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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
  __________________________________________________
FORM 10-Q
  __________________________________________________

 	 	
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.	
For the quarterly period ended September 30, 2015
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)
__________________________________________________

Delaware	 	80-0188269	
(State or other jurisdiction
of incorporation)	 	(I.R.S. Employer
Identification Number)	
 	 	 	
200 Talcott Avenue South
Watertown, MA	 	02472	
(Address of principal executive offices)	 	(Zip code)	
Registrant’s telephone number, including area code: (617) 673-8000
__________________________________________________
Indicate by check mark whether the registrant has (1) 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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	 	Accelerated filer	¨	
Non-accelerated filer	¨	(Do not check if smaller reporting company)	Smaller reporting company	¨	
Indicate by check mark whether the Registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).    Yes   ¨     No   x
As of October 23, 2015, the Company had 60,042,113 shares of common stock, $0.001 par value, outstanding.

 	

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BRIGHT HORIZONS FAMILY SOLUTIONS INC.
FORM 10-Q
For the quarterly period ended September 30, 2015 
TABLE OF CONTENTS

 	 	 	
 	 	Page	
PART I. FINANCIAL INFORMATION	
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3	
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15	
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23	
Item 4.	Controls and Procedures	23	
 	 	 	
PART II. OTHER INFORMATION	
Item 1.	Legal Proceedings	25	
Item 1A.	Risk Factors	25	
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25	
Item 3.	Defaults Upon Senior Securities	25	
Item 4	Mine Safety Disclosures	25	
Item 5.	Other Information	25	
Item 6.	Exhibits	26	

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PART I. FINANCIAL INFORMATION
t
Item 1. Condensed Consolidated Financial Statements (Unaudited)
t                
BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)

 	September 30,
2015	 	December 31,
2014	
ASSETS	 	 	 	
Current assets:	 	 	 	
Cash and cash equivalents	$	21,393	
 	 	$	87,886	
 	
Accounts receivable—net	73,331	
 	 	83,066	
 	
Prepaid expenses and other current assets	59,370	
 	 	39,147	
 	
Current deferred income taxes	13,047	
 	 	13,059	
 	
Total current assets	167,141	
 	 	223,158	
 	
Fixed assets—net	430,380	
 	 	398,947	
 	
Goodwill	1,141,285	
 	 	1,095,738	
 	
Other intangibles—net	394,545	
 	 	406,249	
 	
Deferred income taxes	—	
 	 	580	
 	
Other assets	20,590	
 	 	16,404	
 	
Total assets	$	2,153,941	
 	 	$	2,141,076	
 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	
Current liabilities:	 	 	 	
Current portion of long-term debt	$	9,550	
 	 	$	9,550	
 	
Borrowings on revolving line of credit	26,500	
 	 	—	
 	
Accounts payable and accrued expenses	139,456	
 	 	116,425	
 	
Deferred revenue	121,111	
 	 	133,048	
 	
Other current liabilities	18,995	
 	 	20,400	
 	
Total current liabilities	315,612	
 	 	279,423	
 	
Long-term debt—net	907,137	
 	 	911,627	
 	
Deferred rent and related obligations	47,113	
 	 	43,105	
 	
Other long-term liabilities	32,784	
 	 	23,401	
 	
Deferred revenue	4,909	
 	 	5,525	
 	
Deferred income taxes	131,563	
 	 	127,036	
 	
Total liabilities	1,439,118	
 	 	1,390,117	

Stockholders’ equity:	 	 	 	
Preferred stock, $0.001 par value; 25,000,000 shares authorized and no shares issued or outstanding at September 30, 2015 and December 31, 2014	—	
 	 	—	
 	
Common stock, $0.001 par value; 475,000,000 shares authorized; 60,005,293 and 61,534,802 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively	60	
 	 	62	
 	
Additional paid-in capital	986,285	
 	 	1,083,091	
 	
Accumulated other comprehensive loss	(31,024	)	 	(21,687	)	
Accumulated deficit	(240,498	)	 	(310,507	)	
Total stockholders’ equity	714,823	
 	 	750,959	
 	
Total liabilities and stockholders’ equity	$	2,153,941	
 	 	$	2,141,076	
 	
See notes to condensed consolidated financial statements.

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BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
(Unaudited)

 	Three months ended September 30,	 	Nine months ended September 30,	
 	2015	 	2014	 	2015	 	2014	
Revenue	$	365,944	
 	 	$	334,976	
 	 	$	1,086,849	
 	 	$	1,015,231	
 	
Cost of services	280,560	
 	 	262,115	
 	 	818,997	
 	 	782,107	
 	
Gross profit	85,384	
 	 	72,861	
 	 	267,852	
 	 	233,124	
 	
Selling, general and administrative expenses	36,419	
 	 	32,856	
 	 	110,154	
 	 	101,464	
 	
Amortization of intangible assets	7,224	
 	 	6,959	
 	 	20,978	
 	 	22,068	
 	
Income from operations	41,741	
 	 	33,046	
 	 	136,720	
 	 	109,592	
 	
Interest income	32	
 	 	48	
 	 	117	
 	 	74	
 	
Interest expense	(10,362	)	 	(8,443	)	 	(30,831	)	 	(25,810	)	
Income before income taxes	31,411	
 	 	24,651	
 	 	106,006	
 	 	83,856	
 	
Income tax expense	(10,853	)	 	(9,272	)	 	(35,997	)	 	(30,715	)	
Net income	$	20,558	
 	 	$	15,379	
 	 	$	70,009	
 	 	$	53,141	

Earnings per common share:	 	 	 	 	 	 	 	
Common stock—basic	$	0.34	
 	 	$	0.23	
 	 	$	1.14	
 	 	$	0.81	
 	
Common stock—diluted	$	0.33	
 	 	$	0.23	
 	 	$	1.11	
 	 	$	0.79	
 	
Weighted average number of common shares outstanding:	 	 	 	 	 	 	 	
Common stock—basic	60,290,842	
 	 	66,087,184	
 	 	61,112,263	
 	 	65,755,911	
 	
Common stock—diluted	61,846,725	
 	 	67,635,657	
 	 	62,631,444	
 	 	67,433,972	
 	
See notes to condensed consolidated financial statements.

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BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)

 	Three months ended September 30,	 	Nine months ended September 30,	
 	2015	 	2014	 	2015	 	2014	
Net income	$	20,558	
 	 	$	15,379	
 	 	$	70,009	
 	 	$	53,141	
 	
Other comprehensive income (loss):	 	 	 	 	 	 	 	
Foreign currency translation adjustments	(8,065	)	 	(16,562	)	 	(9,337	)	 	(9,548	)	
Total other comprehensive loss	(8,065	)	 	(16,562	)	 	(9,337	)	 	(9,548	)	
Comprehensive income (loss)	$	12,493	
 	 	$	(1,183	)	 	$	60,672	
 	 	$	43,593	
 	
See notes to condensed consolidated financial statements.

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BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 	Nine months ended September 30,	
 	2015	 	2014	
CASH FLOWS FROM OPERATING ACTIVITIES:	 	 	 	
Net income	$	70,009	
 	 	$	53,141	
 	
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	
Depreciation and amortization	58,539	
 	 	58,332	
 	
Amortization of original issue discount and deferred financing costs	2,672	
 	 	2,259	
 	
Loss on foreign currency transactions	273	
 	 	70	
 	
Non-cash revenue and other	(137	)	 	(239	)	
Loss on disposal of fixed assets	280	
 	 	376	
 	
Stock-based compensation	6,900	
 	 	6,462	
 	
Deferred rent	2,304	
 	 	2,132	
 	
Deferred income taxes	5,263	
 	 	(59	)	
Changes in assets and liabilities:	 	 	 	
Accounts receivable	11,388	
 	 	13,938	
 	
Prepaid expenses and other current assets	(19,267	)	 	(1,121	)	
Accounts payable and accrued expenses	16,380	
 	 	(3,617	)	
Deferred revenue	(12,732	)	 	(4,502	)	
Accrued rent and related obligations	1,917	
 	 	1,687	
 	
Other assets	(3,919	)	 	675	
 	
Other current and long-term liabilities	2,393	
 	 	(8,223	)	
Net cash provided by operating activities	142,263	
 	 	121,311	
 	
CASH FLOWS FROM INVESTING ACTIVITIES:	 	 	 	
Purchases of fixed assets	(61,415	)	 	(47,953	)	
Payments for acquisitions, net of cash acquired	(66,659	)	 	(6,522	)	
Settlement of purchase price for prior year acquisitions	23	
 	 	1,030	
 	
Net cash used in investing activities	(128,051	)	 	(53,445	)	
CASH FLOWS FROM FINANCING ACTIVITIES:	 	 	 	
Borrowings under revolving line of credit	118,100	
 	 	—	
 	
Repayments under revolving line of credit	(91,600	)	 	—	
 	
Principal payments of long-term debt	(7,163	)	 	(5,925	)	
Purchase of treasury stock	(117,538	)	 	(7,233	)	
Proceeds from issuance of common stock upon exercise of options	7,452	
 	 	13,656	
 	
