BRIGHT HORIZONS FAMILY SOLUTIONS INC. [BFAM] Filings

10-Q 1 bfam-20220930.htm 10-Q bfam-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________

FORM 10-Q

__________________________________________________


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

For the quarterly period ended September 30, 2022


☐			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)

2 Wells Avenue

Newton, Massachusetts

02459

(Address of principal executive offices)

(Zip code)

Registrant’s telephone number, including area code: (617) 673-8000

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

BFAM

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 26, 2022, there were 57,750,017 shares of common stock outstanding.

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BRIGHT HORIZONS FAMILY SOLUTIONS INC.

FORM 10-Q

For the quarterly period ended September 30, 2022

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION		Page
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
Signatures		41

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30, 2022		December 31, 2021

	(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	32,604	$	260,980
Accounts receivable — net of allowance for credit losses of $3,044 and $3,006 at September 30, 2022 and December 31, 2021, respectively	194,410		210,971
Prepaid expenses and other current assets	75,830		68,320

Total current assets	302,844		540,271
Fixed assets — net	561,233		598,134
Goodwill	1,674,466		1,481,725
Other intangible assets — net	254,729		251,032
Operating lease right-of-use assets	795,903		696,425
Other assets	126,955		72,460
Total assets	$	3,716,130	$	3,640,047
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	16,000	$	16,000
Borrowings under revolving credit facility	113,000		—
Accounts payable and accrued expenses	232,092		197,366
Current portion of operating lease liabilities	90,710		87,341
Deferred revenue	193,240		258,438
Other current liabilities	44,974		63,030
Total current liabilities	690,016		622,175
Long-term debt — net	965,284		976,396
Operating lease liabilities	804,556		703,911
Other long-term liabilities	196,734		100,091
Deferred revenue	9,954		9,689
Deferred income taxes	55,830		48,509
Total liabilities	2,722,374		2,460,771
Stockholders’ equity:
Preferred stock, $0.001 par value; 25,000,000 shares authorized; no shares issued or outstanding at September 30, 2022 and December 31, 2021	—		—
Common stock, $0.001 par value; 475,000,000 shares authorized; 57,501,048 and 59,305,160 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	58		59
Additional paid-in capital	590,608		745,615
Accumulated other comprehensive loss	(130,470)		(37,359)
Retained earnings	533,560		470,961
Total stockholders’ equity	993,756		1,179,276
Total liabilities and stockholders’ equity	$	3,716,130	$	3,640,047

See accompanying notes to condensed consolidated financial statements.

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BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021

	(In thousands, except share data)
Revenue	$	540,215	$	460,333	$	1,490,965	$	1,292,651
Cost of services	411,406		340,068		1,123,572		985,046
Gross profit	128,809		120,265		367,393		307,605
Selling, general and administrative expenses	80,812		67,135		226,231		191,703
Amortization of intangible assets	8,948		7,140		23,127		22,192

Income from operations	39,049		45,990		118,035		93,710
Loss on foreign currency forward contracts	—		—		(5,917)		—
Interest expense — net	(11,707)		(9,153)		(26,695)		(27,749)
Income before income tax	27,342		36,837		85,423		65,961
Income tax expense	(9,094)		(10,018)		(22,824)		(13,195)
Net income	$	18,248	$	26,819	$	62,599	$	52,766

Earnings per common share:
Common stock — basic	$	0.32	$	0.44	$	1.06	$	0.87
Common stock — diluted	$	0.31	$	0.44	$	1.06	$	0.86

Weighted average common shares outstanding:
Common stock — basic	57,664,895		60,218,090		58,624,221		60,454,855
Common stock — diluted	57,740,013		60,743,765		58,802,742		61,058,843

See accompanying notes to condensed consolidated financial statements.

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BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021

	(In thousands)
Net income	$	18,248	$	26,819	$	62,599	$	52,766
Other comprehensive income (loss):
Foreign currency translation adjustments	(67,483)		(14,634)		(130,834)		(13,935)
Unrealized gain on cash flow hedges and investments, net of tax	14,016		924		37,723		3,640
Total other comprehensive loss	(53,467)		(13,710)		(93,111)		(10,295)
Comprehensive income (loss)	$	(35,219)	$	13,109	$	(30,512)	$	42,471

See accompanying notes to condensed consolidated financial statements.

