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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________
FORM 10-Q
__________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from                      to                     
Commission File Number: 001-35780
__________________________________________________
BRIGHT HORIZONS FAMILY SOLUTIONS INC.
(Exact name of registrant as specified in its charter)
__________________________________________________
Delaware80-0188269
(State or other jurisdiction
of incorporation)
(I.R.S. Employer
Identification Number)
2 Wells Avenue
Newton, Massachusetts
02459
(Address of principal executive offices)(Zip code)
Registrant’s telephone number, including area code: (617) 673-8000
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par value per shareBFAMNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of October 22, 2021, there were 60,369,166 shares of common stock outstanding.


Table of Contents
BRIGHT HORIZONS FAMILY SOLUTIONS INC.
FORM 10-Q
For the quarterly period ended September 30, 2021
TABLE OF CONTENTS
Page
2

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, 2021December 31, 2020
(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents$412,402 $384,344 
Accounts receivable — net of allowance for credit losses of $2,831 and $2,357 at September 30, 2021 and December 31, 2020, respectively
160,316 176,617 
Prepaid expenses and other current assets63,273 62,902 
Prepaid income taxes12,636 322 
Total current assets648,627 624,185 
Fixed assets — net609,491 628,757 
Goodwill1,446,321 1,431,967 
Other intangible assets — net253,529 274,620 
Operating lease right-of-use assets695,829 717,821 
Other assets58,069 49,298 
Total assets$3,711,866 $3,726,648 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt$10,750 $10,750 
Accounts payable and accrued expenses199,649 194,551 
Current portion of operating lease liabilities87,066 87,181 
Deferred revenue212,459 197,939 
Other current liabilities53,414 40,393 
Total current liabilities563,338 530,814 
Long-term debt — net1,013,080 1,020,137 
Operating lease liabilities704,643 729,754 
Other long-term liabilities112,683 105,980 
Deferred revenue10,107 10,215 
Deferred income taxes48,786 45,951 
Total liabilities2,452,637 2,442,851 
Stockholders’ equity:
Preferred stock, $0.001 par value; 25,000,000 shares authorized; no shares issued or outstanding at September 30, 2021 and December 31, 2020
  
     Common stock, $0.001 par value; 475,000,000 shares authorized; 60,092,105 and 60,466,168 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively
60 60 
Additional paid-in capital843,265 910,304 
Accumulated other comprehensive loss(37,364)(27,069)
Retained earnings453,268 400,502 
Total stockholders’ equity1,259,229 1,283,797 
Total liabilities and stockholders’ equity$3,711,866 $3,726,648 
See accompanying notes to condensed consolidated financial statements.
3

Table of Contents
BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
Three months ended September 30,Nine months ended September 30,
2021202020212020
(In thousands, except share data)
Revenue$460,333 $337,920 $1,292,651 $1,138,015 
Cost of services340,068 282,749 985,046 908,749 
Gross profit120,265 55,171 307,605 229,266 
Selling, general and administrative expenses67,135 53,301 191,703 159,917 
Amortization of intangible assets7,140 7,797 22,192 23,881 
Income (loss) from operations45,990 (5,927)93,710 45,468 
Interest expense — net(9,153)(9,186)(27,749)(28,521)
Income (loss) before income tax36,837 (15,113)65,961 16,947 
Income tax benefit (expense)(10,018)8,459 (13,195)7,490 
Net income (loss)$26,819 $(6,654)$52,766 $24,437 
Earnings (loss) per common share:
Common stock — basic$0.44 $(0.11)$0.87 $0.41 
Common stock — diluted$0.44 $(0.11)$0.86 $0.41 
Weighted average common shares outstanding:
Common stock — basic60,218,090 60,196,795 60,454,855 59,253,044 
Common stock — diluted60,743,765 60,196,795 61,058,843 60,001,730 
See accompanying notes to condensed consolidated financial statements.