Proceeds from issuance of restricted stock	3,864	
 	 	4,709	
 	
Tax benefit from stock-based compensation	6,379	
 	 	6,856	
 	
Net cash (used in) provided by financing activities	(80,506	)	 	12,063	
 	
Effect of exchange rates on cash and cash equivalents	(199	)	 	(506	)	
Net (decrease) increase in cash and cash equivalents	(66,493	)	 	79,423	
 	
Cash and cash equivalents—beginning of period	87,886	
 	 	29,585	
 	
Cash and cash equivalents—end of period	$	21,393	
 	 	$	109,008	

NON-CASH TRANSACTION:	 	 	 	
Fixed asset purchases recorded in accounts payable and accrued expenses	$	3,500	
 	 	$	2,000	
 	
SUPPLEMENTAL CASH FLOW INFORMATION:	 	 	 	
Cash payments of interest	$	28,429	
 	 	$	24,259	
 	
Cash payments of taxes	$	43,153	
 	 	$	30,597	
 	
See 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 workplace services for employers and families throughout the United States and the United Kingdom, and also in Puerto Rico, Canada, Ireland, the Netherlands, and India. Workplace services include center-based child care, education and enrichment programs, elementary school education, back-up dependent care (for children and elders), before and after school care, college preparation and admissions counseling, tuition reimbursement program management, and other family support services.
Basis of Presentation—The accompanying unaudited condensed consolidated balance sheet as of September 30, 2015 and the condensed consolidated statements of operations, comprehensive income and cash flows for the interim periods ended September 30, 2015 and 2014 have been prepared by the Company in accordance with accounting principles generally accepted in the U.S. for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required in accordance with generally accepted accounting principles 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, 2014.
In the opinion of the Company’s management, the Company’s unaudited condensed consolidated balance sheet as of September 30, 2015 and the condensed consolidated statements of operations, comprehensive income and cash flows for the interim periods ended September 30, 2015 and 2014, 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.
Stock Offerings—On January 30, 2013, the Company completed an initial public offering (the "Offering”) and, after the exercise of the overallotment option on February 21, 2013, issued a total of 11.6 million shares of common stock. Subsequent to the Offering, on June 19, 2013, March 25, 2014, December 10, 2014, May 27, 2015, and August 10, 2015, certain of the Company’s shareholders commenced the sale of 9.8 million, 7.9 million, 8.0 million, 3.0 million, and 3.0 million shares, respectively, of the Company’s common stock in secondary offerings ("secondary offerings”). The Company did not receive proceeds from the sale of shares in the secondary offerings. The Company incurred $0.5 million and $0.6 million in expenses during the nine months ended September 30, 2015 and September 30, 2014, respectively, in relation to the secondary offerings in 2015 and 2014, which are included in selling, general and administrative expenses. The Company purchased 0.7 million, 1.25 million and 4.5 million of the shares sold in the August 2015, May 2015 and December 2014 secondary offerings, respectively, from investment funds affiliated with Bain Capital Partners, LLC at the same price per share paid by the underwriter to the selling shareholders.
As of September 30, 2015, investment funds affiliated with Bain Capital Partners, LLC held approximately 33.5% of our common stock.
New Accounting Pronouncements—In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09,  Revenue from Contracts with Customers , which provides guidance for revenue recognition. The standard's core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration included in the transaction price and allocating the transaction price to each separate performance obligation. On July 9, 2015, the FASB voted to defer the effective date by one year. The guidance is effective for interim and annual reporting periods beginning on or after December 15, 2017. Early adoption is permitted, but not for periods beginning on or before December 15, 2016. The Company is currently in the process of evaluating the impact of adoption of this ASU on the Company's consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.   This standard amends existing guidance to require the presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability. This ASU is effective for fiscal years beginning after December 15, 2015, with early adoption permitted. The Company does not expect this standard to have a significant effect on the Company's consolidated financial statements.    
In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.   This standard amends existing guidance to simplify the accounting for adjustments made to provisional amounts recognized in a business combination, and the amendments in this update eliminate the requirement to retrospectively account for those adjustments. This ASU is effective for fiscal years beginning after

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December 15, 2015. The Company does not expect this standard to have a significant effect on the Company's consolidated financial statements.    
2. GOODWILL AND INTANGIBLE ASSETS
The changes in the carrying amount of goodwill for the nine months ended September 30, 2015 are as follows (in thousands):

 	Full service
center-based
care	 	Back-up
dependent
care	 	Other
educational
advisory
services	 	Total	
Beginning balance at December 31, 2014	$	913,043	
 	 	$	158,894	
 	 	$	23,801	
 	 	$	1,095,738	
 	
Additions from acquisitions	51,393	
 	 	—	
 	 	—	
 	 	51,393	
 	
Adjustments to prior year acquisitions	(15	)	 	—	
 	 	—	
 	 	(15	)	
Effect of foreign currency translation	(5,831	)	 	—	
 	 	—	
 	 	(5,831	)	
Balance at September 30, 2015	$	958,590	
 	 	$	158,894	
 	 	$	23,801	
 	 	$	1,141,285	

The Company also has intangible assets, which consist of the following at September 30, 2015 and December 31, 2014 (in thousands):

 	Weighted average
amortization period	 	Cost	 	Accumulated
amortization	 	Net carrying
amount	
September 30, 2015	 	 	 	 	 	 	 	
Definite-lived intangibles:	 	 	 	 	 	 	 	
Customer relationships	14 years	 	$	408,413	
 	 	$	(200,886	)	 	$	207,527	
 	
Trade names	8 years	 	6,371	
 	 	(2,649	)	 	3,722	
 	
Non-compete agreements	5 years	 	53	
 	 	(47	)	 	6	
 	
 	 	 	414,837	
 	 	(203,582	)	 	211,255	
 	
Indefinite-lived intangibles:	 	 	 	 	 	 	 	
Trade names	N/A	 	183,290	
 	 	—	
 	 	183,290	
 	
 	 	 	$	598,127	
 	 	$	(203,582	)	 	$	394,545	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Weighted average
amortization period	 	Cost	 	Accumulated
amortization	 	Net carrying
amount	
December 31, 2014	 	 	 	 	 	 	 	
Definite-lived intangibles:	 	 	 	 	 	 	 	
Customer relationships	15 years	 	$	400,097	
 	 	$	(180,900	)	 	$	219,197	
 	
Trade names	8 years	 	5,772	
 	 	(2,177	)	 	3,595	
 	
Non-compete agreements	5 years	 	54	
 	 	(44	)	 	10	
 	
 	 	 	405,923	
 	 	(183,121	)	 	222,802	
 	
Indefinite-lived intangibles:	 	 	 	 	 	 	 	
Trade names	N/A	 	183,447	
 	 	—	
 	 	183,447	
 	
 	 	 	$	589,370	
 	 	$	(183,121	)	 	$	406,249	

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The Company estimates that it will record amortization expense related to intangible assets existing as of September 30, 2015 as follows over the next five years (in thousands):

 	Estimated
amortization
expense	
Remainder of 2015	$	6,797	
 	
2016	$	27,017	
 	
2017	$	25,787	
 	
2018	$	24,698	
 	
2019	$	23,770	
 	
3. ACQUISITIONS
As part of the Company’s growth strategy to expand through strategic and synergistic acquisitions, the Company has made the following acquisitions in the nine months ended September 30, 2015 and year ended December 31, 2014. The goodwill resulting from these acquisitions arises largely from synergies expected from combining the operations of the businesses acquired with our existing operations, as well as from benefits derived from the assembled workforce acquired.
2015 Acquisitions
On May 19, 2015, the Company acquired Hildebrandt Learning Centers, LLC, an operator of 40 centers in the United States, for cash consideration of $19.3 million and contingent consideration of $0.5 million, which was accounted for as a business combination. The Company recorded goodwill of $13.2 million related to the full service center-based care segment, which will be deductible for tax purposes, and intangible assets of $5.7 million, consisting of customer relationships that will be amortized over 12 years. The Company also acquired working capital of $0.4 million, including cash of $1.5 million, and fixed assets of $0.5 million.
On July 15, 2015, the Company acquired Active Learning Childcare Limited, an operator of nine centers in the United Kingdom, for cash consideration of $42.3 million, which was accounted for as a business combination. The Company recorded goodwill of $30.0 million related to the full service center-based care segment, which will not be deductible for tax purposes, and intangible assets of $3.4 million, consisting primarily of customer relationships that will be amortized over six years. The Company also acquired a working capital deficit of $1.1 million, including cash of $1.7 million, fixed assets of $10.7 million, and deferred tax liabilities of $0.7 million.
Our acquisitions of Hildebrandt Learning Centers, LLC and Active Learning Childcare Limited contributed approximately $16.7 million of incremental revenue in the nine months ended September 30, 2015.
During the nine months ended September 30, 2015, the Company also acquired four centers in the United States and one in the United Kingdom, in five separate business acquisitions which were each accounted for as business combinations. The centers were acquired for cash consideration of $8.3 million, net of cash acquired of $0.3 million, and contingent consideration of $0.9 million. The Company recorded goodwill of $8.2 million related to the full service center-based care segment, a portion of which will be deductible for tax purposes. Intangible assets of $0.8 million, consisting of customer relationships that will be amortized over five years were also recorded in relation to these acquisitions.
The 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 the Company gathers additional information regarding the assets acquired and the liabilities assumed. The operating results for the acquired businesses are included in the consolidated results of operations from the dates of acquisition, which were not material to the Company's financial results.
2014 Acquisitions
During the year ended December 31, 2014, the Company acquired two businesses that operate five centers in the United States for cash consideration of $13.2 million, which were each accounted for as business combinations. The Company recorded goodwill of $11.1 million related to the full service center-based care segment, which will be deductible for tax purposes. Intangible assets of $2.1 million, consisting primarily of customer relationships, fixed assets of $0.9 million, and a working capital deficit of $0.9 million, were also recorded in relation to these acquisitions. The allocation of purchase price consideration is based on 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, 2015, the purchase price allocation for one of these two acquisitions remains open as the Company gathers additional information regarding the assets acquired and the liabilities assumed.

