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, 2017~~March 31, 2021



¨☐			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:~~File Number: 001-35780

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

(Exact name of ~~Registrant~~registrant as specified in its ~~charter)~~charter)

Delaware

80-0188269

(State or other jurisdiction

of incorporation)

(I.R.S. Employer

Identification Number)

2 Wells Avenue

~~200 Talcott Avenue South~~

~~Watertown, MA~~

Newton, Massachusetts

~~02472~~

02459

~~(Address~~ (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 ~~(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, 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

x☒

Accelerated filer

¨☐

Non-accelerated filer

¨☐

~~(Do not check if smaller reporting company)~~

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~~Rule 12b-2 of the Exchange Act). Yes ¨☐ No x☒

As of ~~October 27, 2017, the Company had 59,302,552~~April 30, 2021, there were 61,029,675 shares of common stock ~~$0.001 par value,~~ outstanding.

Table of Contents

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

FORM 10-Q

For the quarterly period ended ~~September 30, 2017~~March 31, 2021

TABLE OF CONTENTS

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)

September 30,
2017 December 31,
2016
ASSETS
Current assets:
Cash and cash equivalents $ 42,265
$ 14,633
Accounts receivable—net 96,105
97,212
Prepaid expenses and other current assets 57,416
42,554
Total current assets 195,786
154,399
Fixed assets—net 567,747
529,432
Goodwill 1,302,549
1,267,705
Other intangibles—net 356,469
374,566
Other assets 40,599
32,915
Total assets $ 2,463,150
$ 2,359,017
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt $ 10,750
$ 10,750
Borrowings on revolving credit facility 65,500
76,000
Accounts payable and accrued expenses 143,779
125,400
Deferred revenue 151,283
146,692
Other current liabilities 27,129
28,738
Total current liabilities 398,441
387,580
Long-term debt—net 1,048,643
1,054,009
Deferred rent and related obligations 65,673
59,518
Other long-term liabilities 56,749
52,048
Deferred revenue 8,043
6,284
Deferred income taxes 111,088
111,711
Total liabilities 1,688,637
1,671,150
Stockholders’ equity:
Preferred stock, $0.001 par value; 25,000,000 shares authorized and no shares issued or outstanding at September 30, 2017 and December 31, 2016 —
—
Common stock, $0.001 par value; 475,000,000 shares authorized; 58,886,706 and 58,910,282 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively 59
59
Additional paid-in capital 831,174
899,076
Accumulated other comprehensive loss (40,419 ) (89,448 )
Accumulated deficit (16,301 ) (121,820 )
Total stockholders’ equity 774,513
687,867
Total liabilities and stockholders’ equity $ 2,463,150
$ 2,359,017
(Unaudited)


	March 31, 2021		December 31, 2020

	(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	442,124	$	384,344
Accounts receivable — net of allowance for credit losses of $2,168 and $2,357 at March 31, 2021 and December 31, 2020, respectively	166,642		176,617
Prepaid expenses and other current assets	72,608		62,902
Prepaid income taxes	4,780		322
Total current assets	686,154		624,185
Fixed assets — net	622,716		628,757
Goodwill	1,448,923		1,431,967
Other intangible assets — net	268,939		274,620
Operating lease right-of-use assets	713,811		717,821
Other assets	49,122		49,298
Total assets	$	3,789,665	$	3,726,648
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	10,750	$	10,750

Accounts payable and accrued expenses	188,028		194,551
Current portion of operating lease liabilities	87,431		87,181
Deferred revenue	235,336		197,939
Other current liabilities	41,234		40,393
Total current liabilities	562,779		530,814
Long-term debt — net	1,017,784		1,020,137
Operating lease liabilities	724,918		729,754
Other long-term liabilities	115,768		105,980
Deferred revenue	10,241		10,215
Deferred income taxes	47,550		45,951
Total liabilities	2,479,040		2,442,851
Stockholders’ equity:
Preferred stock, $0.001 par value; 25,000,000 shares authorized; 0 shares issued or outstanding at March 31, 2021 and December 31, 2020	0		0
Common stock, $0.001 par value; 475,000,000 shares authorized; 60,726,701 and 60,466,168 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	61		60
Additional paid-in capital	928,761		910,304
Accumulated other comprehensive loss	(25,831)		(27,069)
Retained earnings	407,634		400,502
Total stockholders’ equity	1,310,625		1,283,797
Total liabilities and stockholders’ equity	$	3,789,665	$	3,726,648

See accompanying notes to condensed consolidated financial statements.