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BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three months ended September 30,Nine months ended September 30,
2021202020212020
(In thousands)
Net income (loss)$26,819 $(6,654)$52,766 $24,437 
Other comprehensive income (loss):
Foreign currency translation adjustments(14,634)24,632 (13,935)(13,319)
Unrealized gain (loss) on cash flow hedges and investments, net of tax924 267 3,640 (3,210)
Total other comprehensive income (loss)(13,710)24,899 (10,295)(16,529)
Comprehensive income$13,109 $18,245 $42,471 $7,908 
See accompanying notes to condensed consolidated financial statements.
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BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
Three months ended September 30, 2021
Common StockAdditional
Paid-in Capital
Treasury Stock,
at Cost
Accumulated Other
Comprehensive
Income (Loss)
Retained EarningsTotal
Stockholders’ Equity
SharesAmount
(In thousands, except share data)
Balance at July 1, 202160,278,756 $60 $868,289 $ $(23,654)$426,449 $1,271,144 
Stock-based compensation expense5,600 5,600 
Issuance of common stock under the Equity Incentive Plan51,895  3,640 3,640 
Shares received in net share settlement of stock option exercises and vesting of restricted stock(2,036)— (287)(287)
Purchase of treasury stock(33,977)(33,977)
Retirement of treasury stock(236,510) (33,977)33,977  
Other comprehensive loss(13,710)(13,710)
Net income26,819 26,819 
Balance at September 30, 202160,092,105 $60 $843,265 $ $(37,364)$453,268 $1,259,229 
Three months ended September 30, 2020
Common StockAdditional
Paid-in Capital
Treasury Stock,
at Cost
Accumulated Other
Comprehensive
Income (Loss)
Retained EarningsTotal
Stockholders’ Equity
SharesAmount
(In thousands, except share data)
Balance at July 1, 202060,152,187 $60 $885,373 $ $(91,759)$404,601 $1,198,275 
Stock-based compensation expense5,700 5,700 
Issuance of common stock under the Equity Incentive Plan119,778  6,074 6,074 
Shares received in net share settlement of stock option exercises and vesting of restricted stock(8,796)— (1,181)(1,181)
Other comprehensive income24,899 24,899 
Net loss(6,654)(6,654)
Balance at September 30, 202060,263,169 $60 $895,966 $ $(66,860)$397,947 $1,227,113 
See accompanying notes to condensed consolidated financial statements.
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BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
Nine months ended September 30, 2021
Common StockAdditional
Paid-in Capital
Treasury Stock,
at Cost
Accumulated Other
Comprehensive
Income (Loss)
Retained EarningsTotal
Stockholders’ Equity
SharesAmount
(In thousands, except share data)
Balance at January 1, 202160,466,168 $60 $910,304 $ $(27,069)$400,502 $1,283,797 
Stock-based compensation expense16,735 16,735 
Issuance of common stock under the Equity Incentive Plan423,456 1 27,977 27,978 
Shares received in net share settlement of stock option exercises and vesting of restricted stock(46,009)— (7,429)(7,429)
Purchase of treasury stock(104,323)(104,323)
Retirement of treasury stock(751,510)(1)(104,322)104,323  
Other comprehensive loss(10,295)(10,295)
Net income52,766 52,766 
Balance at September 30, 202160,092,105 $60 $843,265 $ $(37,364)$453,268 $1,259,229 
Nine months ended September 30, 2020
Common StockAdditional
Paid-in Capital
Treasury Stock,
at Cost
Accumulated Other
Comprehensive
Income (Loss)
Retained EarningsTotal
Stockholders’ Equity
SharesAmount
(In thousands, except share data)
Balance at January 1, 202057,884,020 $58 $648,031 $ $(50,331)$373,510 $971,268 
Issuance of common stock2,138,580 2 249,788 249,790 
Stock-based compensation expense15,138 15,138 
Issuance of common stock under the Equity Incentive Plan535,930 1 24,112 24,113 
Shares received in net share settlement of stock option exercises and vesting of restricted stock(64,048)— (8,896)(8,896)
Purchase of treasury stock(32,208)(32,208)
Retirement of treasury stock(231,313)(1)(32,207)32,208  
Other comprehensive loss(16,529)(16,529)
Net income24,437 24,437 
Balance at September 30, 202060,263,169 $60 $895,966 $ $(66,860)$397,947 $1,227,113 
See accompanying notes to condensed consolidated financial statements.