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BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)


	Three months ended September 30, 2022
	Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount

	(In thousands, except share data)
Balance at July 1, 2022	58,622,868	$	59	$	680,618	$	—	$	(77,003)	$	515,312	$	1,118,986

Stock-based compensation expense				7,514								7,514
Issuance of common stock under the Equity Incentive Plan	13,400	—		859								859
Shares received in net share settlement of stock option exercises and vesting of restricted stock	(3,008)	—		(278)								(278)
Purchase of treasury stock						(98,106)						(98,106)
Retirement of treasury stock	(1,132,212)	(1)		(98,105)		98,106						—
Other comprehensive loss								(53,467)				(53,467)
Net income										18,248		18,248
Balance at September 30, 2022	57,501,048	$	58	$	590,608	$	—	$	(130,470)	$	533,560	$	993,756


	Three months ended September 30, 2021
	Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount

	(In thousands, except share data)
Balance at July 1, 2021	60,278,756	$	60	$	868,289	$	—	$	(23,654)	$	426,449	$	1,271,144

Stock-based compensation expense				5,600								5,600
Issuance of common stock under the Equity Incentive Plan	51,895	—		3,640								3,640
Shares received in net share settlement of stock option exercises and vesting of restricted stock	(2,036)	—		(287)								(287)
Purchase of treasury stock						(33,977)						(33,977)
Retirement of treasury stock	(236,510)	—		(33,977)		33,977						—
Other comprehensive loss								(13,710)				(13,710)
Net income										26,819		26,819
Balance at September 30, 2021	60,092,105	$	60	$	843,265	$	—	$	(37,364)	$	453,268	$	1,259,229

See accompanying notes to condensed consolidated financial statements.

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BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)


	Nine months ended September 30, 2022
	Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount

	(In thousands, except share data)
Balance at January 1, 2022	59,305,160	$	59	$	745,615	$	—	$	(37,359)	$	470,961	$	1,179,276

Stock-based compensation expense				21,282								21,282
Issuance of common stock under the Equity Incentive Plan	229,354	1		11,483								11,484
Shares received in net share settlement of stock option exercises and vesting of restricted stock	(47,320)	—		(5,432)								(5,432)
Purchase of treasury stock						(182,342)						(182,342)
Retirement of treasury stock	(1,986,146)	(2)		(182,340)		182,342						—
Other comprehensive loss								(93,111)				(93,111)
Net income										62,599		62,599
Balance at September 30, 2022	57,501,048	$	58	$	590,608	$	—	$	(130,470)	$	533,560	$	993,756


	Nine months ended September 30, 2021
	Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount

	(In thousands, except share data)
Balance at January 1, 2021	60,466,168	$	60	$	910,304	$	—	$	(27,069)	$	400,502	$	1,283,797

Stock-based compensation expense				16,735								16,735
Issuance of common stock under the Equity Incentive Plan	423,456	1		27,977								27,978
Shares received in net share settlement of stock option exercises and vesting of restricted stock	(46,009)	—		(7,429)								(7,429)
Purchase of treasury stock						(104,323)						(104,323)
Retirement of treasury stock	(751,510)	(1)		(104,322)		104,323						—
Other comprehensive loss								(10,295)				(10,295)
Net income										52,766		52,766
Balance at September 30, 2021	60,092,105	$	60	$	843,265	$	—	$	(37,364)	$	453,268	$	1,259,229

See accompanying notes to condensed consolidated financial statements.