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

Three months ended
September 30, Nine months ended
September 30,
2017 2016 2017 2016
Revenue $ 433,316
$ 383,929
$ 1,301,026
$ 1,171,304
Cost of services 330,122
292,457
978,557
879,673
Gross profit 103,194
91,472
322,469
291,631
Selling, general and administrative expenses 46,369
39,616
141,384
120,403
Amortization of intangible assets 8,191
7,141
24,241
21,338
Other expenses 3,671
—
3,671
—
Income from operations 44,963
44,715
153,173
149,890
Interest expense—net (10,824 ) (10,502 ) (32,252 ) (31,490 )
Income before income taxes 34,139
34,213
120,921
118,400
Income tax expense (3,034 ) (11,703 ) (15,402 ) (40,760 )
Net income $ 31,105
$ 22,510
$ 105,519
$ 77,640

Earnings per common share:
Common stock—basic $ 0.53
$ 0.38
$ 1.78
$ 1.30
Common stock—diluted $ 0.51
$ 0.37
$ 1.74
$ 1.27
Weighted average number of common shares outstanding:
Common stock—basic 58,811,488
58,928,264
59,039,931
59,326,525
Common stock—diluted 60,088,078
60,275,902
60,457,004
60,737,185

Table of Contents

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three months ended March 31,
	2021		2020

	(In thousands, except share data)
Revenue	$	390,840	$	506,323
Cost of services	309,482		397,464
Gross profit	81,358		108,859
Selling, general and administrative expenses	60,110		57,369
Amortization of intangible assets	7,540		8,209

Income from operations	13,708		43,281
Interest expense — net	(9,016)		(10,206)
Income before income tax	4,692		33,075
Income tax benefit (expense)	2,440		(2,343)
Net income	$	7,132	$	30,732

Earnings per common share:
Common stock — basic	$	0.12	$	0.53
Common stock — diluted	$	0.12	$	0.52

Weighted average common shares outstanding:
Common stock — basic	60,594,947		57,930,909
Common stock — diluted	61,325,973		58,878,784

See accompanying notes to condensed consolidated financial statements.

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

Three months ended
September 30, Nine months ended
September 30,
2017 2016 2017 2016
Net income $ 31,105
$ 22,510
$ 105,519
$ 77,640
Other comprehensive income (loss):
       Foreign currency translation adjustments 18,983
(7,054 ) 49,029
(31,894 )
       Total other comprehensive income (loss) 18,983
(7,054 ) 49,029
(31,894 )
       Comprehensive income $ 50,088
$ 15,456
$ 154,548
$ 45,746

Table of Contents

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three months ended March 31,
	2021		2020

	(In thousands)
Net income	$	7,132	$	30,732
Other comprehensive income (loss):
Foreign currency translation adjustments	(514)		(39,508)
Unrealized gain (loss) on cash flow hedges and investments, net of tax	1,752		(4,270)
Total other comprehensive income (loss)	1,238		(43,778)
Comprehensive income (loss)	$	8,370	$	(13,046)

See accompanying notes to condensed consolidated financial statements.

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

Nine months ended September 30,
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 105,519
$ 77,640
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 70,289
62,090
Amortization of original issue discount and deferred financing costs 1,323
2,861
Loss (gain) on foreign currency transactions 1,608
(56 )
Non-cash revenue and other —
(29 )
Loss (gain) on disposal of fixed assets 2,282
(79 )
Stock-based compensation 8,777
8,476
Deferred rent 3,647
1,614
Deferred income taxes 1,038
(4,729 )
Changes in assets and liabilities:
Accounts receivable 2,324
13,963
Prepaid expenses and other current assets (13,796 ) 49
Accounts payable and accrued expenses 17,815
(1,814 )
Deferred revenue 4,149
(3,531 )
Accrued rent and related obligations 1,684
6,880
Other assets (7,254 ) 1,157
Other current and long-term liabilities 1,806
461
Net cash provided by operating activities 201,211
164,953
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets—net (63,070 ) (50,466 )
Payments and settlements for acquisitions—net of cash acquired (17,526 ) (22,307 )
Net cash used in investing activities (80,596 ) (72,773 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facility 475,001
270,500
Payments under revolving credit facility (485,501 ) (264,500 )
Principal payments of long-term debt (5,375 ) (7,163 )
Payments for debt issuance costs (1,314 ) (1,002 )
Purchase of treasury stock (74,935 ) (95,677 )
Taxes paid related to the net share settlement of stock options and restricted stock (25,830 ) (7,747 )
Proceeds from issuance of common stock upon exercise of options 18,709
9,148
Proceeds from issuance of restricted stock 4,363
3,682
Payments of contingent consideration for acquisitions (185 ) (750 )
Tax benefits from stock-based compensation —
10,484
Net cash used in financing activities (95,067 ) (83,025 )
Effect of exchange rates on cash and cash equivalents 2,084
(1,210 )
Net increase in cash and cash equivalents 27,632
7,945
Cash and cash equivalents—beginning of period 14,633
11,539
Cash and cash equivalents—end of period $ 42,265
$ 19,484

Table of Contents

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

Nine months ended September 30,
2017 2016
NON-CASH TRANSACTION:
Fixed asset purchases recorded in accounts payable and accrued expenses $ 3,000
$ 3,000
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments of interest $ 33,450
$ 28,752
Cash payments of taxes $ 24,996
$ 29,405
BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)


	Three months ended March 31, 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	$	0	$	(27,069)	$	400,502	$	1,283,797