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BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30,
20212020
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$52,766 $24,437 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization82,858 83,173 
Impairment losses on long-lived assets 18,609 
Impairment losses on equity investment 2,128 
Stock-based compensation expense16,735 15,138 
Deferred income taxes1,573 8,408 
Other non-cash adjustments — net3,369 (206)
Changes in assets and liabilities:
Accounts receivable15,836 (1,385)
Prepaid expenses and other current assets(4,095)(28,599)
Accounts payable and accrued expenses8,911 11,921 
Income taxes(11,269)(18,830)
Deferred revenue15,360 (14,956)
Leases(3,378)30,434 
Other assets3,233 4,192 
Other current and long-term liabilities3,348 35,389 
Net cash provided by operating activities185,247 169,853 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets(47,350)(54,494)
Proceeds from the disposal of fixed assets5,840 9,997 
Purchases of debt securities and other investments(20,032)(6,106)
Proceeds from the maturity of debt securities and sale of other investments17,730 10,247 
Payments and settlements for acquisitions — net of cash acquired(18,914)(8,101)
Net cash used in investing activities(62,726)(48,457)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock issuance — net of issuance costs 249,808 
Borrowings under revolving credit facility 43,200 
Payments under revolving credit facility (43,200)
Principal payments of long-term debt(8,063)(8,063)
Payments of debt issuance costs(2,057)(2,818)
Purchase of treasury stock(102,184)(32,658)
Proceeds from issuance of common stock upon exercise of options and restricted stock upon purchase31,820 27,087 
Taxes paid related to the net share settlement of stock options and restricted stock(7,429)(8,896)
Payments of contingent consideration for acquisitions(196)(1,088)
Net cash provided by (used in) financing activities(88,109)223,372 
Effect of exchange rates on cash, cash equivalents and restricted cash(2,120)286 
Net increase in cash, cash equivalents and restricted cash32,292 345,054 
Cash, cash equivalents and restricted cash — beginning of period388,465 31,192 
Cash, cash equivalents and restricted cash — end of period$420,757 $376,246 
See accompanying notes to condensed consolidated financial statements.
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BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
Nine months ended September 30,
20212020
(In thousands)
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS:
Cash and cash equivalents$412,402 $365,300 
Restricted cash and cash equivalents, included in prepaid expenses and other current assets8,355 10,946 
Total cash, cash equivalents and restricted cash — end of period$420,757 $376,246 
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments of interest$25,193 $26,741 
Cash payments of income taxes$23,427 $8,329 
Cash paid for amounts included in the measurement of lease liabilities$106,878 $83,874 
NON-CASH TRANSACTIONS:
Fixed asset purchases recorded in accounts payable and accrued expenses$2,402 $3,377 
Contingent consideration issued for acquisitions$7,337 $ 
Operating right-of-use assets obtained in exchange for operating lease liabilities — net$46,653 $88,850 
Restricted stock reclassified from other current liabilities to equity upon vesting $4,178 $4,445 
Treasury stock purchases in other current liabilities$2,139 $ 
See accompanying notes to condensed consolidated financial statements.
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BRIGHT HORIZONS FAMILY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization — Bright Horizons Family Solutions Inc. (“Bright Horizons” or the “Company”) provides center-based early education and child care, back-up child and adult/elder care, tuition assistance and student loan repayment program administration, educational advisory services, and other support services for employers and families in the United States, the United Kingdom, the Netherlands, Puerto Rico and India. The Company provides services designed to help families, employers and their employees better integrate work and family life, primarily under multi-year contracts with employers who offer early education and child care, family care solutions, and workforce education services, as part of their employee benefits packages in an effort to support employees across life and career stages and improve employee engagement.