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BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine months ended September 30,
	2022		2021

	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	62,599	$	52,766
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	77,958		82,858
Stock-based compensation expense	21,282		16,735
Loss on foreign currency forward contracts	5,917		—
Deferred income taxes	(8,209)		1,573
Other non-cash adjustments — net	1,894		3,369
Changes in assets and liabilities:
Accounts receivable	16,369		15,836
Prepaid expenses and other current assets	(7,204)		(4,095)
Accounts payable and accrued expenses	27,122		8,911
Income taxes	(6,278)		(11,269)
Deferred revenue	(64,235)		15,360
Leases	703		(3,378)
Other assets	11,453		3,233
Other current and long-term liabilities	(8,393)		3,348
Net cash provided by operating activities	130,978		185,247

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets	(48,228)		(47,350)
Proceeds from the disposal of fixed assets	10,456		5,840
Purchases of debt securities and other investments	(13,838)		(20,032)
Proceeds from the maturity of debt securities and sale of other investments	16,009		17,730
Settlement of foreign currency forward contracts	(5,917)		—

Payments and settlements for acquisitions — net of cash acquired	(209,421)		(18,914)
Net cash used in investing activities	(250,939)		(62,726)

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under revolving credit facility	167,000		—
Payments under revolving credit facility	(54,000)		—
Principal payments of long-term debt	(12,000)		(8,063)
Payments of debt issuance costs	—		(2,057)
Purchase of treasury stock	(182,570)		(102,184)
Proceeds from issuance of common stock upon exercise of options and restricted stock upon purchase	11,412		31,820
Taxes paid related to the net share settlement of stock options and restricted stock	(5,432)		(7,429)

Payments of contingent consideration for acquisitions	(13,865)		(196)
Net cash used in financing activities	(89,455)		(88,109)
Effect of exchange rates on cash, cash equivalents and restricted cash	(4,018)		(2,120)
Net increase (decrease) in cash, cash equivalents and restricted cash	(213,434)		32,292
Cash, cash equivalents and restricted cash — beginning of period	265,281		388,465
Cash, cash equivalents and restricted cash — end of period	$	51,847	$	420,757

See accompanying notes to condensed consolidated financial statements.

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BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)


	Nine months ended September 30,
	2022		2021

	(In thousands)
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS:
Cash and cash equivalents	$	32,604	$	412,402
Restricted cash and cash equivalents, included in prepaid expenses and other current assets	7,906		8,355
Restricted cash and cash equivalents, included in other assets	11,337		—
Total cash, cash equivalents and restricted cash — end of period	$	51,847	$	420,757

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments of interest	$	24,973	$	25,193
Cash payments of income taxes	$	38,013	$	23,427
Cash paid for amounts included in the measurement of lease liabilities	$	104,809	$	106,878

NON-CASH TRANSACTIONS:
Fixed asset purchases recorded in accounts payable and accrued expenses	$	2,121	$	2,402
Deferred or contingent consideration issued for acquisitions	$	97,653	$	7,337
Operating right-of-use assets obtained in exchange for operating lease liabilities — net	$	44,575	$	46,653
Restricted stock reclassified from other current liabilities to equity upon vesting	$	3,160	$	4,178
Treasury stock purchases in other current liabilities	$	—	$	2,139

See accompanying notes to condensed consolidated financial statements.

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BRIGHT HORIZONS FAMILY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization — Bright Horizons Family Solutions Inc. (“Bright Horizons” or the “Company”) provides center-based early education and child care, back-up child and adult/elder care, tuition assistance and student loan repayment program administration, educational advisory services, and other support services for employers and families in the United States, the United Kingdom, the Netherlands, Australia, Puerto Rico and India. The Company provides services designed to help families, employers and their employees better integrate work and family life, primarily under multi-year contracts with employers who offer child care, dependent care, and workforce education services, as part of their employee benefits packages in an effort to support employees across life and career stages and improve employee engagement.

On July 1, 2022, the Company acquired Only About Children, an operator of approximately 75 child care centers in Australia. Refer to Note 4, Acquisitions, for additional information.

Basis of Presentation — The accompanying unaudited condensed consolidated balance sheet as of September 30, 2022 and the condensed consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the interim periods ended September 30, 2022 and 2021 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required in accordance with U.S. GAAP for complete financial statements and should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

In the opinion of the Company’s management, the Company’s unaudited condensed consolidated balance sheet as of September 30, 2022 and the condensed consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the interim periods ended September 30, 2022 and 2021, reflect all adjustments (consisting only of normal and recurring adjustments) necessary to present fairly the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year.