Stock-based compensation expense				5,306								5,306
Issuance of common stock under the Equity Incentive Plan	296,392	1		18,996								18,997
Shares received in net share settlement of stock option exercises and vesting of restricted stock	(35,859)	—		(5,845)								(5,845)


Other comprehensive income								1,238				1,238
Net income										7,132		7,132
Balance at March 31, 2021	60,726,701	$	61	$	928,761	$	0	$	(25,831)	$	407,634	$	1,310,625


	Three months ended March 31, 2020
	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, 2020	57,884,020	$	58	$	648,031	$	0	$	(50,331)	$	373,510	$	971,268
Stock-based compensation expense				4,283								4,283
Issuance of common stock under the Equity Incentive Plan	298,876	1		12,461								12,462
Shares received in net share settlement of stock option exercises and vesting of restricted stock	(31,429)	—		(5,231)								(5,231)
Purchase of treasury stock						(32,208)						(32,208)
Retirement of treasury stock	(231,313)	(1)		(32,207)		32,208						0
Other comprehensive loss								(43,778)				(43,778)
Net income										30,732		30,732
Balance at March 31, 2020	57,920,154	$	58	$	627,337	$	0	$	(94,109)	$	404,242	$	937,528

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three months ended March 31,
	2021		2020

	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	7,132	$	30,732
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	27,282		28,221
Impairment losses on long-lived assets	0		4,970

Stock-based compensation expense	5,306		4,283
Deferred income taxes	1,016		(5,048)
Other non-cash adjustments — net	(964)		(691)
Changes in assets and liabilities:
Accounts receivable	10,006		(23,421)
Prepaid expenses and other current assets	(11,192)		(11,422)
Accounts payable and accrued expenses	(3,889)		24,529
Income taxes	(5,262)		1,367
Deferred revenue	37,706		(5,299)
Leases	(819)		16,839
Other assets	3,660		1,894
Other current and long-term liabilities	(1,687)		(2,871)
Net cash provided by operating activities	68,295		64,083

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets	(17,912)		(17,094)
Proceeds from the disposal of fixed assets	3,858		4,454
Proceeds from the maturity of debt securities and sale of other investments	6,000		3,247
Purchases of debt securities and other investments	(5,269)		(42)

Payments and settlements for acquisitions — net of cash acquired	(8,961)		(3,529)
Net cash used in investing activities	(22,284)		(12,964)

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under revolving credit facility	0		10,500
Payments under revolving credit facility	0		(10,500)
Principal payments of long-term debt	(2,688)		(2,688)

Purchase of treasury stock	0		(32,658)
Proceeds from issuance of common stock upon exercise of options and restricted stock upon purchase	22,432		15,962
Taxes paid related to the net share settlement of stock options and restricted stock	(5,845)		(5,231)

Payments of contingent consideration for acquisitions	0		(1,088)
Net cash provided by (used in) financing activities	13,899		(25,703)
Effect of exchange rates on cash, cash equivalents and restricted cash	(539)		(1,203)
Net increase in cash, cash equivalents and restricted cash	59,371		24,213
Cash, cash equivalents and restricted cash — beginning of period	388,465		31,192
Cash, cash equivalents and restricted cash — end of period	$	447,836	$	55,405

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)


	Three months ended March 31,
	2021		2020

	(In thousands)
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS:
Cash and cash equivalents	$	442,124	$	49,230
Restricted cash and cash equivalents, included in prepaid expenses and other current assets	5,712		6,175

Total cash, cash equivalents and restricted cash — end of period	$	447,836	$	55,405

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments of interest	$	8,403	$	9,535
Cash payments of income taxes	$	1,980	$	6,026
Cash paid for amounts included in the measurement of lease liabilities	$	36,964	$	29,130

NON-CASH TRANSACTIONS:
Fixed asset purchases recorded in accounts payable and accrued expenses	$	2,556	$	3,514
Contingent consideration issued for acquisitions	$	6,518	$	0

Operating right-of-use assets obtained in exchange for operating lease liabilities — net	$	18,412	$	56,825
Restricted stock reclassified from other current liabilities to equity upon vesting	$	4,178	$	4,366

See accompanying notes to condensed consolidated financial statements.

Table of Contents

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~~center-based child care and early education, 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 ~~throughout~~in the United States, ~~and~~ the United Kingdom, ~~and also in~~the Netherlands, Puerto Rico ~~Canada, the Netherlands,~~ and India. ~~Workplace~~The Company provides services ~~include center-based~~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, ~~education and enrichment programs, elementary school education, back-up~~ dependent care, ~~(for children~~ and ~~elders), before~~workforce education services, as part of their employee benefits packages in an effort to support employees across life and ~~after school care, college preparation~~career stages and ~~admissions counseling, tuition reimbursement program management, and other family support services.~~improve employee engagement.

Basis of Presentation—The accompanying unaudited condensed consolidated balance sheet as of ~~September 30, 2017~~March 31, 2021 and the condensed consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the interim periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 have been prepared ~~by the Company~~ 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.~~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, ~~2016.~~2020. The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior period amounts within the condensed consolidated balance sheet and supplemental statement of cash flows information to conform to the current period presentation.