Basis of Presentation — The accompanying unaudited condensed consolidated balance sheet as of September 30, 2021 and the condensed consolidated statements of income (loss), comprehensive income, changes in stockholders’ equity, and cash flows for the interim periods ended September 30, 2021 and 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required in accordance with U.S. GAAP for complete financial statements and should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior period amounts within the condensed consolidated balance sheet and supplemental statement of cash flows information to conform to the current period presentation.
In the opinion of the Company’s management, the Company’s unaudited condensed consolidated balance sheet as of September 30, 2021 and the condensed consolidated statements of income (loss), comprehensive income, changes in stockholders’ equity, and cash flows for the interim periods ended September 30, 2021 and 2020, reflect all adjustments (consisting only of normal and recurring adjustments) necessary to present fairly the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year.
Stockholders Equity — The board of directors of the Company authorized a share repurchase program of up to $300 million of the Company’s outstanding common stock, effective June 12, 2018. The share repurchase program has no expiration date. The shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions, under Rule 10b5-1 plans, or by other means in accordance with federal securities laws. During the nine months ended September 30, 2021, 0.8 million shares were repurchased for $104.3 million under this authorization, and at September 30, 2021, $90.5 million remained available under the repurchase program.
On April 21, 2020, the Company completed the issuance and sale of 2,138,580 shares of common stock, par value $0.001 per share, to Durable Capital Master Fund LP at a price of $116.90 per share. The Company subsequently filed a registration statement to register the resale of these shares in accordance with the terms of the purchase agreement. The Company received net proceeds from the offering of $249.8 million.
COVID-19 Pandemic — Since March 2020, the Company's global operations have been significantly impacted by the COVID-19 pandemic. As of September 30, 2021, the Company operated 1,011 early education and child care centers, of which 949 early education and child care centers were open. The Company remains focused on the re-enrollment of its centers and the phased re-opening of the limited number of centers that remain temporarily closed, which the Company expects will continue throughout 2021 and into 2022. The broad and long-term effects of COVID-19 and its variants, its duration and the scope of ongoing and related disruptions cannot be predicted and the Company currently expects the effects of COVID-19 to continue to adversely impact the results of its operations for the remainder of 2021 and into 2022.
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Government Support — The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), the Consolidated Appropriations Act, 2021 (“CAA”), and the American Rescue Plan Act of 2021 (“ARPA”) were enacted in the United States on March 27, 2020, January 1, 2021, and March 11, 2021, respectively; all are economic aid packages to help mitigate the impact of the pandemic. Additionally, other foreign governmental legislation that provided relief provisions was enacted in response to the economic impact of COVID-19. The Company has participated in certain government support programs, including availing itself of certain tax deferrals, tax credits and federal block grant funding in the United States, as well as certain tax deferrals, tax credits, and employee wage support in the United Kingdom. On December 27, 2020, the employee retention tax credit, originally enacted under the CARES Act in the United States, was expanded and extended under the CAA to wages paid through the first two quarters of 2021, among other changes. Additionally, on March 11, 2021, the employee retention tax credit was expanded and extended under the ARPA through December 31, 2021, among other changes. Governmental support received is recorded on the consolidated statement of income as a reduction to the related expenses that the assistance is intended to defray. During the nine months ended September 30, 2021 and 2020, $32.2 million and $61.5 million, respectively, was recorded as a reduction to cost of services in relation to these benefits, of which $9.3 million and $3.3 million, respectively, reduced the operating subsidies paid by employers for the related child care centers. As of September 30, 2021 and December 31, 2020, $3.9 million and $8.4 million, respectively, was recorded in prepaid expenses and other current assets on the consolidated balance sheet for amounts due from government support programs. As of September 30, 2021, payroll tax deferrals of $10.2 million were recorded in other long-term liabilities on the consolidated balance sheet and as of December 31, 2020, payroll tax deferrals were $20.4 million, of which $10.2 million was recorded in accounts payable and accrued expenses and $10.2 million was included in other long-term liabilities.
Recently Adopted Pronouncement — In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The standard removes certain exceptions to the general principles in Topic 740 and improves the consistent application of U.S. GAAP by clarifying and amending certain areas of the existing guidance. The Company adopted the new guidance on January 1, 2021. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.