Stockholders’ Equity — The board of directors of the Company authorized a share repurchase program of up to $400 million of the Company’s outstanding common stock effective December 16, 2021. The share repurchase program has no expiration date and replaced the prior June 2018 authorization. The shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions, under Rule 10b5-1 plans, or by other means in accordance with federal securities laws. During the nine months ended September 30, 2022, the Company repurchased 2.0 million shares for $182.3 million. At September 30, 2022, $198.3 million remained available under the repurchase program. During the nine months ended September 30, 2021, 0.8 million shares were repurchased for $104.3 million. All repurchased shares have been retired.

Government Support — During the nine months ended September 30, 2022 and 2021, the Company participated in government support programs that were enacted in response to the economic impact of the COVID-19 pandemic, including availing itself of certain tax deferrals, tax credits and federal block grant funding in the United States, as well as employee wage support in the United Kingdom.

During the nine months ended September 30, 2022 and 2021, $68.6 million and $32.2 million, respectively, was recorded as a reduction to cost of services in relation to these benefits, of which $25.6 million and $9.3 million, respectively, reduced the operating subsidy revenue due from employers for the related child care centers. Additionally during the nine months ended September 30, 2022, amounts received for tuition support of $4.6 million were recorded to revenue. As of September 30, 2022 and December 31, 2021, $2.9 million and $3.3 million, respectively, was recorded in prepaid expenses and other current assets on the consolidated balance sheet for amounts due from government support programs. As of September 30, 2022 and December 31, 2021, $6.1 million and $3.9 million, respectively, was recorded to other current liabilities related to government support received related to future periods, and as of September 30, 2022 and December 31, 2021, payroll tax deferrals of $7.6 million and $7.0 million, respectively, were recorded in accounts payable and accrued expenses on the consolidated balance sheet.

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2. REVENUE RECOGNITION

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers into segments and geographical regions. Revenue disaggregated by segment and geographical region was as follows:


	Full service center-based child care		Back-up care		Educational advisory and other services		Total

	(In thousands)
Three months ended September 30, 2022
North America	$	243,747	$	119,555	$	31,053	$	394,355
International	136,809		9,051		—		145,860
	$	380,556	$	128,606	$	31,053	$	540,215
Three months ended September 30, 2021
North America	$	221,297	$	91,237	$	27,253	$	339,787
International	112,586		7,960		—		120,546
	$	333,883	$	99,197	$	27,253	$	460,333


	Full service center-based child care		Back-up care		Educational advisory and other services		Total

	(In thousands)
Nine months ended September 30, 2022
North America	$	744,806	$	280,580	$	83,997	$	1,109,383
International	360,998		20,584		—		381,582
	$	1,105,804	$	301,164	$	83,997	$	1,490,965
Nine months ended September 30, 2021
North America	$	630,078	$	239,079	$	76,986	$	946,143
International	328,551		17,957		—		346,508
	$	958,629	$	257,036	$	76,986	$	1,292,651

The classification “North America” is comprised of the Company’s United States and Puerto Rico operations and the classification “International” includes the Company’s United Kingdom, Netherlands, Australia and India operations. On July 1, 2022, the Company acquired Only About Children, an operator of approximately 75 child care centers in Australia. Refer to Note 4, Acquisitions, for additional information.

Deferred Revenue

The Company records deferred revenue when payments are received in advance of the Company’s performance under the contract, which is recognized as revenue as the performance obligation is satisfied. During the nine months ended September 30, 2022 and 2021, $224.6 million and $169.2 million was recognized as revenue related to the deferred revenue balance recorded at December 31, 2021 and December 31, 2020, respectively.

Remaining Performance Obligations

The Company does not disclose the value of unsatisfied performance obligations for contracts with an original contract term of one year or less, or for variable consideration allocated to the unsatisfied performance obligation of a series of services. The transaction price allocated to the remaining performance obligations relates to services that are paid or invoiced in advance. The Company’s remaining performance obligations not subject to the practical expedients were not material.