In the opinion of the Company’s management, the Company’s unaudited condensed consolidated balance sheet as of ~~September 30, 2017~~March 31, 2021 and the condensed consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the interim periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, reflect all adjustments (consisting only of normal and recurring adjustments) necessary to present fairly the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year.

~~Stock Offerings~~Stockholders’ Equity —~~On January 30, 2013, the Company completed an initial public offering (the “Offering”) and issued a total~~ The board of ~~11.6 million shares of common stock. The Company also authorized 25 million shares of undesignated preferred stock for issuance.~~

Certain of the Company’s stockholders have sold a total of 43.6 million shares of the Company’s common stock in secondary offerings (“secondary offerings”), including 4.15 million in the nine months ended September 30, 2017. The Company did not receive proceeds from the sale of shares in the secondary offerings. The Company incurred $0.2 million in the nine months ended September 30, 2017 in offering costs related to secondary offerings, which were included in selling, general and administrative expenses. The Company purchased 0.7 million of the shares sold in secondary offerings in the nine months ended September 30, 2017 from investment funds affiliated with Bain Capital Partners, LLC at the same price per share paid by the underwriter to the selling stockholders. As of September 30, 2017, investment funds affiliated with Bain Capital Partners, LLC held approximately 14.2% of our common stock.

~~On August 2, 2016, the Board of Directors~~directors of the Company authorized a share repurchase program of up to $300 million of the Company’s outstanding common stock, effective ~~August 5, 2016, of which $207.9 million remained available at September 30, 2017.~~June 12, 2018. The share repurchase program ~~which~~ has no expiration ~~date, replaced the prior $250 million authorization announced in February 2015, of which $26.3 million remained available at the date the program was replaced.~~date. The shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions, under Rule 10b5-1 plans, or by other means in accordance with federal securities laws. During the three months ended March 31, 2021, there were no share repurchases and at March 31, 2021, $194.9 million remained available under the repurchase program.

On April 21, 2020, the Company completed the issuance and sale of 2,138,580 shares of common stock, par value $0.001 per share, to Durable Capital Master Fund LP at a price of $116.90 per share. The Company subsequently filed a registration statement to register the resale of these shares in accordance with the terms of the purchase agreement. The Company received net proceeds from the offering of $249.8 million.

COVID-19 Pandemic — Since March 2020, the Company's global operations have been significantly impacted by the COVID-19 pandemic. As of March 31, 2021, the Company operated 1,015 child care and early education centers, of which approximately 900 child care and early education centers were open. The Company remains focused on the re-enrollment of its centers and the phased re-opening of the limited number of centers that remain temporarily closed, which the Company expects will continue throughout 2021. The broad and long-term effects of COVID-19, its duration and scope of the ongoing disruption, cannot be predicted. Given these factors, the Company currently expects the effects of COVID-19 to continue to adversely impact the results of its operations for the remainder of 2021.

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Government Support — The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 in the United States, which is an economic aid package to help mitigate the impact of the pandemic. Additionally, other foreign governmental legislation that provides relief provisions has been enacted in response to the economic impact of COVID-19. The Company has participated in certain government support programs, including availing itself of certain tax deferrals and tax credits allowed pursuant to the CARES Act in the United States, as well as certain tax deferrals, tax credits, and employee wage support in the United Kingdom. On December 27, 2020, the employee retention tax credit, originally enacted under the CARES Act in the United States, was expanded and extended under the Consolidated Appropriations Act, 2021 (“CAA”) beginning January 1, 2021. The CAA extended the availability of the employee retention tax credit to wages paid through the first two quarters of 2021, among other changes. Governmental support received is recorded on the consolidated statement of income as a reduction to the related expenses that the assistance is intended to defray. During the three months ended March 31, 2021, $9.6 million was recorded as a reduction to cost of services in relation to these benefits. As of March 31, 2021 and December 31, 2020, $13.1 million and $8.4 million was recorded in prepaid expenses and other current assets on the consolidated balance sheet for amounts due from government support programs, respectively. Additionally, the Company had payroll tax deferrals totaling $20.4 million as of March 31, 2021 and December 31, 2020, of which $10.2 million was recorded in accounts payable and accrued expenses and $10.2 million was included in other long-term liabilities.