2. REVENUE RECOGNITION
Disaggregation of Revenue
The Company disaggregates revenue from contracts with customers into segments and geographical regions. Revenue disaggregated by segment and geographical region was as follows:
Full service
center-based
child care
Back-up careEducational
advisory and
other services
Total
(In thousands)
Three months ended September 30, 2021
North America$221,297 $91,237 $27,253 $339,787 
Europe112,586 7,960  120,546 
$333,883 $99,197 $27,253 $460,333 
Three months ended September 30, 2020
North America$137,112 $89,271 $24,734 $251,117 
Europe83,024 3,779  86,803 
$220,136 $93,050 $24,734 $337,920 
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Full service
center-based
child care
Back-up careEducational
advisory and
other services
Total
(In thousands)
Nine months ended September 30, 2021
North America$630,078 $239,079 $76,986 $946,143 
Europe328,551 17,957  346,508 
$958,629 $257,036 $76,986 $1,292,651 
Nine months ended September 30, 2020
North America$527,751 $292,934 $66,061 $886,746 
Europe241,082 10,187  251,269 
$768,833 $303,121 $66,061 $1,138,015 
The classification “North America” is comprised of the Company’s United States, Puerto Rico, and Canada operations and the classification “Europe” includes the United Kingdom, Netherlands, and India operations. During the third quarter of fiscal 2020, the Company divested its child care center business in Canada and ceased to operate its two centers in that geography.
Deferred Revenue
The Company records deferred revenue when payments are received in advance of the Company’s performance under the contract, which is recognized as revenue as the performance obligation is satisfied. During the nine months ended September 30, 2021, $169.2 million was recognized as revenue related to the deferred revenue balance recorded at December 31, 2020. During the nine months ended September 30, 2020, $170.0 million was recognized as revenue related to the deferred revenue balance recorded at December 31, 2019.
Remaining Performance Obligations
The Company does not disclose the value of unsatisfied performance obligations for contracts with an original contract term of one year or less, or for variable consideration allocated to the unsatisfied performance obligation of a series of services. The transaction price allocated to the remaining performance obligations relates to services that are paid or invoiced in advance. The Company’s remaining performance obligations not subject to the practical expedients were not material.
3. LEASES
The Company has operating leases for certain of its full service and back-up early education and child care centers, corporate offices, call centers, and to a lesser extent, various office equipment, in the United States, the United Kingdom, and the Netherlands. Most of the leases expire within 10 to 15 years and many contain renewal options and/or termination provisions. The Company does not have any finance leases as of September 30, 2021.
Lease Expense
The components of lease expense were as follows:
Three months ended September 30,Nine months ended September 30,
2021202020212020
(In thousands)
Operating lease expense (1)
$33,358 $33,436 $100,635 $105,964 
Variable lease expense (1)
9,399 6,419 23,076 21,772 
Total lease expense$42,757 $39,855 $123,711 $127,736 
(1) Excludes short-term lease expense and sublease income, which were immaterial for the periods presented.
Operating lease expense for the three and nine months ended September 30, 2020 includes an impairment loss on operating lease right-of-use assets of $0.3 million and $5.5 million, respectively. Refer to Note 9, Fair Value Measurements, for additional information.
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Other Information
The weighted average remaining lease term and the weighted average discount rate were as follows:
September 30, 2021December 31, 2020
Weighted average remaining lease term (in years)1010
Weighted average discount rate5.9%6.0%
Maturity of Lease Liabilities
The following table summarizes the maturity of lease liabilities as of September 30, 2021:
Operating Leases
(In thousands)
Remainder of 2021$20,246 
2022134,267 
2023126,966 
2024116,221 
2025102,167 
Thereafter552,043 
Total lease payments1,051,910 
Less imputed interest(260,201)
Present value of lease liabilities791,709 
Less current portion of operating lease liabilities
(87,066)
Long-term operating lease liabilities$704,643 
As of September 30, 2021, the Company had entered into additional operating leases that have not yet commenced with total fixed payment obligations of $26.9 million. The leases are expected to commence between the fourth quarter of fiscal 2021 and the fourth quarter of fiscal 2022 with initial lease terms of 15 years.