3. LEASES

The Company has operating leases for certain of its full service and back-up early education and child care centers, corporate offices, call centers, and to a lesser extent, various office equipment, in the United States, the United Kingdom, the Netherlands, and Australia. Most of the leases expire within 10 to 15 years and many contain renewal options and/or termination provisions. As of September 30, 2022 and December 31, 2021, there were no material finance leases.

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Lease Expense

The components of lease expense were as follows:


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021

	(In thousands)
Operating lease expense (1)	$	37,992	$	33,358	$	102,879	$	100,635
Variable lease expense (1)	10,264		9,399		29,976		23,076
Total lease expense	$	48,256	$	42,757	$	132,855	$	123,711

(1) Excludes short-term lease expense and sublease income, which were immaterial for the periods presented.

Other Information

The weighted average remaining lease term and the weighted average discount rate were as follows:


	September 30, 2022	December 31, 2021

Weighted average remaining lease term (in years)	11	10
Weighted average discount rate	6.7%	5.8%

Maturity of Lease Liabilities

The following table summarizes the maturity of lease liabilities as of September 30, 2022:


	Operating Leases

	(In thousands)
Remainder of 2022	$	23,811
2023	148,016
2024	140,222
2025	129,354
2026	121,992
Thereafter	709,667
Total lease payments	1,273,062
Less imputed interest	(377,796)
Present value of lease liabilities	895,266
Less current portion of operating lease liabilities	(90,710)
Long-term operating lease liabilities	$	804,556

As of September 30, 2022, the Company had entered into additional operating leases that have not yet commenced with total fixed payment obligations of $28.3 million. The leases are expected to commence between the fourth quarter of 2022 and the first quarter of 2023 and have initial lease terms of approximately 12 to 15 years.

4. ACQUISITIONS

The Company’s growth strategy includes expansion through strategic and synergistic acquisitions. The goodwill resulting from these acquisitions arises largely from synergies expected from combining the operations of the businesses acquired with the Company’s existing operations, including cost efficiencies and leveraging existing client relationships, as well as from benefits derived from gaining the related assembled workforce.

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Only About Children

On July 1, 2022, the Company, through wholly-owned subsidiaries, completed the acquisition of the outstanding shares of Only About Children, a child care operator in Australia with approximately 75 early education and child care centers, for aggregate consideration of AUD$450 million (USD$310 million), which was accounted for as a business combination. The Company paid approximately AUD$300 million (USD$207 million), net of cash acquired and subject to customary purchase price adjustments, and will pay an additional USD$106.5 million 18 months after closing. In October 2022, the Company reached an agreement with the sellers on the final net working capital, resulting in a refund of AUD$2.6 million (USD$1.8 million), which is expected to be received in the fourth quarter of 2022. The present value of the deferred consideration of AUD$141.8 million (USD$97.7 million) is included in other long-term liabilities and AUD$2.6 million (USD$1.8 million) receivable from the sellers related to working capital settlements is included in other current assets on the consolidated balance sheet.

During the nine months ended September 30, 2022, the Company incurred acquisition-related transaction costs of approximately $9.2 million, which are included in selling, general and administrative expenses. In addition, the Company recognized realized losses of $5.9 million in relation to foreign currency forward contracts for the purchase of Australian dollars entered into in connection with the acquisition. Refer to Note 6, Credit Arrangements and Debt Obligations, for additional information on the foreign currency forward contracts.

The purchase price for this acquisition has been allocated based on preliminary estimates of the fair values of the acquired assets and assumed liabilities at the date of acquisition as follows:


	At acquisition date

	(In thousands)
Cash	$	4,705
Accounts receivable and prepaid expenses	4,295
Fixed assets	21,702
Goodwill	283,466
Intangible assets	30,945
Operating lease right of use assets	156,678
Total assets acquired	501,791
Accounts payable and accrued expenses	17,991
Deferred revenue and parent deposits	6,809
Deferred tax liabilities	3,392
Operating lease liabilities	161,405
Other long-term liabilities	5,458
Total liabilities assumed	195,055
Purchase price	$	306,736

The Company recorded goodwill of $283.5 million related to the full service center-based child care segment, which will not be deductible for tax purposes. Intangible assets consist of customer relationships of $23.0 million that will be amortized over 6 years and trade names of $7.9 million that will be amortized over 11 years.

