service cost	16	16
Net pension expense of defined benefit pension plans	$ 420	$ 480

XML

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017	Dec. 31, 2017
Income Tax Disclosure [Abstract]
Effective income tax rate	23.40%	38.50%
Income tax liability, transition toll tax	$ 6,100
Unrecognized tax benefits	2,581		$ 2,581
Unrecognized tax benefits that would impact effective tax rate	1,948		1,948
Unrecognized tax benefits, interest on income taxes accrued	$ 128		$ 128

XML

Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Accumulated other comprehensive income (loss) [Roll Forward]
Beginning balance	$ (8,393)	$ (12,162)
Unrealized losses	(832)	322
Amounts reclassified from accumulated other comprehensive income (loss)	198	253
Tax effect	(52)	(96)
Net of tax amount	(686)	479
Ending balance	(9,079)	(11,683)
Foreign currency translation adjustments [Member]
Accumulated other comprehensive income (loss) [Roll Forward]
Beginning balance	(3,305)	(5,500)
Unrealized losses	(832)	322
Amounts reclassified from accumulated other comprehensive income (loss)	0	0
Tax effect	0	0
Net of tax amount	(832)	322
Ending balance	(4,137)	(5,178)
Defined benefit pension plans [member]
Accumulated other comprehensive income (loss) [Roll Forward]
Beginning balance	(5,088)	(6,662)
Unrealized losses	0	0
Amounts reclassified from accumulated other comprehensive income (loss)	198	253
Tax effect	(52)	(96)
Net of tax amount	146	157
Ending balance	$ (4,942)	$ (6,505)

XML

Per Share Amounts and Common Shares Outstanding (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Equity [Abstract]
Net loss	$ (6,627)	$ (3,887)
Weighted-average shares outstanding, basic	25,229,000	24,967,000
Weighted-average shares, partially-paid share subscriptions	189,000	208,000
Basic weighted average shares	25,418,000	25,175,000
Incremental shares from assumed exercise of stock subscription purchase rights	146,000	145,000
Incremental shares from assumed exercise of stock options and awards	912,000	896,000
Diluted weighted-average shares	26,476,000	26,216,000
Net loss per share--basic and diluted	$ (0.26)	$ (0.15)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares outstanding at January 1, 2018	24,220,859
Shares purchased	(301,064)
Shares sold	217,325
Stock subscription offering -- cash purchases	12,670
Options and awards exercised	12,649
Shares outstanding at March 31, 2018	24,162,439
Employee and director options exercisable	786,815
Partially-paid subscriptions	757,040
Purchase rights outstanding	302,797
Common shares, net of treasury shares [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares outstanding at January 1, 2018	17,753,832
Shares purchased	(261,959)
Shares sold	0
Stock subscription offering -- cash purchases	12,670
Options and awards exercised	12,649
Shares outstanding at March 31, 2018	17,517,192
Redeemable shares [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares outstanding at January 1, 2018	6,467,027
Shares purchased	(39,105)
Shares sold	217,325
Stock subscription offering -- cash purchases	0
Options and awards exercised	0
Shares outstanding at March 31, 2018	6,645,247

XML

Per Share Amounts and Common Shares Outstanding Stock subscription (Details)	3 Months Ended
	Mar. 31, 2018 USD ($) $ / shares shares
Equity [Abstract]
Stock subscription offering, subscription price | $ / shares	$ 9.85
Stock subscription offering, number of shares subscribed | shares	1,275,428
stock subscription offering, value of shares subscribed | $	$ 12,563,000
Stock subscription offering, minimum financed amount | $	$ 5,000
Stock subscription offering, down payment	10.00%
Stock subscription offering, term (in years)	7 years
Stock subscription offering, interest rate	2.00%
Stock subscription offering, minimum amount to receive right | $	$ 5,000
Stock subscription offering, number of shares purchased to receive one right | shares	3
Stock subscription offering, number of rights issued | shares	423,600
Stock subscription offering, portion exercisable per year	14.29%
Stock subscription offering, right expiration term (in years)	7 years

XML

Operations by Business Segment (Details) $ in Thousands		3 Months Ended
		Mar. 31, 2018 USD ($)	Apr. 01, 2017 USD ($)	Dec. 31, 2017 USD ($)
Segment Reporting Information [Line Items]
Number of reportable segments		2
Revenues		$ 208,651	$ 192,813
Income (loss) from operations		(5,666)	(3,995)
Interest expense		(1,401)	(1,257)
Interest income		78	70
Other income (expense), net		(1,662)	(1,139)
Loss before income taxes		(8,651)	(6,321)
Segment assets, total		474,200	448,089	$ 473,135
Utility [Member]
Segment Reporting Information [Line Items]
Revenues		118,687	112,478
Income (loss) from operations		1,814	2,658
Segment assets, total		200,201	176,504
Residential commercial [Member]
Segment Reporting Information [Line Items]
Revenues		89,345	79,587
Income (loss) from operations		(3,105)	(3,582)
Segment assets, total		188,789	171,777
All other [Member]
Segment Reporting Information [Line Items]
Revenues		619	748
Income (loss) from operations		(3,792)	(2,228)
Segment assets, total		0	0
Reconciling adjustments [Member]
Segment Reporting Information [Line Items]
Revenues		0	0
Income (loss) from operations	[1]	(583)	(843)
Interest expense		(1,401)	(1,257)
Interest income		78	70
Other income (expense), net		(1,662)	(1,139)
Segment assets, total	[2]	$ 85,210	$ 99,808

[1] (a)Reclassification of depreciation expense and allocation of corporate expenses

[2] (b)Corporate assets include cash, prepaid expenses, corporate facilities, enterprise-wide information systems and other nonoperating assets.