Lease Modifications
As of September 30, 2021, the Company had deferred lease payments of $1.4 million. The majority of these lease payments are payable over the next year. As of December 31, 2020, the Company had deferred lease payments of $7.7 million.
4. ACQUISITIONS
The Company’s growth strategy includes expansion through strategic and synergistic acquisitions. The goodwill resulting from these acquisitions arises largely from synergies expected from combining the operations of the businesses acquired with the Company's existing operations, including cost efficiencies and leveraging existing client relationships, as well as from benefits derived from gaining the related assembled workforce.
2021 Acquisitions
During the nine months ended September 30, 2021, the Company acquired two centers as well as a camp and back-up care provider in the United States, one center in the United Kingdom, and three centers in the Netherlands, in four separate business acquisitions, which were each accounted for as a business combination. These businesses were acquired for aggregate cash consideration of $18.3 million, net of cash acquired of $0.6 million, and consideration payable of $0.5 million. Additionally, the Company is subject to contingent consideration payments for two of these acquisitions, and recorded a preliminary fair value estimate of $7.3 million in relation to these contingent consideration arrangements at acquisition. Contingent consideration of up to $1.2 million may be payable within one year if certain performance targets are met for one of the acquisitions, and contingent consideration is payable in 2026 based on certain financial metrics for the other acquisition. The Company recorded goodwill of $14.6 million related to the back-up care segment and $8.0 million related to the full service center-based child care segment, of which $18.0 million will be deductible for tax purposes. In addition, the Company recorded intangible assets of $1.3 million that will be amortized over five years, as well as fixed assets of $7.0 million in relation to these acquisitions.
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The determination and allocation of purchase price consideration is based on preliminary estimates of fair value; such estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). As of September 30, 2021, the purchase price allocations for these acquisitions remain open as the Company gathers additional information regarding the assets acquired and the liabilities assumed, and finalizes its determination of the estimated fair value of the contingent consideration at the date of acquisition. The operating results for the acquired businesses are included in the consolidated results of operations from the date of acquisition, and were not material to the Company’s financial results.
2020 Acquisitions
During the year ended December 31, 2020, the Company acquired two child care centers and the Sittercity business, an online marketplace for families and caregivers, in the United States, in three separate business acquisitions, which were each accounted for as a business combination. These businesses were acquired for aggregate cash consideration of $8.1 million, net of cash acquired of $1.3 million, and consideration payable of $0.1 million, and included fixed assets and technology of $4.1 million, as well as a trade name of $0.7 million that will be amortized over five years. The Company recorded goodwill of $2.0 million related to the educational advisory and other services segment and $2.1 million related to the full-service center-based child care segment, all of which will be deductible for tax purposes.
During the year ended December 31, 2020, the Company paid $1.2 million for contingent consideration related to acquisitions completed in 2018 and 2019, which had been recorded as a liability at the date of acquisition.
5. GOODWILL AND INTANGIBLE ASSETS
The changes in the carrying amount of goodwill were as follows:
Full service
center-based
child care
Back-up careEducational
advisory and
other services
Total
(In thousands)
Balance at January 1, 2021$1,197,658 $194,616 $39,693 $1,431,967 
Additions from acquisitions7,997 14,557  22,554 
Adjustments to prior year acquisitions  150 150 
Effect of foreign currency translation(7,963)(387) (8,350)
Balance at September 30, 2021$1,197,692 $208,786 $39,843 $1,446,321 
The Company also has intangible assets, which consisted of the following at September 30, 2021 and December 31, 2020:
September 30, 2021Weighted average
amortization period
CostAccumulated
amortization
Net carrying
amount
(In thousands)
Definite-lived intangible assets:
Customer relationships14 years$401,907 $(331,454)$70,453 
Trade names6 years12,090 (10,010)2,080 
413,997 (341,464)72,533 
Indefinite-lived intangible assets:
Trade namesN/A180,996 — 180,996 
$594,993 $(341,464)$253,529 
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December 31, 2020Weighted average
amortization period
CostAccumulated
amortization
Net carrying
amount
(In thousands)
Definite-lived intangible assets:
Customer relationships14 years$402,319 $(310,587)$91,732 
Trade names6 years11,219 (9,633)1,586 
413,538 (320,220)93,318 
Indefinite-lived intangible assets:
Trade namesN/A181,302 — 181,302 
$594,840 $(320,220)$274,620 
6. CREDIT ARRANGEMENTS AND DEBT OBLIGATIONS
Senior Secured Credit Facilities
The Company’s senior secured credit facilities consist of a secured term loan facility (“term loan facility”) and a $400 million multi-currency revolving credit facility (“revolving credit facility”). The term loan matures on November 7, 2023 and requires quarterly principal payments of $2.7 million, with the remaining principal balance due on November 7, 2023.