The determination and allocation of purchase price consideration is based on preliminary estimates of fair value; such estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). As of September 30, 2022, the purchase price allocation for Only About Children remains open as the Company gathers additional information regarding the assets acquired and the liabilities assumed, primarily in relation to the valuation of intangibles, fixed assets, leases, and the Company’s assessment of tax related items.

The operating results for Only About Children are included in the consolidated results of operations from the date of acquisition. Only About Children contributed total revenue of $37.3 million during the three months ended September 30, 2022. Net income for the three months ended September 30, 2022 was not materially impacted by the acquisition of Only About Children.

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The following table presents consolidated pro forma revenue as if the acquisition of Only About Children had occurred on January 1, 2021:


	Pro forma (Unaudited)
	Nine months ended September 30, 2022		Nine months ended September 30, 2021

	(In thousands)
Revenue	$	1,559,882	$	1,400,372

Other than the impact of shifting the transaction costs incurred in 2022 to 2021, consolidated pro forma net income did not materially change from the reported results. In assessing the impact to the unaudited pro forma results we considered certain adjustments related to the acquisition, such as increased amortization expense related to the acquired intangible assets, adjusted depreciation associated with the fair value of the acquired fixed assets, shifting of transaction costs, as well as applying U.S. GAAP rent expense in accordance with Accounting Standards Codification 842, Leases.

Other 2022 Acquisitions

During the nine months ended September 30, 2022, the Company acquired one center in the Netherlands, which was accounted for as a business combination. This business was acquired for aggregate cash consideration of $3.3 million and consideration payable of $0.2 million. The Company recorded goodwill of $3.1 million related to the full service center-based child care segment in relation to this acquisition, which will not be deductible for tax purposes. In addition, the Company recorded intangible assets of $0.5 million that will be amortized over four years.

The determination and allocation of purchase price consideration is based on preliminary estimates of fair value; such estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). As of September 30, 2022, the purchase price allocation for this acquisition remains open as the Company gathers additional information regarding the assets acquired and the liabilities assumed. The operating results for the acquired business are included in the consolidated results of operations from the date of acquisition, and were not material to the Company’s financial results.

During the nine months ended September 30, 2022, the Company paid contingent consideration of $19.1 million related to an acquisition completed in 2019 and contingent consideration of $0.2 million related to an acquisition completed in 2021. Of the total amounts paid of $19.3 million, $13.9 million had been recorded as a liability at the date of acquisition and is presented as cash used in financing activities in the consolidated statement of cash flows with remaining amounts reflected as cash used in operating activities.

2021 Acquisitions

During the year ended December 31, 2021, the Company acquired two centers as well as a school-age camp provider in the United States, 13 centers in the United Kingdom, and three centers in the Netherlands, in five separate business acquisitions, which were each accounted for as a business combination. These businesses were acquired for aggregate cash consideration of $53.2 million, net of cash acquired of $2.2 million, and consideration payable of $0.6 million. Additionally, the Company is subject to contingent consideration payments for two of these acquisitions, and recorded a fair value estimate of $7.3 million in relation to these contingent consideration arrangements at acquisition. Contingent consideration of up to $1.2 million was payable within one year from the date of acquisition if certain performance targets were met for one of the acquisitions, of which $0.8 million was paid based on the performance targets met. Contingent consideration is payable in 2026 based on certain financial metrics for the other acquisition. The Company recorded goodwill of $39.5 million related to the full service center-based child care segment, of which $3.4 million will be deductible for tax purposes, and $14.6 million related to the back-up care segment, all of which will be deductible for tax purposes. In addition, the Company recorded intangible assets of $5.7 million that will be amortized over five years, as well as fixed assets of $10.1 million 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 of September 30, 2022, the purchase price allocation for one of the acquisitions remains open as the Company gathers additional information regarding the assets acquired and the liabilities assumed.

During the year ended December 31, 2021, the Company paid $0.6 million for contingent consideration related to acquisitions completed in 2021, which had been recorded as a liability at the date of acquisition.