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4. CREDIT ARRANGEMENTS AND DEBT OBLIGATIONS
Outstanding term loan borrowings were as follows at September 30, 2015 and December 31, 2014 (in thousands):

 	September 30,
2015	 	December 31,
2014	
Term loans	$	932,038	
 	 	$	939,200	
 	
Deferred financing costs and original issue discount	(15,351	)	 	(18,023	)	
Total debt	916,687	
 	 	921,177	
 	
Less current maturities	9,550	
 	 	9,550	
 	
Long-term debt	$	907,137	
 	 	$	911,627	
 	
The Company's $1.1 billion senior credit facilities consist of $955.0 million in secured term loan facilities and a $100.0 million revolving credit facility. In conjunction with a debt refinancing in January 2013, $790.0 million in senior secured term loans were issued, with the subsequent issuance of $165.0 million in additional term loans in December 2014. The term loans and revolving credit facility mature on January 30, 2020 and 2018, respectively.
The effective interest rate for the term loans was 3.84% at September 30, 2015 and the weighted average interest rate was 3.92% for the nine months ended September 30, 2015. There were borrowings of $26.5 million outstanding on the $100.0 million revolving credit facility at September 30, 2015, and $73.5 million of the revolving credit facility was available for borrowings. The weighted average interest rate for the revolving credit facility was 3.8% for the nine months ended September 30, 2015.
The Company incurred financing fees of $12.7 million and original issue discount costs of $7.9 million in connection with the 2013 debt refinancing and $1.6 million and $1.7 million in connection with the 2014 financing. These fees are being amortized over the terms of the related debt instruments. Amortization expense of deferred financing costs and original issue discount costs in the nine months ended September 30, 2015 were $1.6 million and $1.1 million, respectively, which are included in interest expense.
The future principal payments under the term loans at September 30, 2015 are as follows (in thousands):

Remainder of 2015	$	2,388	
 	
2016	9,550	
 	
2017	9,550	
 	
2018	9,550	
 	
2019	9,550	
 	
Thereafter	891,450	
 	
 	$	932,038	
 	
5. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing net income by the weighted-average common shares outstanding. Diluted earnings per share is calculated by dividing net income by the weighted-average common shares and potentially dilutive securities outstanding during the period.
Earnings per share is calculated using the two-class method, which requires the allocation of earnings to each class of common stock outstanding and to unvested stock-based payment awards that participate equally in dividends with common stock, also referred to herein as unvested participating shares.
The Company’s unvested stock-based payment awards include unvested shares awarded as restricted stock awards at the discretion of the Company’s Board of Directors. The restricted stock awards generally vest at the end of three years. See Note 6 for a discussion of the unvested stock awards and issuances.

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Earnings per Share - Basic
The following table sets forth the computation of earnings per share using the two-class method for unvested participating shares (in thousands, except share and per share amounts):

 	Three months ended 
 September 30,	 	Nine months ended 
 September 30,	
 	2015	 	2014	 	2015	 	2014	
Basic earnings per share:	 	 	 	 	 	 	 	
Net income	$	20,558	
 	 	$	15,379	
 	 	$	70,009	
 	 	$	53,141	

Allocation of net income to common stockholders:	 	 	 	 	 	 	 	
Common stock	$	20,415	
 	 	$	15,319	
 	 	$	69,536	
 	 	$	52,936	
 	
Unvested participating shares	143	
 	 	60	
 	 	473	
 	 	205	
 	
 	$	20,558	
 	 	$	15,379	
 	 	$	70,009	
 	 	$	53,141	

Weighted average number of common shares:	 	 	 	 	 	 	 	
Common stock	60,290,842	
 	 	66,087,184	
 	 	61,112,263	
 	 	65,755,911	
 	
Unvested participating shares	422,725	
 	 	259,525	
 	 	415,472	
 	 	254,719	

Earnings per share:	 	 	 	 	 	 	 	
Common stock	$	0.34	
 	 	$	0.23	
 	 	$	1.14	
 	 	$	0.81	
 	
Earnings per Share - Diluted
The Company calculates diluted earnings per share for common stock using the more dilutive of (1) the treasury stock method, or (2) the two-class method. The following table sets forth the computation of diluted earnings per share using the two-class method for unvested participating shares (in thousands, except share and per share amounts):

 	Three months ended 
 September 30,	 	Nine months ended 
 September 30,	
 	2015	 	2014	 	2015	 	2014	
Diluted earnings per share:	 	 	 	 	 	 	 	
Earnings allocated to common stock	$	20,415	
 	 	$	15,319	
 	 	$	69,536	
 	 	$	52,936	
 	
Plus earnings allocated to unvested participating shares	143	
 	 	60	
 	 	473	
 	 	205	
 	
Less adjusted earnings allocated to unvested participating shares	(139	)	 	(59	)	 	(460	)	 	(200	)	
Earnings allocated to common stock	$	20,419	
 	 	$	15,320	
 	 	$	69,549	
 	 	$	52,941	

Weighted average number of common shares:	 	 	 	 	 	 	 	
Common stock	60,290,842	
 	 	66,087,184	
 	 	61,112,263	
 	 	65,755,911	
 	
Effect of dilutive securities	1,555,883	
 	 	1,548,473	
 	 	1,519,181	
 	 	1,678,061	
 	
 	61,846,725	
 	 	67,635,657	
 	 	62,631,444	
 	 	67,433,972	

Earnings per share:	 	 	 	 	 	 	 	
Common stock	$	0.33	
 	 	$	0.23	
 	 	$	1.11	
 	 	$	0.79	
 	
Options outstanding to purchase 0.1 million and 0.3 million shares of common stock were excluded from diluted earnings per share for the three and nine months ended September 30, 2015, respectively, and 0.9 million shares of common stock were excluded from diluted earnings per share for the three and nine months ended September 30, 2014, respectively, since their effect was anti-dilutive, which may be dilutive in the future.

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6. STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION
Treasury Stock
On March 28, 2014, the Board of Directors of the Company authorized the repurchase of up to $225.0 million of its common stock. Under this authorization, the Company repurchased a total of 5.0 million shares for $221.6 million in the year ended December 31, 2014, including 4.5 million shares that were repurchased on December 16, 2014, from investment funds affiliated with Bain Capital Partners, LLC in connection with the sale of 8.0 million shares through an underwritten secondary offering to the public that commenced on December 10, 2014.
On February 4, 2015, the Board of Directors of the Company authorized the repurchase of up to $250.0 million of its common stock. The repurchase program has no expiration date and replaced the prior 2014 authorization. During the nine months ended September 30, 2015, 2.1 million shares were repurchased for $117.5 million, including 1.25 million and 0.7 million shares that were repurchased on June 1, 2015 and August 14, 2015, respectively, from investment funds affiliated with Bain Capital Partners, LLC, each in connection with the sale of 3.0 million shares through underwritten secondary offerings to the public that commenced on May 27, 2015 and August 10, 2015, respectively. At September 30, 2015, $132.5 million is available for repurchase under this program. All repurchased shares have been retired.
Equity Incentive Plan
The Company has the 2012 Omnibus Long-Term Incentive Plan (the "Plan"), which became effective on January 24, 2013, and allows for the issuance of equity awards of up to 5.0 million shares of common stock. As of September 30, 2015, there were approximately 2.9 million shares of common stock available for grant.
During the nine months ended September 30, 2015, the Company granted options to purchase 436,200 shares of common stock at a weighted average price of $49.94 per share and a requisite service period of five years, with 60% of the options vesting on the third anniversary of the date of grant and 20% vesting on each of the fourth and fifth anniversaries. The weighted average fair value of options granted during the nine months ended September 30, 2015 was $14.96 per share. The fair value of each option to purchase common stock was estimated on the date of grant using the Black-Scholes option pricing model using the following weighted average assumptions: expected dividend yield of 0%; expected volatility of 30.0%; risk free interest rate of 1.49%; and expected life of options of 5.3 years.
Restricted stock awards are also granted at the discretion of the Board of Directors as allowed under the Plan. During the nine months ended September 30, 2015, 163,200 shares of restricted stock were granted to certain senior managers and key employees, which vest on the earliest of the third anniversary of the grant date, a change of control of the Company, and the termination of employment by reason of death or disability, and are accounted for as nonvested stock. The restricted stock was sold for a price equal to 50% of the fair value of the stock at the date of grant, or $23.68. Proceeds from the issuance of restricted stock are recorded as other liabilities in the consolidated balance sheet until the earlier of vesting or forfeiture of the awards. Stock-based compensation expense for restricted stock awards is calculated based on the fair value of the award on the date of grant, which will be recognized on a straight line basis over the requisite service period. The unvested shares of restricted stock participate equally in dividends with common stock. At September 30, 2015, there were 422,725 unvested shares of restricted stock outstanding, which were legally issued at the date of grant but are not considered common stock issued and outstanding in accordance with accounting guidance until the requisite service period is fulfilled. All outstanding shares of restricted stock are expected to vest.
Restricted stock units are awarded to members of the Board of Directors as allowed under the Plan. The awards allow for the issuance of a share of the Company's common stock for each vested unit upon the earliest of termination of service as a member of the Board of Directors or five years after the date of the award. During the nine months ended September 30, 2015, 9,000 restricted stock units were awarded at a weighted average fair value of $53.18 for a total value of $0.5 million. At September 30, 2015, there were 15,066 restricted stock units outstanding, which vested upon award.
The Company recorded stock-based compensation expense of $6.4 million in selling, general and administrative expenses and $0.5 million in cost of services during the nine months ended September 30, 2015.
At September 30, 2015, there was $15.3 million of total unrecognized compensation expense related to unvested stock-based compensation arrangements granted under the Plan, which is expected to be recognized over the remaining requisite service periods of approximately two years.
7. INCOME TAXES
The Company's effective income tax rates were 34.6% and 37.6% for the three months ended September 30, 2015 and 2014, respectively. The Company's effective income tax rates were 34.0% and 36.6% for the nine months ended September 30, 2015 and 2014, respectively. The effective income tax rate is based upon estimated income before income taxes for the year, by jurisdiction, and estimated permanent tax adjustments. The effective income tax rate may fluctuate from quarter