Outstanding term loan borrowings were as follows:
September 30, 2021December 31, 2020
(In thousands)
Term loan$1,026,625 $1,034,688 
Deferred financing costs and original issue discount(2,795)(3,801)
Total debt1,023,830 1,030,887 
Less current maturities(10,750)(10,750)
Long-term debt$1,013,080 $1,020,137 
On May 26, 2021, the Company amended its existing senior secured credit facilities to, among other changes, extend the revolving credit facility maturity date from July 31, 2022 to May 26, 2026 (subject to a springing maturity to August 8, 2023 if more than $25 million of the term loan has not been repaid, refinanced or extended), and reduce the interest rates applicable to borrowings outstanding on the revolving credit facility. In conjunction with this credit amendment, the Company incurred $2.1 million in fees that have been capitalized in other assets on the consolidated balance sheet and are amortized over the contractual life of the revolving credit facility. There were no borrowings outstanding on the revolving credit facility at September 30, 2021 and December 31, 2020.
In April and May 2020, the Company amended its existing senior secured credit facilities to, among other things, increase the borrowing capacity of the revolving credit facility from $225 million to $400 million, modify the interest rates applicable to borrowings outstanding on the revolving credit facility, and modify the terms of the applicable covenants. In conjunction with these credit amendments, the Company incurred $2.8 million in fees that have been capitalized in other assets on the consolidated balance sheet and were being amortized over the contractual life of the revolving credit facility prior to the May 26, 2021 amendment.
All borrowings under the credit agreement are subject to variable interest. The effective interest rate for the term loan was 2.50% at September 30, 2021 and December 31, 2020, and the weighted average interest rate was 2.50% and 2.83% for the nine months ended September 30, 2021 and 2020, respectively, prior to the effects of any interest rate hedge arrangements. Effective as of May 26, 2021, borrowings under the revolving credit facility bear interest at a rate per annum ranging from 0.50% to 0.75% over the base rate, or 1.50% to 1.75% over the eurocurrency rate. The weighted average interest rate for the revolving credit facility was 4.00% and 4.49% for the nine months ended September 30, 2021 and 2020, respectively.
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All obligations under the senior secured credit facilities are secured by substantially all the assets of the Company’s U.S. subsidiaries. The senior secured credit facilities contain a number of covenants that, among other things and subject to certain exceptions, may restrict the ability of Bright Horizons Family Solutions LLC, the Company’s wholly-owned subsidiary, and its restricted subsidiaries, to: incur certain liens; make investments, loans, advances and acquisitions; incur additional indebtedness or guarantees; pay dividends on capital stock or redeem, repurchase or retire capital stock or subordinated indebtedness; engage in transactions with affiliates; sell assets, including capital stock of the Company’s subsidiaries; alter the business conducted; enter into agreements restricting the Company’s subsidiaries’ ability to pay dividends; and consolidate or merge.
In addition, the credit agreement governing the senior secured credit facilities requires Bright Horizons Capital Corp., the Company’s direct subsidiary, to be a passive holding company, subject to certain exceptions. The revolving credit facility requires Bright Horizons Family Solutions LLC, the borrower, and its restricted subsidiaries, to comply with a maximum first lien net leverage ratio of 4.25 to 1.00 beginning June 30, 2021. A breach of the applicable covenant is subject to certain equity cure rights.