XML

Revenue Recognition (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($)
Disaggregation of revenue [Line Items]
Revenue from contract with customer	$ 208,651
United States
Disaggregation of revenue [Line Items]
Revenue from contract with customer	193,550
Canada
Disaggregation of revenue [Line Items]
Revenue from contract with customer	15,101
Tree and plant care [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	142,728
Grounds maintenance [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	22,802
Storm damage services [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	4,113
Consulting and other [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	39,008
Utility [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	118,687
Utility [Member] | United States
Disaggregation of revenue [Line Items]
Revenue from contract with customer	110,453
Utility [Member] | Canada
Disaggregation of revenue [Line Items]
Revenue from contract with customer	8,234
Utility [Member] | Tree and plant care [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	86,316
Utility [Member] | Grounds maintenance [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	0
Utility [Member] | Storm damage services [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	3,214
Utility [Member] | Consulting and other [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	29,157
Residential commercial [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	89,345
Residential commercial [Member] | United States
Disaggregation of revenue [Line Items]
Revenue from contract with customer	82,478
Residential commercial [Member] | Canada
Disaggregation of revenue [Line Items]
Revenue from contract with customer	6,867
Residential commercial [Member] | Tree and plant care [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	56,397
Residential commercial [Member] | Grounds maintenance [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	22,802
Residential commercial [Member] | Storm damage services [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	899
Residential commercial [Member] | Consulting and other [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	9,247
All other [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	619
All other [Member] | United States
Disaggregation of revenue [Line Items]
Revenue from contract with customer	619
All other [Member] | Canada
Disaggregation of revenue [Line Items]
Revenue from contract with customer	0
All other [Member] | Tree and plant care [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	15
All other [Member] | Grounds maintenance [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	0
All other [Member] | Storm damage services [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	0
All other [Member] | Consulting and other [Member]
Disaggregation of revenue [Line Items]
Revenue from contract with customer	$ 604

XML

Revenue Recognition Contract with customer, asset and liability (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Revenue Recognition [Abstract]
Liability recognized in revenue	$ 568
Contract liabilities - current	3,989	$ 2,072
Contract liabilities - noncurrent	2,042	2,020
Net contract liabilities	$ 6,031	$ 4,092

XML

Fair Value Measurements and Financial Instruments (Details) - Fair value, measurements, recurring [Member] - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Quoted prices in active markets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets invested for self-insurance, classified as other assets, noncurrent	$ 20,905	$ 19,422
Deferred compensation	0	0
Significant other observable inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets invested for self-insurance, classified as other assets, noncurrent	0	0
Deferred compensation	2,318	2,146
Significant unobservable inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets invested for self-insurance, classified as other assets, noncurrent	0	0
Deferred compensation	0	0
Total carrying value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets invested for self-insurance, classified as other assets, noncurrent	20,905	19,422
Deferred compensation	$ 2,318	$ 2,146

XML

Fair Value Measurements and Financial Instruments Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Liabilities, fair value disclosure [Abstract]
Revolving credit facility, noncurrent	$ 128,500	$ 100,000
Senior unsecured notes	18,000	18,000
Carrying value [Member]
Liabilities, fair value disclosure [Abstract]
Revolving credit facility, noncurrent	128,500	100,000
Senior unsecured notes	12,000	12,000
Term loans, noncurrent	6,583	7,935
Total	147,083	119,935
Fair value [Member]
Liabilities, fair value disclosure [Abstract]
Revolving credit facility, noncurrent	128,500	100,000
Senior unsecured notes	12,291	12,389
Term loans, noncurrent	7,545	10,038
Total	$ 148,336	$ 122,427

XML

Contingencies Details (Details)	12 Months Ended
	Dec. 31, 2017
Former Davey employee defendants [Member]
Loss contingency, number of defendants	1
Wolf employee defendants [Member]
Loss contingency, number of defendants	2
Former Wolf employee defendants [Member]
Loss contingency, number of defendants	1
Defendants for which Davey has retained separate counsel [Member]
Loss contingency, number of defendants	3

XML

The Davey 401KSOP and Employee Stock Ownership Plan (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($) shares	Dec. 31, 2017 USD ($)
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Employee Stock Ownership Plan (ESOP), Initial Shares in ESOP | shares	120,000
Employee Stock Ownership Plan (ESOP), Shares Adjusted for Stock Split | shares	23,040,000
Employee Stock Ownership Plan (ESOP), Initial Value in ESOP	$ 2,700
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay	3.00%
Defined Contribution Plan, Eligible Age	21
Defined Contribution Plan, Service Requirement for Eligibility	1 year
Number of put option periods	2
Duration of put option periods	60 days
Employee Stock Ownership Plan (ESOP), Fair Value of Shares Subject to Repurchase Obligation	$ 3,279	$ 3,843
Company shares held in 401KSOP shares, fair value	123,645	119,677
Redeemable common shares related to 401KSOP and Employee Stock Ownership Plan (ESOP); 6,645 and 6,467 shares at redemption value as of March 31, 2018 and December 31, 2017	$ 126,924	$ 123,520
Defined Contribution Plan, Tier 1 [Member]
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay	100.00%
Defined Contribution Plan, Tier 2 [Member]
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay	50.00%
Maximum [Member] | Defined Contribution Plan, Tier 1 [Member]
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay	1.00%
Maximum [Member] | Defined Contribution Plan, Tier 2 [Member]
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay	4.00%