Recently Adopted Pronouncement— In ~~March 2016,~~December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting ~~Standards Update (“ASU”) 2016-09:~~ ~~Compensation - Stock Compensation (Topic 718): Improvements~~for Income Taxes. The standard removes certain exceptions to ~~Employee Share-Based Payment Accounting.~~ ~~The amendments~~the general principles in ~~this update simplify several aspects~~Topic 740 and improves the consistent application of U.S. GAAP by clarifying and amending certain areas of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification on the statement of cash flows. The update is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods with early adoption permitted.existing guidance. The Company adopted the ~~standard prospectively~~new guidance on January 1, ~~2017, and as such, prior periods have not been adjusted.~~2021. The adoption of this guidance impacted the Company’s income tax expense, effective tax rate, and weighted average shares outstanding. Upon adoption, the Company now recognizes all excess tax benefits and tax deficiencies as income tax benefits or expenses on the income statement, which were previously recorded to additional paid-in capital on the balance sheet. As a result, the Company decreased tax expense and increased net income by $3.4 million and $21.9 million in the three and nine months ended September 30, 2017, respectively, in relation to the excess tax benefit associated with the exercise of stock options and vesting of restricted stock. Additionally, weighted average diluted common shares increased in the three and nine months ended September 30, 2017 by approximately 0.4 million shares under the new methodology and tax benefits from stock option exercises were included with cash flows from operating activities as a component of net income rather than as cash flows from financing activities under previous guidance.

~~New Accounting Pronouncements— In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842).~~ ~~This~~ standard amends the existing guidance and requires lessees to recognize on the balance sheet assets and liabilities for the rights and obligations created by those leases with lease terms longer than twelve months. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018, and is to be applied using a modified retrospective approach. Early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption of this ASU on the Company's consolidated financial statements. Based on its preliminary assessment, the Company anticipates that the adoption of this standard will have a material impact on the Company's consolidated financial statements, as all long-term leases will be capitalized on the consolidated balance sheet.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~, which provides a single comprehensive model for revenue recognition. The FASB has subsequently issued various ASUs which amend or clarify specific areas of the guidance. 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. This new guidance is effective for the Company beginning January 1, 2018 and can be adopted using either a full retrospective or modified approach. The Company plans to adopt the standard using the modified approach. The Company is in the process of completing the evaluation of the impact of adoption of this ASU on the Company’s consolidated financial statements, but doesdid not ~~currently anticipate it will~~ have a material impact on the Company’s consolidated ~~results of operations.~~financial statements and related disclosures.

2. REVENUE RECOGNITION

Disaggregation of Revenue

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


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

	(In thousands)
Three months ended March 31, 2021
North America	$	192,454	$	71,182	$	24,166	$	287,802
Europe	97,865		5,173		0		103,038
	$	290,319	$	76,355	$	24,166	$	390,840
Three months ended March 31, 2020
North America	$	298,067	$	70,557	$	20,765	$	389,389
Europe	113,324		3,610		0		116,934
	$	411,391	$	74,167	$	20,765	$	506,323

The classification “North America” is comprised of the Company’s United States, Puerto Rico, and Canada operations and the classification “Europe” includes the United Kingdom, Netherlands, and India operations. During the third quarter of fiscal 2020, the Company divested its child care center business in Canada and ceased to operate its 2 centers in that geography.

Deferred Revenue

The Company records deferred revenue when payments are received in advance of the Company’s performance under the contract, which is recognized as revenue as the performance obligation is satisfied. During the three months ended March 31, 2021, $107.0 million was recognized as revenue related to the deferred revenue balance recorded at December 31, 2020. During the three months ended March 31, 2020, $123.8 million was recognized as revenue related to the deferred revenue balance recorded at December 31, 2019.

Remaining Performance Obligations

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

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3. LEASES

The Company has operating leases for certain of its full service and back-up child care and early education centers, corporate offices, call centers, and to a lesser extent, various office equipment, in the United States, the United Kingdom, and the Netherlands. Most of the leases expire within 10 to 15 years and many contain renewal options and/or termination provisions. The Company does not have any finance leases as of March 31, 2021.

Lease Expense

The components of lease expense were as follows:


	Three months ended March 31,
	2021		2020

	(In thousands)
Operating lease expense (1)	$	33,625	$	33,861
Variable lease expense (1)	6,942		9,233
Total lease expense	$	40,567	$	43,094

(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:


	March 31, 2021	December 31, 2020

Weighted average remaining lease term (in years)	10	10
Weighted average discount rate	6.0%	6.0%

Maturity of Lease Liabilities

The following table summarizes the maturity of lease liabilities as of March 31, 2021:


	Operating Leases

	(In thousands)
Remainder of 2021	$	90,174
2022	132,517
2023	123,996
2024	113,079
2025	98,485
Thereafter	532,595
Total lease payments	1,090,846
Less imputed interest	(278,497)
Present value of lease liabilities	812,349
Less current portion of operating lease liabilities	(87,431)
Long-term operating lease liabilities	$	724,918

As of March 31, 2021, the Company had entered into additional operating leases that have not yet commenced with total fixed payment obligations of $24.5 million. The leases are expected to commence between the second quarter of fiscal 2021 and the fourth quarter of fiscal 2022 and have initial lease terms of approximately 10 to 15 years.

Lease Modifications

As of March 31, 2021, the Company had deferred lease payments of $3.5 million. The majority of these lease payments are payable over the next year. As of December 31, 2020, the Company had deferred lease payments of $7.7 million.

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4. ACQUISITIONS ~~AND DISPOSITIONS~~

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 ~~our~~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.