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to quarter for various reasons, including discrete items such as settlement of foreign, Federal and State tax issues. The difference between the effective income tax rates is primarily attributable to a $1.3 million benefit recorded in the first quarter of 2015 related to the adjustment of certain permanent and temporary items.
The Company’s unrecognized tax benefits were $0.7 million at September 30, 2015 and December 31, 2014. Interest and penalties related to unrecognized tax benefits were $0.9 million at September 30, 2015 and December 31, 2014.
The Company expects the unrecognized tax benefits to change over the next twelve months if certain tax matters settle with the applicable taxing jurisdiction during this time frame, or, if the applicable statutes of limitations lapse. The impact of the amount of such changes to previously recorded uncertain tax positions could range from zero to $0.7 million, exclusive of interest and penalties.
The Company and its domestic subsidiaries are subject to U.S. Federal income tax as well as multiple state jurisdictions. U.S. Federal income tax returns are typically subject to examination by the Internal Revenue Service ("IRS") and the statute of limitations for Federal income tax returns is three years. The Company's filings for 2012 through 2014 are subject to audit based upon the Federal statute of limitations. An audit of a subsidiary's filing for 2013 began in the second quarter of 2015.
State income tax returns are generally subject to examination for a period of three to five years after filing of the respective return. The state impact of any Federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. There was one state audit completed with no material adjustment during the first quarter of 2015. As of September 30, 2015, there was one state income tax audit still in process and the tax years from 2010 to 2014 are subject to audit.
The Company is also subject to corporate income tax at its subsidiaries located in the United Kingdom, the Netherlands, India, Canada, Ireland, and Puerto Rico. The tax returns for the Company's subsidiaries located in foreign jurisdictions are subject to examination for periods ranging from one to seven years.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company defines fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date and applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. The hierarchy gives the highest priority to observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The Company uses observable inputs where relevant and whenever possible.
Level 1—Quoted prices are available in active markets for identical investments as of the reporting date.
Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, revolving line of credit, and long-term debt. The fair value of the Company’s financial instruments, other than long-term debt, approximates their carrying value. As of September 30, 2015, the Company’s long-term debt had a book value of $932.0 million and a fair value of $933.6 million based on quoted market prices for similar instruments and a model that considers observable inputs (Level 2 inputs). As of December 31, 2014, the Company's long-term debt had a book value of $939.2 million and a fair value of $921.6 million based on quoted market prices for similar instruments and a model that considers observable inputs (Level 2 inputs).
Financial instruments that potentially expose the Company to concentrations of credit risk consist mainly of cash and cash equivalents and accounts receivable. The Company mitigates its exposure by maintaining its cash and cash equivalents in financial institutions of high credit standing. The Company’s accounts receivable, which are derived primarily from the services it provides, are dispersed across many clients in various industries with no single client accounting for more than 10% of the Company’s net revenue or accounts receivable. The Company believes that no significant credit risk exists at September 30, 2015.

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9. SEGMENT INFORMATION
Bright Horizons' workplace services are primarily comprised of full service center-based child care, back-up dependent care, and other educational advisory services. Full service center-based care includes the traditional center-based child care, preschool, and elementary education, which have similar operating characteristics and meet the criteria for aggregation. Full service center-based care derives its revenues primarily from contractual arrangements with corporate clients and from tuition. The Company’s back-up dependent care services consist of center-based back-up child care, in-home care, mildly ill care, and adult/elder care. The Company’s other educational advisory services consists of the remaining services, including college preparation and admissions counseling, tuition reimbursement program administration, and related consulting services, which do not meet the quantitative thresholds for separate disclosure and are not material for segment reporting individually or in the aggregate. The Company and its chief operating decision makers evaluate performance based on revenues and income from operations.
The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements and, as a result, no additional information is produced or included herein.

 	Full service
center-based
care	 	Back-up
dependent
care	 	Other
educational
advisory
services	 	Total	
 	(In thousands)	
Three months ended September 30, 2015	 	 	 	 	 	 	 	
Revenue	$	307,512	
 	 	$	47,935	
 	 	$	10,497	
 	 	$	365,944	
 	
Amortization of intangible assets	6,899	
 	 	181	
 	 	144	
 	 	7,224	
 	
Income from operations (1)	24,414	
 	 	14,082	
 	 	3,245	
 	 	41,741	
 	
Three months ended September 30, 2014	 	 	 	 	 	 	 	
Revenue	$	282,798	
 	 	$	43,493	
 	 	$	8,685	
 	 	$	334,976	
 	
Amortization of intangible assets	6,634	
 	 	181	
 	 	144	
 	 	6,959	
 	
Income from operations	19,079	
 	 	12,356	
 	 	1,611	
 	 	33,046	
 	
(1) For the three months ended September 30, 2015, income from operations includes secondary offering and completed acquisition expenses of $0.2 million which has been allocated to full service center-based care.

 	Full service
center-based
care	 	Back-up
dependent
care	 	Other
educational
advisory
services	 	Total	
 	(In thousands)	
Nine months ended September 30, 2015	 	 	 	 	 	 	 	
Revenue	$	925,027	
 	 	$	133,940	
 	 	$	27,882	
 	 	$	1,086,849	
 	
Amortization of intangibles	20,003	
 	 	543	
 	 	432	
 	 	20,978	
 	
Income from operations (1)	89,012	
 	 	42,083	
 	 	5,625	
 	 	136,720	
 	
Nine months ended September 30, 2014	 	 	 	 	 	 	 	
Revenue	$	870,546	
 	 	$	120,689	
 	 	$	23,996	
 	 	$	1,015,231	
 	
Amortization of intangibles	21,090	
 	 	543	
 	 	435	
 	 	22,068	
 	
Income from operations (2)	70,587	
 	 	36,229	
 	 	2,776	
 	 	109,592	
 	
(1) For the nine months ended September 30, 2015, income from operations includes secondary offering and completed acquisition expenses of $0.5 million which has been allocated to full service center-based care.
(2) For the nine months ended September 30, 2014, income from operations includes secondary offering and completed acquisition expenses of $0.6 million which has been allocated to full service center-based care.

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

Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). The following cautionary statements are being made pursuant to the provisions of the Act and with the intention of obtaining the benefits of the “safe harbor” provisions of the Act. These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “expects,” “may,” “will,” “should,” “seeks,” “projects,” “approximately,” “intends,” “plans,” “estimates” or “anticipates,” or, in each case, their negatives or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Quarterly Report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies, the industries in which we and our partners operate, the impact of accounting principles and policies, the outcome of acquisitions and the subsequent integration and expected synergies, our fair value estimates, the vesting of Company equity, the recognition of compensation expense, unrecognized tax benefits and the impact of uncertain tax positions, our tax rates, the outcome of tax audit and tax liabilities, our credit risk, the impact of seasonality on results of operations, the outcome of litigation and our insurance coverage, the cost, timing and impact of the remediation of our material weakness in internal controls, borrowings under our credit facility, the need for additional debt or equity financings and our ability to obtain such financing, our sources of cash flow, our ability to fund operations, make capital expenditures and payments, and complete share repurchases with cash and cash equivalents and borrowings, and our ability to meet financial obligations and comply with covenants of our credit facility.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 and other factors disclosed from time to time in our other filings with the Securities and Exchange Commission.
Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may not be indicative of results or developments in subsequent periods.
Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statement that we make in this Quarterly Report speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments, except as may be required by law.