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5. GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill were as follows:


	Full service center-based child care		Back-up care		Educational advisory and other services		Total

	(In thousands)




Balance at January 1, 2022	$	1,233,096	$	208,786	$	39,843	$	1,481,725
Additions from acquisitions	286,581		—		—		286,581

Effect of foreign currency translation	(89,264)		(4,576)		—		(93,840)
Balance at September 30, 2022	$	1,430,413	$	204,210	$	39,843	$	1,674,466

The Company also has intangible assets, which consisted of the following at September 30, 2022 and December 31, 2021:


September 30, 2022	Weighted average amortization period	Cost		Accumulated amortization		Net carrying amount

		(In thousands)
Definite-lived intangible assets:
Customer relationships	13 years	$	414,770	$	(348,502)	$	66,268
Trade names	6 years	18,257		(9,549)		8,708
		433,027		(358,051)		74,976
Indefinite-lived intangible assets:
Trade names	N/A	179,753		—		179,753
		$	612,780	$	(358,051)	$	254,729


December 31, 2021	Weighted average amortization period	Cost		Accumulated amortization		Net carrying amount

		(In thousands)
Definite-lived intangible assets:
Customer relationships	14 years	$	400,399	$	(332,571)	$	67,828
Trade names	6 years	12,358		(10,150)		2,208
		412,757		(342,721)		70,036
Indefinite-lived intangible assets:
Trade names	N/A	180,996		—		180,996
		$	593,753	$	(342,721)	$	251,032

The Company estimates that it will record amortization expense related to intangible assets existing as of September 30, 2022 as follows over the next five years:


	Estimated amortization expense

	(In thousands)
Remainder of 2022	$	8,765
2023	$	32,762
2024	$	16,699
2025	$	5,270
2026	$	3,718

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6. CREDIT ARRANGEMENTS AND DEBT OBLIGATIONS

Senior Secured Credit Facilities

The Company’s senior secured credit facilities consist of a term loan B facility of $600 million (“term loan B”) and a term loan A facility of $400 million (“term loan A”), collectively the “term loan facilities” or “term loans,” as well as a $400 million multi-currency revolving credit facility (“revolving credit facility”). Long-term debt obligations were as follows:


	September 30, 2022		December 31, 2021

	(In thousands)
Term loan B	$	595,500	$	600,000
Term loan A	392,500		400,000
Deferred financing costs and original issue discount	(6,716)		(7,604)
Total debt	981,284		992,396
Less current maturities	(16,000)		(16,000)
Long-term debt	$

BRIGHT HORIZONS FAMILY SOLUTIONS INC. [BFAM] Filings
10-Q	[2022-11-08]
10-Q	[2022-08-05]
10-Q	[2022-05-06]
10-K	[2022-02-25]
10-Q	[2021-11-05]
10-Q	[2021-08-06]
10-Q	[2021-05-10]
10-K	[2021-03-01]
10-Q	[2020-11-09]
10-Q	[2020-08-10]
10-Q	[2020-05-11]
10-K	[2020-02-27]
10-Q	[2019-11-06]
10-Q	[2019-08-07]
10-Q	[2019-05-09]
10-K	[2019-02-27]
10-Q	[2018-11-06]
10-Q	[2018-08-07]
10-Q	[2018-05-07]
10-K	[2018-02-28]
10-Q	[2017-11-07]
10-Q	[2017-08-07]
10-Q	[2017-05-09]
10-K	[2017-03-01]
10-Q	[2016-11-07]
10-Q	[2016-08-05]
10-Q	[2016-05-06]
10-K	[2016-02-29]
10-Q	[2015-11-09]
10-Q	[2015-08-07]
10-Q	[2015-05-08]
10-K	[2015-03-02]
10-Q	[2014-11-07]
10-Q	[2014-08-08]
10-Q	[2014-05-09]
10-K	[2014-03-25]
S-1	[2013-11-08]
10-Q	[2013-11-07]
10-Q	[2013-08-09]
S-1	[2013-05-29]
10-Q	[2013-05-10]
10-K	[2013-03-26]
S-1	[2012-10-24]