~~2017~~2021 Acquisitions

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, the Company acquired ~~ten~~2 centers ~~in the Netherlands~~as well as a camp and ~~three centers~~back-up care provider in the United States, in ~~six~~2 separate business acquisitions, which were each accounted for as a business ~~combinations. The centers~~combination. These businesses were acquired for an aggregate cash consideration of ~~$17.5~~$8.6 million, net of cash acquired of ~~$0.1~~$0.4 million, and consideration payable of ~~$0.2~~$0.6 million. Additionally, the Company is subject to contingent consideration payments for these two acquisitions. Contingent consideration of up to $1.2 million may be payable within one year if certain performance targets are met for one of the acquisitions, and contingent consideration is payable in 2026 based on certain financial metrics for the other acquisition. The Company recorded a preliminary fair value estimate of $6.5 million in relation to these contingent consideration arrangements at acquisition. The Company recorded goodwill of ~~$13.1~~$13.2 million related to the back-up care segment and of $3.7 million related to the full service center-based child care segment, ~~a portion~~all of which will be deductible for tax purposes. In addition, the Company recorded intangible assets of ~~$2.0~~$1.8 million ~~consisting of customer relationships~~ that will be amortized over ~~three to four~~five years, as well as fixed assets of ~~$4.6 million, deferred tax liabilities of $0.6 million, and a working capital deficit of $1.4~~$1.5 million in relation to these acquisitions.

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, 2017,~~March 31, 2021, the purchase price allocations for these acquisitions remain open as the Company gathers additional information regarding the assets acquired and the liabilities ~~assumed.~~assumed, and finalizes its determination of the estimated fair value of the contingent consideration at the date of acquisition. The operating results for the acquired businesses are included in the consolidated results of operations from the date of acquisition, ~~which~~and were not material to the Company’s financial results.

~~2017 Dispositions~~2020 Acquisitions

During the ~~three months~~year ended September 30, 2017, the Company disposed of its remaining three centers in Ireland for a loss of $3.7 million, which was included in other expenses in the consolidated statements of income, offset by a tax benefit of approximately $7.0 million that was recorded from the loss on investment of a subsidiary.

~~2016 Acquisitions~~

~~Conchord Limited~~

~~On November 10, 2016,~~December 31, 2020, the Company acquired ~~all of the outstanding shares of Conchord Limited, which operates Asquith Day Nurseries & Pre-Schools (“Asquith~~”~~), a group of 90~~2 child care centers and ~~programs throughout~~the Sittercity business, an online marketplace for families and caregivers, in the United ~~Kingdom, for cash consideration of $206.1 million,~~States, in 3 separate business acquisitions, which ~~was~~were each accounted for as a business combination. ~~The purchase price was financed with available~~These businesses were acquired for cash ~~on hand~~consideration of $8.1 million, net of cash acquired of $1.3 million, and ~~funds available under the Company’s senior credit facilities. The Company incurred transaction costs~~consideration payable of ~~approximately $1.4~~$0.1 million, ~~for this transaction, which were~~and included ~~in selling, general and administrative expenses in 2016.~~

~~The purchase price for this acquisition has been allocated based on preliminary estimates of the fair values of the acquired~~fixed assets and ~~assumed liabilities at the date~~technology of ~~acquisition~~$4.1 million, as ~~follows (in thousands):~~

At acquisition date
As reported
December 31, 2016

Measurement
period adjustments
At acquisition date
As reported
September 30, 2017
Cash $ 5,210
$ 75
$ 5,285
Prepaid expenses and other assets 5,700
(237 ) 5,463
Fixed assets 96,868
(720 ) 96,148
Intangible assets 10,540
1,860
12,400
Goodwill 122,714
(6,028 ) 116,686
Total assets acquired 241,032
(5,050 ) 235,982
Accounts payable and accrued expenses (18,696 ) 1,719
(16,977 )
Deferred revenue and parent deposits (5,394 ) 342
(5,052 )
Deferred tax liabilities (7,793 ) 2,993
(4,800 )
Other long-term liabilities (3,048 ) (4 ) (3,052 )
Total liabilities assumed (34,931 ) 5,050
(29,881 )
Purchase price $ 206,101
$ —
$ 206,101

~~The Company acquired fixed assets~~well as a trade name of ~~$96.1~~$0.7 million including 39 properties. The Company recorded goodwill of $116.7 million, which will not be deductible for tax purposes. Goodwill related to this acquisition is reported within the full service center-based care segment. Intangible assets consist of $9.9 million of customer relationships that will be amortized over five ~~years~~years. The Company recorded goodwill of $2.0 million related to the educational advisory and ~~$2.5~~other services segment and $2.1 million related to the full-service center-based child care segment, all of ~~trademarks that~~which will be ~~amortized over six years.~~deductible for tax purposes.

The operating results for Asquith are included in the consolidated results of operations from the date of acquisition. The following table presents consolidated pro forma information as if the acquisition of Asquith had occurred on January 1, 2015 (in thousands):

Pro forma (Unaudited)
Nine Months Ended
September 30, 2016
Revenue $ 1,241,675
Net income $ 77,002

~~The unaudited pro forma results reflect certain adjustments related to the acquisition, such as increased amortization expense related to the acquired intangible assets as well as financing costs.~~

Asquith contributed total revenue of $69.3 million in the nine months ended September 30, 2017. The Company has determined that the presentation of net income, from the date of acquisition, is impracticable due to the integration of the operations upon acquisition.