Introduction and Overview
The following is a discussion of the significant factors affecting the consolidated operating results, financial condition and liquidity and cash flows of Bright Horizons Family Solutions Inc. (“we” or the “Company”) for the three and nine months ended September 30, 2015 compared to the three and nine months ended September 30, 2014. This discussion should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the Consolidated Financial Statements of the Company and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
Our business is subject to seasonal and quarterly fluctuations. Demand for child care and early education and elementary school services has historically decreased during the summer months when school is not in session, at which time families are often on vacation or have alternative child care arrangements. In addition, our enrollment declines as older children transition to elementary schools. Demand for our services generally increases in September and October coinciding with the beginning of the new school year and remains relatively stable throughout the rest of the school year. In addition, use of our back-up dependent care services tends to be higher when schools are not in session and during holiday periods, which can increase the operating costs of the program and impact the results of operations. Results of operations may also fluctuate from quarter to quarter as a result of, among other things, the performance of existing centers, including enrollment and staffing fluctuations, the number and timing of new center openings, acquisitions and management transitions, the length of time

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required for new centers to achieve profitability, center closings, refurbishment or relocation, the contract model mix (profit and loss versus cost-plus) of new and existing centers, the timing and level of sponsorship payments, competitive factors and general economic conditions.
Results of Operations
The following table sets forth statement of operations data as a percentage of revenue for the three months ended September 30, 2015 and 2014 (in thousands, except percentages):

 	Three Months Ended September 30,	
 	2015	 	%	 	2014	 	%	
Revenue	$	365,944	
 	 	100.0	 %	 	$	334,976	
 	 	100.0	 %	
Cost of services (1)	280,560	
 	 	76.7	 %	 	262,115	
 	 	78.2	 %	
Gross profit	85,384	
 	 	23.3	 %	 	72,861	
 	 	21.8	 %	
Selling, general and administrative expenses (2)	36,419	
 	 	10.0	 %	 	32,856	
 	 	9.8	 %	
Amortization of intangible assets	7,224	
 	 	2.0	 %	 	6,959	
 	 	2.1	 %	
Income from operations	41,741	
 	 	11.3	 %	 	33,046	
 	 	9.9	 %	
Net interest expense and other	(10,330	)	 	(2.8	)%	 	(8,395	)	 	(2.5	)%	
Income before income tax	31,411	
 	 	8.5	 %	
 	24,651	
 	
 	7.4	 %	
Income tax expense	(10,853	)	 	(3.0	)%	 	(9,272	)	 	(2.8	)%	
Net income	$	20,558	
 	 	5.5	 %	 	$	15,379	
 	 	4.6	 %	
Adjusted EBITDA (3)	$	64,729	
 	 	17.7	 %	 	$	55,284	
 	 	16.5	 %	
Adjusted income from operations (3)	$	41,906	
 	 	11.5	 %	 	$	33,046	
 	 	9.9	 %	
Adjusted net income (3)	$	26,509	
 	 	7.2	 %	 	$	21,367	
 	 	6.4	 %	
The following table sets forth statement of operations data as a percentage of revenue for the nine months ended September 30, 2015 and 2014 (in thousands, except percentages):

 	Nine Months Ended September 30,	
 	2015	 	%	 	2014	 	%	
Revenue	$	1,086,849	
 	 	100.0	 %	 	$	1,015,231	
 	 	100.0	 %	
Cost of services (1)	818,997	
 	 	75.4	 %	 	782,107	
 	 	77.0	 %	
Gross profit	267,852	
 	 	24.6	 %	 	233,124	
 	 	23.0	 %	
Selling, general and administrative expenses (2)	110,154	
 	 	10.1	 %	 	101,464	
 	 	10.0	 %	
Amortization of intangible assets	20,978	
 	 	1.9	 %	 	22,068	
 	 	2.2	 %	
Income from operations	136,720	
 	 	12.6	 %	 	109,592	
 	 	10.8	 %	
Net interest expense and other	(30,714	)	 	(2.8	)%	 	(25,736	)	 	(2.5	)%	
Income before income tax	106,006	
 	 	9.8	 %	 	83,856	
 	 	8.3	%	
Income tax expense	(35,997	)	 	(3.3	)%	 	(30,715	)	 	(3.0	)%	
Net income	$	70,009	
 	 	6.5	 %	 	$	53,141	
 	 	5.3	%	
Adjusted EBITDA (3)	$	204,974	
 	 	18.9	 %	 	$	177,068	
 	 	17.4	 %	
Adjusted income from operations (3)	$	137,231	
 	 	12.6	 %	 	$	110,142	
 	 	10.8	 %	
Adjusted net income (3)	$	86,685	
 	 	8.0	 %	 	$	71,535	
 	 	7.0	 %	
 	 	
(1)	Cost of services consists of direct expenses associated with the operation of child care centers, and direct expenses to provide back-up dependent care services, including fees to back-up care providers, and educational advisory services. Direct expenses consist primarily of salaries, taxes and benefits for personnel, food costs, program supplies and materials, and parent marketing and facilities costs, which include occupancy costs and depreciation.	
 	 	
(2)	Selling, general and administrative expenses consist primarily of salaries, payroll taxes and benefits (including stock-based compensation costs) for corporate, regional and business development personnel. Other overhead costs include information technology, occupancy costs for corporate and regional personnel, professional services fees, including accounting and legal services, and other general corporate expenses.	
 	 	
(3)	Adjusted EBITDA, adjusted income from operations and adjusted net income are non-GAAP measures, which are reconciled to net income below.	

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Three Months Ended September 30, 2015 Compared to the Three Months Ended September 30, 2014 
Revenue. Revenue increased $30.9 million, or 9%, to $365.9 million for the three months ended September 30, 2015 from $335.0 million for the same period in 2014. Revenue growth is primarily attributable to contributions from new and ramping child care and early education centers, expanded sales of our back-up dependent care services, and typical annual tuition increases of 3-4%, partially offset by the effects of foreign currency translation on our European operations. Revenue generated by full service center-based care services in the three months ended September 30, 2015 increased by $24.7 million, or 9%, when compared to the same period in 2014, and overall enrollment increased approximately 8%. Our acquisitions of Hildebrandt Learning Centers, LLC ("HLC"), an operator of 40 centers in the United States on May 19, 2015, and of Active Learning Childcare Limited ("ALC"), an operator of 9 centers in the United Kingdom on July 15, 2015, contributed approximately $12.7 million of incremental revenue in the full service center-based care services segment during the quarter. At September 30, 2015, we operated 928 child care and early education centers compared to 876 centers at September 30, 2014.
Revenue generated by back-up dependent care services in the three months ended September 30, 2015 increased by $4.4 million, or 10%, when compared to the same period in 2014. Additionally, revenue generated by other educational advisory services in the three months ended September 30, 2015 increased by $1.8 million, or 21%, when compared to the same period in 2014.
Cost of Services. Cost of services increased $18.5 million, or 7%, to $280.6 million for the three months ended September 30, 2015 from $262.1 million for the same period in 2014. Cost of services in the full service center-based care services segment increased $16.4 million, or 7%, to $249.0 million in the three months ended September 30, 2015 when compared to the same period in 2014. Personnel costs, which typically represent approximately 70% of total cost of services for this segment, increased 8% and program supplies, materials, food and facilities costs increased 6% in connection with the enrollment growth at new and existing centers, and the incremental occupancy costs associated with centers that have been added since September 30, 2014. Cost of services in the back-up dependent care segment increased $2.1 million, or 8%, to $27.3 million in the three months ended September 30, 2015, primarily for personnel costs and for increased care provider fees associated with the higher levels of back-up services provided. Cost of services in the other educational advisory services segment decreased $0.1 million, or 2%, to $4.3 million in the three months ended September 30, 2015 due to a decrease in depreciation from assets becoming fully depreciated, partially offset by increases in personnel and technology costs related to the incremental sales of these services.
Gross Profit. Gross profit increased $12.5 million, or 17%, to $85.4 million for the three months ended September 30, 2015 from $72.9 million for the same period in 2014. Gross profit margin as a percentage of revenue was 23% for the three months ended September 30, 2015 compared to 22% for the same period in 2014. The increase in gross profit is primarily due to contributions from new centers and from ramping profit and loss centers, which achieve proportionately lower levels of operating costs in relation to revenue as they ramp up enrollment to steady state levels, increased enrollment in our mature profit and loss centers, effective operating cost management, and expanded back-up services revenue with proportionately lower direct costs of services.
Selling, General and Administrative Expenses ("SGA"). SGA increased $3.5 million, or 11%, to $36.4 million for the three months ended September 30, 2015 compared to $32.9 million for the same period in 2014, and was 10% of revenue for the three months ended September 30, 2015 consistent with the same period in 2014. Results for the three months ended September 30, 2015 included approximately $0.2 million of costs related to secondary offerings and completed acquisitions. After taking these charges into account, SGA increased over the comparable 2014 period due to increases in personnel costs including annual wage increases, continued investments in technology and routine increases in other SGA costs.
Amortization. Amortization expense on intangible assets of $7.2 million for the three months ended September 30, 2015 increased from $7.0 million for the same period in 2014 due to the acquisitions completed in 2015 offset by decreases from certain intangible assets becoming fully amortized during the 2015 period.
Income from Operations. Income from operations increased by $8.7 million, or 26%, to $41.7 million for the three months ended September 30, 2015 when compared to the same period in 2014. Income from operations was 11% of revenue for the three months ended September 30, 2015, compared to 10% of revenue for the three months ended September 30, 2014. The increase in income from operations was due to the following:
 	 	
•	In the full service center-based care segment, income from operations increased $5.3 million for the three months ended September 30, 2015. Results for the three months ended September 30, 2015 included $0.2 million of costs related to secondary offerings and completed acquisitions. In addition to these items, income from operations increased over the comparable period due to tuition increases and enrollment gains over the prior year as well as contributions from new centers that have been added since September 30, 2014, and effective cost management, partially offset by the costs incurred during the ramp-up of certain new lease/consortium centers opened during 2014 and 2015 and the effects of foreign currency translation on our European business.	

