INVESTMENT IN UNCONSOLIDATED AFFILIATES

As of September 30, 2018, the Company held a minority equity interest of approximately 30% in the TruGreen Joint Venture. In addition, the Company and TruGreen Holdings are parties to a limited liability company agreement (the “LLC Agreement”) governing the management of the TruGreen Joint Venture, as well as certain ancillary agreements including a transition services agreement and an employee leasing agreement. The LLC Agreement provides the Company with minority representation on the board of directors of the TruGreen Joint Venture. The Company’s interest had an initial fair value of $294.0 million and is accounted for using the equity method of accounting. In the first quarter of fiscal 2018, the Company’s net investment and advances were reduced to a liability and the Company no longer records its proportionate share of the TruGreen Joint Venture earnings in the Consolidated Statements of Operations until the Company’s net investment and advances are no longer a liability. The Company does not have any contractual obligations to fund losses of the TruGreen Joint Venture.

In connection with the closing of the transactions contemplated by the Contribution Agreement on April 13, 2016, the TruGreen Joint Venture obtained debt financing and made a distribution of $196.2 million to the Company and the Company invested $18.0 million in second lien term loan financing to the TruGreen Joint Venture. The second lien term loan receivable had a carrying value of $18.1 million at September 30, 2018 and 2017 and is recorded in the “Other assets” line in the Consolidated Balance Sheets. The Company was reimbursed $1.4 million, $40.2 million and $52.6 million during fiscal 2018, fiscal 2017 and fiscal 2016, respectively, and had accounts receivable of $0.2 million and $0.4 million at September 30, 2018 and 2017, respectively, for expenses incurred pursuant to a short-term transition services agreement, payments on claims associated with insurance programs and an employee leasing agreement. The Company received distributions from unconsolidated affiliates intended to cover required tax payments of zero, $3.6 million and $7.5 million during fiscal 2018, fiscal 2017 and fiscal 2016, respectively. The Company also had an indemnification asset of $2.7 million and $4.8 million at September 30, 2018 and 2017, respectively, for future payments on claims associated with insurance programs. During the fourth quarter of fiscal 2017, the Company received an $87.1 million distribution from the TruGreen Joint Venture in connection with its August 2017 debt refinancing. The Company has received cumulative distributions from the TruGreen Joint Venture in excess of its investment balance, which resulted in an amount recorded in the “Distributions in excess of investment in unconsolidated affiliate” line in the Consolidated Balance Sheets of $21.9 million at September 30, 2018 and 2017. In accordance with the applicable accounting guidance, the Company has classified the negative balance in the liability section of the Consolidated Balance Sheets.

During the fourth quarter of fiscal 2017, the Company made a $29.4 million investment in an unconsolidated subsidiary whose products support the professional U.S. industrial, turf and ornamental market (the “IT&O Joint Venture”). The Company provided the IT&O Joint Venture with line of credit financing of $14.3 million during fiscal 2018, which was fully repaid as of September 30, 2018.

The following tables present summarized financial information of the Company’s unconsolidated affiliates:



	September 30,
	2018		2017
	(In millions)
Cash and cash equivalents	$	110.6	$	26.4
Other current assets	198.6		180.9
Intangible assets, net	809.8		860.7
Goodwill	199.8		184.0
Other assets	222.5		229.5
Total assets	$	1,541.3	$	1,481.5

Current liabilities	$	276.5	$	221.0
Current portion of debt	12.5		15.5
Long-term debt	981.9		987.5
Other liabilities	56.7		57.9
Equity	213.7		199.6
Total liabilities and equity	$	1,541.3	$	1,481.5



	Year Ended September 30,
	2018			2017			2016
	(in millions)
Revenue	$	1,427.4		$	1,340.2		$	808.4
Gross margin	475.0			429.7			287.5
Selling and administrative expenses	330.2			316.8			167.8
Amortization expense	62.0			72.8			27.1
Interest expense	74.5			69.9			30.8
Restructuring and other charges	14.6			67.5			34.8
Net (loss) income	$	(6.3	)	$	(97.3	)	$	27.0

Net income (loss) does not include income taxes, which are recognized and paid by the partners of the unconsolidated affiliates. The income taxes associated with the Company’s share of net income (loss) have been recorded in the “Income tax expense (benefit) from continuing operations” line in the Consolidated Statement of Operations.

The Company recognized equity in (income) loss of unconsolidated affiliates of $(4.9) million, $29.0 million and $(7.8) million in fiscal 2018, fiscal 2017 and fiscal 2016, respectively. Included within (income) loss of unconsolidated affiliates for fiscal 2017 and fiscal 2016, respectively, is the Company’s $25.2 million and $11.7 million share of restructuring and other charges incurred by the TruGreen Joint Venture. For fiscal 2017, these charges included $1.3 million for transaction costs, $12.1 million for nonrecurring integration and separation costs, $7.2 million of costs associated with the TruGreen Joint Venture’s August 2017 debt refinancing and $4.6 million for a non-cash purchase accounting fair value write-down adjustment related to deferred revenue and advertising. For fiscal 2016, these charges included $6.0 million for transaction costs, $4.4 million for nonrecurring integration and separation costs and $1.3 million for a non-cash purchase accounting fair value write-down adjustment related to deferred revenue and advertising.