~~Other 2016 Acquisitions~~assumed.

During the year ended December 31, ~~2016,~~2020, the Company ~~also acquired four centers in the United States and eight centers in the United Kingdom in four separate business acquisitions, which were each accounted~~paid $1.2 million for ~~as business combinations. The centers were acquired for cash consideration of $18.1 million and~~ contingent consideration ~~of $1.1 million. The Company recorded goodwill of $17.0 million~~ related to ~~the full service center-based care segment, a portion of~~acquisitions completed in 2018 and 2019, which ~~will be deductible for tax purposes. In addition, the Company~~had been recorded intangible assets of $3.4 million, consisting primarily of customer relationships that will be amortized over five years, and a working capital deficit of $1.8 million, including cash of $0.3 million, were also recorded in relation to these acquisitions.

~~During the year ended December 31, 2016, the Company acquired all of the outstanding shares of a provider of back-up care in the United States, which was accounted for~~ as a ~~business combination. The business was acquired for cash consideration~~liability at the date of $10.4 million and contingent consideration of $3.8 million. The Company recorded goodwill of $9.2 million related to the back-up care segment, which will not be deductible for tax purposes. In addition, the Company recorded

intangible assets of $4.9 million, consisting primarily of the provider network that will be amortized over five years, technology of $2.6 million, and working capital of $0.4 million, including cash of $0.3 million, in relation to this acquisition.

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, 2017, the purchase price allocation for one of the 2016 acquisitions remains open 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.

3.5. GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill ~~for the year ended December 31, 2016 and the nine months ended September 30, 2017 are~~were as ~~follows (in thousands):~~follows:


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

	(In thousands)




Balance at January 1, 2021	$	1,197,658	$	194,616	$	39,693	$	1,431,967
Additions from acquisitions	3,675		13,239		0		16,914
Adjustments to prior year acquisitions	0		0		150		150
Effect of foreign currency translation	(302)		194		0		(108)
Balance at March 31, 2021	$	1,201,031	$	208,049	$	39,843	$	1,448,923

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Full service
center-based
care

Back-up
dependent
care

Other
educational
advisory services
Total
Balance at January 1, 2016 $ 965,114
$ 158,894
$ 23,801
$ 1,147,809
Additions from acquisitions 139,539
9,214
—
148,753
Adjustments to prior year acquisitions 73
—
—
73
Effect of foreign currency translation (28,930 ) —
—
(28,930 )
Balance at December 31, 2016 1,075,796
168,108
23,801
1,267,705
Additions from acquisitions 13,072
—
—
13,072
Adjustments to prior year acquisitions (5,821 ) (3 ) —
(5,824 )
Effect of foreign currency translation 27,596
—
—
27,596
Balance at September 30, 2017 $ 1,110,643
$ 168,105
$ 23,801
$ 1,302,549

The Company also has intangible assets, which ~~consist~~consisted of the following at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016 (in thousands):~~2020:


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

		(In thousands)
Definite-lived intangible assets:
Customer relationships	14 years	$	402,872	$	(317,979)	$	84,893
Trade names	6 years	12,716		(9,823)		2,893
		415,588		(327,802)		87,786
Indefinite-lived intangible assets:
Trade names	N/A	181,153		—		181,153
		$	596,741	$	(327,802)	$	268,939


December 31, 2020	Weighted average amortization period	Cost		Accumulated amortization		Net carrying amount

		(In thousands)
Definite-lived intangible assets:
Customer relationships	14 years	$	402,319	$	(310,587)	$	91,732
Trade names	6 years	11,219		(9,633)		1,586
		413,538		(320,220)		93,318
Indefinite-lived intangible assets:
Trade names	N/A	181,302		—		181,302
		$	594,840	$	(320,220)	$	274,620

September 30, 2017
Weighted average
amortization period
Cost
Accumulated
amortization

Net carrying
amount
Definite-lived intangibles:
Customer relationships 14 years $ 400,105
$ (230,730 ) $ 169,375
Trade names 7 years 10,157
(4,207 ) 5,950
Non-compete agreements N/A 50
(50 ) —
410,312
(234,987 ) 175,325
Indefinite-lived intangibles:
Trade names N/A 181,144
—
181,144
$ 591,456
$ (234,987 ) $ 356,469

December 31, 2016
Weighted average
amortization period
Cost
Accumulated
amortization

Net carrying
amount
Definite-lived intangibles:
Customer relationships 15 years $ 392,820
$ (205,342 ) $ 187,478
Trade names 7 years 8,283
(2,961 ) 5,322
Non-compete agreements N/A 49
(49 ) —
401,152
(208,352 ) 192,800
Indefinite-lived intangibles:
Trade names N/A 181,766
—
181,766
$ 582,918
$ (208,352 ) $ 374,566