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•	Income from operations for the back-up dependent care segment increased $1.7 million in the three months ended September 30, 2015 due to the expanding revenue base.	
 	 	
•	Income from operations in the other educational advisory services segment increased $1.6 million for the three months ended September 30, 2015 compared to the same period in 2014 due to the expanding revenue base.	
Net Interest Expense and Other. Net interest expense and other increased to $10.3 million for the three months ended September 30, 2015 from $8.4 million for the same period in 2014 due to the increase in debt from the issuance of $165.0 million in additional term loans in December 2014 and borrowings on our line of credit in 2015.
Income Tax Expense. We recorded income tax expense of $10.9 million during the three months ended September 30, 2015 compared to $9.3 million during the comparable period in 2014 at an effective rate of 35% for the three months ended September 30, 2015 and 38% for the three months ended September 30, 2014. The difference between the effective income tax rate of 35% and the statutory rate was due to the impact of permanent differences, primarily deductions allowed in foreign jurisdictions.
Adjusted EBITDA and Adjusted Income from Operations. Adjusted EBITDA and adjusted income from operations increased $9.4 million, or 17%, and $8.9 million, or 27%, respectively, for the three months ended September 30, 2015 over the comparable period in 2014 primarily as a result of the increase in gross profit due to additional contributions from full-service centers, including the impact of acquired centers, as well as growth in the back-up dependent care business, offset by increases in SGA spending.
Adjusted Net Income. Adjusted net income increased $5.1 million, or 24%, for the three months ended September 30, 2015 when compared to the same period in 2014 primarily due to the incremental gross profit described above, which was offset by increases in SGA spending to support the growth and interest expense.

Nine Months Ended September 30, 2015 Compared to the Nine Months Ended September 30, 2014 
Revenue. Revenue increased $71.6 million, or 7%, to $1.1 billion for the nine months ended September 30, 2015 from $1.0 billion for the same period in 2014. Revenue growth is primarily attributable to contributions from new and ramping child care and early education centers, expanded sales of our back-up dependent care services and typical annual tuition increases of 3-4%, partially offset by the effects of foreign currency translation on our European operations. Revenue generated by full service center-based care services in the nine months ended September 30, 2015 increased by $54.5 million, or 6%, when compared to the same period in 2014. Our acquisitions of HLC and ALC contributed approximately $16.7 million of incremental revenue in the nine months ended September 30, 2015.
Revenue generated by back-up dependent care services in the nine months ended September 30, 2015 increased by $13.3 million, or 11%, when compared to the same period in 2014. Additionally, revenue generated by other educational advisory services in the nine months ended September 30, 2015 increased by $3.9 million, or 16%, when compared to the same period in 2014.
Cost of Services. Cost of services increased $36.9 million, or 5%, to $819.0 million for the nine months ended September 30, 2015 from $782.1 million for the same period in 2014. Cost of services in the full service center-based care services segment increased $31.1 million, or 4%, to $732.1 million in the nine months ended September 30, 2015 when compared to the same period in 2014. Personnel costs increased 4% as a result of an 8% increase in overall enrollment and routine wage increases. In addition, program supplies, materials, food and facilities costs increased 6% in connection with the enrollment growth and the incremental occupancy costs associated with centers that have been added since September 30, 2014. Cost of services in the back-up dependent care segment increased $5.6 million, or 8%, to $73.5 million in the nine months ended September 30, 2015, primarily for personnel costs and for increased care provider fees associated with the higher levels of back-up services provided. Cost of services in the other educational advisory services segment increased by $0.2 million, or 1%, to $13.4 million in the nine months ended September 30, 2015 due to personnel and technology costs related to the incremental sales of these services, partially offset by a decrease in certain fixed costs.
Gross Profit. Gross profit increased $34.8 million, or 15%, to $267.9 million for the nine months ended September 30, 2015 from $233.1 million for the same period in 2014. Gross profit margin as a percentage of revenue was 25% for the nine months ended September 30, 2015 compared to 23% for the nine months ended September 30, 2014. The increase in gross profit is primarily due to contributions from new and acquired centers, increased enrollment in our mature and ramping profit and loss centers, effective operating cost management, and expanded back-up services revenue with proportionately lower direct cost of services.
Selling, General and Administrative Expenses. SGA increased $8.7 million, or 9%, to $110.2 million for the nine months ended September 30, 2015 compared to $101.5 million for the same period in 2014, and was 10% of revenue for the nine months ended September 30, 2015 consistent with the same period in 2014. Results for the nine months ended September 30, 2015 

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included approximately $0.5 million of costs related to secondary offerings and completed acquisitions compared to $0.6 million of costs related to secondary offerings included in the nine months ended September 30, 2014. After taking these charges into account, SGA increased over the comparable 2014 period due to increases in personnel costs including annual wage increases, continued investments in technology and routine increases in other SGA costs.
Amortization. Amortization expense on intangible assets of $21.0 million for the nine months ended September 30, 2015, decreased from $22.1 million for the nine months ended September 30, 2014 due primarily to certain intangibles becoming fully amortized during the 2015 period.
Income from Operations. Income from operations increased by $27.1 million, or 25%, to $136.7 million for the nine months ended September 30, 2015 when compared to the same period in 2014. Income from operations was 13% of revenue for the nine months ended September 30, 2015, compared to 11% of revenue for the nine months ended September 30, 2014. The increase was due to the following:
 	 	
•	In the full service center-based care segment, income from operations increased $18.4 million for the nine months ended September 30, 2015. Results for the nine months ended September 30, 2015 included $0.5 million of costs related to secondary offerings and completed acquisitions compared to $0.6 million of costs related to secondary offerings included in the nine months ended September 30, 2014. In addition to these items, income from operations increased over the comparable period due to tuition increases and enrollment gains over the prior year as well as contributions from new centers that have been added since September 30, 2014, and effective cost management, partially offset by the costs incurred during the ramp-up of certain new lease/consortium centers opened during 2014 and 2015 and the effects of foreign currency translation on our European business.	
 	 	
•	Income from operations for the back-up dependent care segment increased $5.9 million in the nine months ended September 30, 2015 due to the expanding revenue base.	
 	 	
•	Income from operations in the other educational advisory services segment increased $2.8 million for the nine months ended September 30, 2015 compared to the same period in 2014 due to the expanding revenue base.	
Net Interest Expense and Other. Net interest expense and other increased to $30.7 million for the nine months ended September 30, 2015 from $25.7 million for the same period in 2014 due to the increase in debt from the issuance of $165.0 million in additional term loans in December 2014 and borrowings on our line of credit in 2015.
Income Tax Expense. We recorded an income tax expense of $36.0 million during the nine months ended September 30, 2015 compared to an income tax expense of $30.7 million during the comparable period in 2014. The effective rate decreased to 34% for the nine months ended September 30, 2015 compared to 37% in the nine months ended September 30, 2014. The majority of the difference between the effective income tax rates in 2015 was due to the treatment of certain permanent and temporary items adjusted in the first quarter by a $1.3 million benefit. We expect that the annual effective rate in 2015 to approximate 35%.
Adjusted EBITDA and Adjusted Income from Operations.  Adjusted EBITDA and adjusted income from operations increased $27.9 million, or 16%, and $27.1 million, or 25% respectively, for the nine months ended September 30, 2015 over the comparable period in 2014 primarily as a result of the increase in gross profit due to additional contributions from full-service centers, including the impact of acquired centers, as well as the growth in the back-up dependent care business, offset by increases in SGA spending.
Adjusted Net Income. Adjusted net income increased $15.2 million, or 21%, for the nine months ended September 30, 2015 when compared to the same period in 2014 primarily due to the incremental gross profit described above, which was offset by increases in SGA spending to support the growth and interest expense.