Future principal payments of long-term debt are as follows for the years ending December 31:
Term Loan
(In thousands)
Remainder of 2021$2,687 
202210,750 
20231,013,188 
Total future principal payments$1,026,625 
Derivative Financial Instruments
The Company is subject to interest rate risk as all borrowings under the senior secured credit facilities are subject to variable interest rates. In October 2017, the Company entered into variable-to-fixed interest rate swap agreements to mitigate the exposure to variable interest arrangements on $500 million notional amount of the outstanding term loan borrowings. These swap agreements, designated and accounted for as cash flow hedges from inception, matured on October 31, 2021. The Company was required to make monthly payments on the notional amount at a fixed average interest rate, plus the applicable rate for eurocurrency loans. Effective as of May 31, 2018, the notional amount was subject to a total interest rate of approximately 3.65%. In exchange, the Company received interest on the notional amount at a variable rate based on the one-month LIBOR rate, subject to a 0.75% floor.
In June 2020, the Company entered into interest rate cap agreements with a total notional value of $800 million, designated and accounted for as cash flow hedges from inception, to provide the Company with interest rate protection in the event the one-month LIBOR rate increases above 1%. Interest rate cap agreements for $300 million notional value have an effective date of June 30, 2020 and expire on October 31, 2023, while interest rate cap agreements for another $500 million notional amount have a forward starting effective date of October 29, 2021, which coincides with the maturity of the interest rate swap agreements discussed above, and expire on October 31, 2023.
The interest rate swaps and interest rate caps are recorded on the Company’s consolidated balance sheet at fair value and classified based on the instruments’ maturity dates. The Company records gains and losses resulting from changes in the fair value of the interest rate swaps and interest rate caps to accumulated other comprehensive income or loss. These gains and losses are subsequently reclassified into earnings and recognized to interest expense in the Company’s consolidated statement of income in the period that the hedged interest expense on the term loan facility is recognized. The premium paid for the interest rate cap was recorded as an asset and will be allocated to each of the individual hedged interest payments on the basis of their relative fair values. The change in each respective allocated fair value amount will be reclassified out of accumulated other comprehensive income when each of the hedged forecasted transactions impacts earnings and recognized to interest expense in the Company's consolidated statement of income.
The fair value of the derivative financial instruments was as follows for the periods presented:
Derivative financial instrumentsConsolidated balance sheet classificationSeptember 30, 2021December 31, 2020
(In thousands)
Interest rate swaps - liabilityOther current liabilities$446 $4,775 
Interest rate caps - assetOther assets$923 $277 
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The effect of the derivative financial instruments on other comprehensive income (loss) was as follows:
Derivatives designated as cash flow hedging instrumentsAmount of gain (loss) recognized in other comprehensive income (loss)Consolidated statement of income classificationAmount of net gain (loss) reclassified into earningsTotal effect on other comprehensive income (loss)
(In thousands)(In thousands)
Three months ended September 30, 2021
Cash flow hedges$(222)Interest expense — net$(1,493)$1,271 
Income tax effect59 Income tax expense399 (340)
Net of income taxes$(163)$(1,094)$931 
Three months ended September 30, 2020
Cash flow hedges$(1,015)Interest expense — net$(1,468)$453 
Income tax effect273 Income tax expense395 (122)
Net of income taxes$(742)$(1,073)$331 
Derivatives designated as cash flow hedging instrumentsAmount of gain (loss) recognized in other comprehensive income (loss)Consolidated statement of income classificationAmount of net gain (loss) reclassified into earningsTotal effect on other comprehensive income (loss)
(In thousands)(In thousands)
Nine months ended September 30, 2021
Cash flow hedges$618 Interest expense — net$(4,414)$5,032 
Income tax effect(165)Income tax expense1,179 (1,344)
Net of income taxes$453 $(3,235)$3,688 
Nine months ended September 30, 2020
Cash flow hedges$(7,536)