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Non-GAAP Reconciliations
In our quarterly and annual reports, earnings press releases and conference calls, we discuss key financial measures that are not calculated in accordance with GAAP. A reconciliation of the non-GAAP measures of adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per share are as follows (in thousands, except share data):

 	Three Months Ended 
 September 30,	 	Nine Months Ended 
 September 30,	
 	2015	 	2014	 	2015	 	2014	
Net income	$	20,558	
 	 	$	15,379	
 	 	$	70,009	
 	 	$	53,141	
 	
Interest expense, net	10,330	
 	 	8,395	
 	 	30,714	
 	 	25,736	
 	
Income tax expense	10,853	
 	 	9,272	
 	 	35,997	
 	 	30,715	
 	
Depreciation	12,649	
 	 	12,423	
 	 	37,561	
 	 	36,264	
 	
Amortization of intangible assets (a)	7,224	
 	 	6,959	
 	 	20,978	
 	 	22,068	
 	
EBITDA	61,614	
 	 	52,428	
 	 	195,259	
 	 	167,924	
 	
Additional Adjustments:	 	 	 	 	 	 	 	
Deferred rent (b)	650	
 	 	817	
 	 	2,304	
 	 	2,132	
 	
Stock-based compensation expense (c)	2,300	
 	 	2,039	
 	 	6,900	
 	 	6,462	
 	
Expenses related to secondary offerings and completed acquisitions (d)	165	
 	 	—	
 	 	511	
 	 	550	
 	
Total adjustments	3,115	
 	 	2,856	
 	 	9,715	
 	 	9,144	
 	
Adjusted EBITDA	$	64,729	
 	 	$	55,284	
 	 	$	204,974	
 	 	$	177,068	

Income from operations	$	41,741	
 	 	$	33,046	
 	 	$	136,720	
 	 	$	109,592	
 	
Expenses related to secondary offerings and completed acquisitions (d)	165	
 	 	—	
 	 	511	
 	 	550	
 	
Adjusted income from operations	$	41,906	
 	 	$	33,046	
 	 	$	137,231	
 	 	$	110,142	

Net income	$	20,558	
 	 	$	15,379	
 	 	$	70,009	
 	 	$	53,141	
 	
Income tax expense	10,853	
 	 	9,272	
 	 	35,997	
 	 	30,715	
 	
Income before tax	31,411	
 	 	24,651	
 	 	106,006	
 	 	83,856	
 	
Stock-based compensation expense (c)	2,300	
 	 	2,039	
 	 	6,900	
 	 	6,462	
 	
Amortization of intangible assets (a)	7,224	
 	 	6,959	
 	 	20,978	
 	 	22,068	
 	
Expenses related to secondary offerings and completed acquisitions (d)	165	
 	 	—	
 	 	511	
 	 	550	
 	
Adjusted income before tax	41,100	
 	 	33,649	
 	 	134,395	
 	 	112,936	
 	
Adjusted income tax expense (e)	(14,591	)	 	(12,282	)	 	(47,710	)	 	(41,401	)	
Adjusted net income	$	26,509	
 	 	$	21,367	
 	 	$	86,685	
 	 	$	71,535	
 	
Weighted average number of common shares—diluted	61,846,725	
 	 	67,635,657	
 	 	62,631,444	
 	 	67,433,972	
 	
Diluted adjusted earnings per common share	$	0.43	
 	 	$	0.32	
 	 	$	1.38	
 	 	$	1.06	

(a)	Represents amortization of intangible assets, including approximately $5.0 million for the three months ended September 30, 2015 and 2014, respectively, and $14.0 million and $15.0 million for the nine months ended September 30, 2015 and 2014, respectively, associated with intangible assets recorded in connection with our going private transaction in May 2008, pursuant to which a wholly owned merger subsidiary of investment funds affiliated with Bain Capital Partners, LLC was merged with and into Bright Horizons Family Solutions Inc.	
 	 	
(b)	Represents rent expense in excess of cash paid for rent, recognized on a straight line basis over the life of the lease in accordance with Accounting Standards Codification Topic 840,  Leases .	
 	 	
(c)	Represents non-cash stock-based compensation expense.	
 	 	
(d)	Represents costs incurred in connection with completed acquisitions and the secondary offerings of common stock in March 2014, May 2015 and August 2015.	
 	 	
(e)	Represents income tax expense calculated on adjusted income before tax at the effective rate of approximately 36% and 37% in 2015 and  2014 , respectively.	

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Adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share are not presentations made in accordance with GAAP, and the use of the terms adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share may differ from similar measures reported by other companies. We believe that adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share provide investors with useful information with respect to our historical operations. We present adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share as supplemental performance measures because we believe they facilitate a comparative assessment of our operating performance relative to our performance based on our results under GAAP, while isolating the effects of some items that vary from period to period. Specifically, adjusted EBITDA allows for an assessment of our operating performance and of our ability to service or incur indebtedness without the effect of non-cash charges, such as depreciation, amortization, the excess of rent expense over cash rent expense and stock-based compensation expense, as well as the expenses related to secondary offerings. In addition, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share allow us to assess our performance without the impact of the specifically identified items that we believe do not directly reflect our core operations. These measures also function as benchmarks to evaluate our operating performance. Adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share are not measurements of our financial performance under GAAP and should not be considered in isolation or as an alternative to income before taxes, net income, diluted earnings per common share, net cash provided by operating, investing or financing activities or any other financial statement data presented as indicators of financial performance or liquidity, each as presented in accordance with GAAP. The Company understands that although adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share are frequently used by securities analysts, lenders and others in their evaluation of companies, they have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
 	 	
•	adjusted EBITDA, adjusted income from operations and adjusted net income do not fully reflect the Company’s cash expenditures, future requirements for capital expenditures or contractual commitments;	
 	 	
•	adjusted EBITDA, adjusted income from operations and adjusted net income do not reflect changes in, or cash requirements for, the Company’s working capital needs;	
 	 	
•	adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt;	
 	 	
•	although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future; and adjusted EBITDA, adjusted income from operations and adjusted net income do not reflect any cash requirements for such replacements.	
Because of these limitations, adjusted EBITDA, adjusted income from operations and adjusted net income should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations.

Liquidity and Capital Resources
Our primary cash requirements are for the ongoing operations of our existing child care centers, back-up dependent care and other educational advisory services, the addition of new centers through development or acquisition and debt financing obligations. Our primary sources of liquidity are our cash flows from operations and borrowings available under our $100.0 million revolving credit facility, of which we had borrowings of $26.5 million outstanding at September 30, 2015 (none at December 31, 2014).
We had a working capital deficit of $148.5 million and $56.3 million at September 30, 2015 and December 31, 2014, respectively. Our working capital deficit has arisen from using cash generated from operations to make long-term investments in fixed assets and acquisitions. We anticipate that we will continue to generate positive cash flows from operating activities and that the cash generated will be used principally to fund ongoing operations of our new and existing full service child care centers and expanded operations in the back-up dependent care and educational advisory segments, as well as to make scheduled principal and interest payments and for share repurchases.
The Company's $1.1 billion senior credit facilities consist of $955.0 million in secured term loan facilities and a $100.0 million revolving credit facility. In conjunction with a debt refinancing in January 2013, $790.0 million in senior secured term loans were issued, with the subsequent issuance of $165.0 million in additional term loans in December 2014.
On March 28, 2014, the Board of Directors of the Company approved a $225.0 million repurchase program of its common stock. During the year ended December 31, 2014, the Company repurchased and retired 5.0 million shares of common stock for $221.6 million. On February 4, 2015, the Board of Directors of the Company approved a $250.0 million repurchase program of its common stock. The repurchase program has no expiration date and replaced the prior 2014

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authorization, of which $3.4 million remained unused. The Company repurchased 2.1 million shares of common stock for $117.5 million in the nine months ended September 30, 2015. All repurchased shares have been retired.
We believe that funds provided by operations, our existing cash and cash equivalent balances and borrowings available under our revolving credit facility will be adequate to meet planned operating and capital expenditures for at least the next 12 months under current operating conditions. However, if we were to undertake any significant acquisitions or investments in the purchase of facilities for new or existing child care and early education centers, which requires financing beyond our existing borrowing capacity, it may be necessary for us to obtain additional debt or equity financing. We may not be able to obtain such financing on reasonable terms, or at all.
Cash Flows

 	Nine Months Ended September 30,	
 	2015	 	2014	
 	(In thousands)	
Net cash provided by operating activities	$	142,263	
 	 	$	121,311	
 	
Net cash used in investing activities	$	(128,051	)	 	$	(53,445	)	
Net cash (used in) provided by financing activities	$	(80,506	)	 	$	12,063	
 	
Cash and cash equivalents (beginning of period)	$	87,886	
 	 	$	29,585	
 	
Cash and cash equivalents (end of period)	$	21,393	
 	 	$	109,008	
 	
Cash Provided by Operating Activities
Cash provided by operating activities was $142.3 million for the nine months ended September 30, 2015, compared to $121.3 million for the same period in 2014. The increase in net income of $16.9 million was largely offset by changes in working capital arising from the timing of payments and collections.
Cash Used in Investing Activities
Cash used in investing activities was $128.1 million for the nine months ended September 30, 2015 and was related to fixed asset additions for new child care centers, maintenance and refurbishments in our existing centers, and continued investments in technology, equipment and furnishings, as well as investments in acquisitions. The Company acquired 54 centers in the nine months ended September 30, 2015 for $66.7 million. Cash used in investing activities was $53.4 million for the same period in 2014 and primarily related to fixed asset additions. The Company also acquired three centers for $6.5 million in the nine months ended September 30, 2014.
Cash (Used in) Provided by Financing Activities
Cash used in financing activities amounted to $80.5 million for the nine months ended September 30, 2015 compared to cash provided by financing activities of $12.1 million for the same period in 2014. Cash used in financing activities for the nine months ended September 30, 2015 consisted principally of stock repurchases of $117.5 million and principal payments of $7.2 million on our debt, offset by net proceeds of $26.5 million from borrowings under the revolving credit facility, proceeds from the exercise of options to purchase common stock of $7.5 million, proceeds from the issuance and sale of restricted stock of $3.9 million, and the tax benefit of stock-based compensation in the amount of $6.4 million. Cash provided by financing activities for the nine months ended September 30, 2014 consisted principally of proceeds from the exercise of options to purchase common stock of $13.7 million, proceeds from the issuance and sale of restricted stock of $4.7 million, and the tax benefit of stock-based compensation in the amount of $6.9 million, offset by principal payments of $5.9 million on our debt and stock repurchases of $7.2 million.
Debt
Outstanding term loan borrowings were as follows at September 30, 2015 and December 31, 2014 (in thousands):

 	September 30, 2015	 	December 31, 2014	
Term loans	$	932,038	
 	 	$	939,200	
 	
Deferred financing costs and original issue discount	(15,351	)	 	(18,023	)	
Total debt	916,687	
 	 	921,177	
 	
Less current maturities	9,550	
 	 	9,550	
 	
Long-term debt	$	907,137	
 	 	$	911,627	

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The $1.1 billion senior secured credit facilities include the following terms:
 	 	
•	$955.0 million secured term loan facilities with a maturity date in 2020;	
 	 	
•	$100.0 million revolving credit facility with a maturity date in 2018, of which there were borrowings of $26.5 million outstanding at September 30, 2015, and $73.5 million of the revolving credit facility was available for borrowings.	
 	 	
•	Applicable margin percentages for the loan facilities range from 1.75% to 2.50% per annum for base rate loans and 2.75% to 3.50% per annum for LIBOR rate loans as defined in the credit agreement, provided that the base rate for the term loan may not be lower than 2.0% and LIBOR may not be lower than 1%.	
Principal payments of $2.4 million on the term loans are due quarterly with the remaining principal due on January 30, 2020.
The credit agreement governing the $1.1 billion senior secured credit facilities contains a number of covenants that, among other things and subject to certain exceptions, may restrict the ability of Bright Horizons Family Solutions LLC, our 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 our subsidiaries; alter the business conducted; enter into agreements restricting our 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., our 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 senior secured first lien net leverage ratio financial maintenance covenant, to be tested only if, on the last day of each fiscal quarter, revolving loans and/or swingline loans in excess of a specified percentage of the revolving commitments on such date are outstanding under the revolving credit facility. The breach of this covenant is subject to certain equity cure rights.
The credit agreement also contains certain customary affirmative covenants and events of default. We were in compliance with our financial covenants at September 30, 2015.

Off-Balance Sheet Arrangements
As of September 30, 2015, we had no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Since December 31, 2014, there have been no significant changes in the Company’s exposures to interest rate or foreign currency rate fluctuations. The Company currently does not enter into derivatives or other market risk sensitive instruments for the purpose of hedging or for trading purposes.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of September 30, 2015, the Company conducted an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer (its principal executive officer and principal financial officer, respectively) regarding the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). The term "disclosure controls and procedures" means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the requisite time periods and that such disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to its management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were not effective as of September 30, 2015 due to the material weakness in internal control over financial reporting described below.
Remediation of the Material Weakness
As disclosed in our Annual Report on Form 10-K, Item 9A, for the year ended December 31, 2014, our management concluded that our internal control over financial reporting was not effective at December 31, 2014. As of

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December 31, 2014, management identified a material weakness in internal control over financial reporting relating to the design and operating effectiveness of user access and program change management controls related to certain information systems that are relevant to the preparation of the Company’s consolidated financial statements and system of internal control over financial reporting.
We are actively engaged in the implementation of a remediation plan to ensure that controls contributing to this material weakness are designed appropriately and will operate effectively. We expect that our remediation efforts will continue through the end of fiscal year 2015 and may continue into fiscal year 2016, although the material weakness will not be considered remediated until our controls are operational for a period of time, tested and management concludes that these controls are operating effectively.
Notwithstanding the identified material weakness and the conclusion above that our disclosure controls and procedures were not effective as of September 30, 2015, management believes that the consolidated financial statements contained in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America.
Changes in Internal Control over Financial Reporting
There was no change in the Company’s internal control over financial reporting that occurred during the quarter ended September 30, 2015 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting, except for our remediation efforts described above.

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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are, from time to time, subject to claims and suits arising in the ordinary course of business, some of which have not been fully adjudicated. Such claims have in the past generally been covered by insurance. We believe the resolution of such legal matters will not have a material adverse effect on our financial condition, results of operations or cash flows, although we cannot predict the ultimate outcome of any such actions. Furthermore, there can be no assurance that our insurance will be adequate to cover all liabilities that may arise out of claims brought against us.
Item 1A. Risk Factors
Our operations and financial results are subject to various risks and uncertainties, including those disclosed in Part I, Item 1A “Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, which could adversely affect our business, financial condition and operating results. There have been no material changes to our risk factors since our Annual Report on Form 10-K for the year ended December 31, 2014.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The table below sets forth information regarding the Company's repurchases of its common stock during the three months ended September 30, 2015:

Period	 	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be  Purchased Under the Plans or Programs (In thousands) (1)	
July 1, 2015 to July 31, 2015	 	—	
 	$	—	
 	—	
 	$	177,356	
 	
August 1, 2015 to August 31, 2015	 	736,542	
 	$	60.95	
 	736,542	
 	$	132,464	
 	
September 1, 2015 to September 30, 2015	 	—	
 	$	—	
 	—	
 	$	132,464	
 	
 	 	736,542	
 	 	736,542	
 	 	
(1) On February 4, 2015, the Board of Directors of the Company authorized the repurchase of up to $250.0 million of its common stock. The repurchase program has no expiration date and replaced the prior share repurchase authorization from March 2014. All repurchased shares have been retired. The Company repurchased 0.7 million shares during the three months ended September 30, 2015 primarily in connection with an underwritten secondary offering. The remaining share repurchases during the three months ended September 30, 2015 were open market transactions pursuant to the February 2015 authorization.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.

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Item 6. Exhibits
(a) Exhibits:

31.1*	Principal Executive Officer Certification Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to the Section 302 of the Sarbanes-Oxley Act of 2002.	
31.2*	Principal Financial Officer Certification Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to the Section 302 of the Sarbanes-Oxley Act of 2002.	
32.1**	Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
32.2**	Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
Ex. 101.INS*	XBRL Instance Document	
Ex. 101.SCH*	XBRL Taxonomy Extension Schema Document	
Ex. 101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document	
Ex. 101.LAB*	XBRL Taxonomy Extension Label Linkbase Document	
Ex. 101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document	
Ex. 101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document	

 	 	
*	Exhibits filed herewith.	
**	Exhibits furnished herewith.	

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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.

BRIGHT HORIZONS FAMILY SOLUTIONS INC.	 	 	
Date:	November 9, 2015	By:	/s/ David Lissy	
 	 	David Lissy	
 	 	Chief Executive Officer	

27

Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER, BRIGHT HORIZONS FAMILY SOLUTIONS INC.
I, David Lissy, certify that:
 	 	
1.	I have reviewed this quarterly report on Form 10-Q of Bright Horizons Family Solutions Inc.;	
 	 	
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 the 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.	

 	
 	 	 	
November 9, 2015	 	/s/ David Lissy	
Date	 	David Lissy	
 	 	Chief Executive Officer	

Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER, BRIGHT HORIZONS FAMILY SOLUTIONS INC.
I, Elizabeth Boland, certify that:
 	 	
1.	I have reviewed this quarterly report on Form 10-Q of Bright Horizons Family Solutions Inc.;	
 	 	
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 the 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.	

 	
 	 	 	
November 9, 2015	 	/s/ Elizabeth Boland	
Date	 	Elizabeth Boland	
 	 	Chief Financial Officer	

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Bright Horizons Family Solutions Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David Lissy, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:
 	 	
1)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and	
 	 	
2)	
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	

 	
/s/ David Lissy	
David Lissy	
Chief Executive Officer	
Dated: November 9, 2015 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Bright Horizons Family Solutions Inc. and will be retained by Bright Horizons Family Solutions Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Bright Horizons Family Solutions Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Elizabeth Boland, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:
 	 	
1)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and	
 	 	
2)	
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	

 	
/s/ Elizabeth Boland	
Elizabeth Boland	
Chief Financial Officer	
Dated: November 9, 2015
 
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Bright Horizons Family Solutions Inc. and will be retained by Bright Horizons Family Solutions Inc. and furnished to the Securities and Exchange Commission or its staff upon request.