~~The Company estimates that it will record amortization expense related to intangible assets existing as of September 30, 2017 as follows over the next five years (in thousands):~~

Estimated
amortization expense
Remainder of 2017 $ 7,955
2018 $ 29,791
2019 $ 27,497
2020 $ 26,620
2021 $ 25,113

4.6. CREDIT ARRANGEMENTS AND DEBT OBLIGATIONS

Senior Secured Credit Facilities

The Company’s ~~$1.3 billion~~ senior secured credit facilities consist of ~~$1.1 billion in~~ a secured term loan facility (“term loan facility”) and a ~~$225~~$400 million multi-currency revolving credit ~~facility.~~facility (“revolving credit facility”). The term ~~loans mature~~loan matures on November 7, 2023 and ~~require~~requires quarterly principal payments of $2.7 million, with the remaining principal balance due on November 7, 2023.

Outstanding term loan borrowings were as ~~follows at September 30, 2017~~follows:


	March 31, 2021		December 31, 2020

	(In thousands)
Term loan	$	1,032,000	$	1,034,688
Deferred financing costs and original issue discount	(3,466)		(3,801)
Total debt	1,028,534		1,030,887
Less current maturities	(10,750)		(10,750)
Long-term debt	$	1,017,784	$	1,020,137

In April and ~~December 31, 2016 (in thousands):~~

September 30,
2017 December 31,
2016
Term loans $ 1,069,625
$ 1,075,000
Deferred financing costs and original issue discount (10,232 ) (10,241 )
Total debt 1,059,393
1,064,759
Less current maturities 10,750
10,750
Long-term debt $ 1,048,643
$ 1,054,009

May 2020, the Company amended its existing senior credit facilities to, among other things, increase the borrowing capacity of the revolving credit facility from $225 million to $400 million, modify the interest rates applicable to borrowings outstanding on the revolving credit facility, and modify the terms of the applicable covenants. In conjunction with these credit amendments, the Company incurred $2.8 million in fees that have been capitalized in other assets on the consolidated balance sheet and will be amortized over the remaining life of the revolving credit facility. The revolving credit facility matures on July 31, 2022. ~~Borrowings~~There were 0 borrowings outstanding on the revolving credit facility ~~were $65.5 million~~ at ~~September 30, 2017~~March 31, 2021 and ~~$76.0 million at~~ December 31, ~~2016.~~2020.

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All borrowings under the credit agreement are subject to variable interest. Borrowings under the term loan facility bear interest at a rate per annum of 1.25% over the base rate, or 2.25% over the Eurocurrency rate (each as defined in the credit agreement), which is the one, two, three or six month LIBOR rate or, with applicable lender approval, the twelve month or less than one month LIBOR rate. With respect to the term loan facility, the base rate is subject to an interest rate floor of 1.75% and the Eurocurrency rate is subject to an interest rate floor of 0.75%. Borrowings under the revolving credit facility bear interest at a rate per annum ranging from 0.75% to 1.25% over the base rate, or 1.75% to 2.25% over the Eurocurrency rate.

Prior to an amendment to the credit agreement on May 8, 2017, borrowings under the term loan facility bore interest at a rate per annum ranging from 1.5% to 1.75% over the base rate, or 2.5% to 2.75% over the Eurocurrency rate. With respect to the term loan facility, the base rate was subject to an interest rate floor of 1.75% and the Eurocurrency rate was subject to an interest rate floor of 0.75%. Borrowings under the revolving credit facility bore interest at a rate per annum ranging from 1.25% to 1.75% over the base rate, or 2.25% to 2.75% over the Eurocurrency rate.

The effective interest rate for the term ~~loans~~loan was ~~3.5%~~2.50% at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, and the weighted average interest rate was ~~3.5%~~2.50% and ~~4.0%~~3.42% for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively. The effective~~2020, respectively, prior to the effects of any interest rate ~~for the revolving credit facility was 3.5% and 5.5% at September 30, 2017 and December 31, 2016, respectively.~~hedge arrangements. The weighted average interest rate for the revolving credit facility was ~~4.2%~~4.50% and ~~4.4% for the nine months ended September 30, 2017 and 2016, respectively.~~

Certain financing fees and original issue discount costs are capitalized and are being amortized over the terms of the related debt instruments and amortization expense is included in interest expense. Amortization expense of deferred financing costs were $0.3 million and $0.6 million5.41% for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively,~~2020, respectively.

All obligations under the senior secured credit facilities are secured by substantially all the assets of the Company’s U.S. subsidiaries. The senior secured credit facilities contain a number of covenants that, among other things and ~~were $1.0 million~~subject to certain exceptions, may restrict the ability of Bright Horizons Family Solutions LLC, the Company’s wholly-owned subsidiary, and ~~$1.8 million for~~its restricted subsidiaries, to: incur certain liens; make investments, loans, advances and acquisitions; incur additional indebtedness or guarantees; pay dividends on capital stock or redeem, repurchase or retire capital stock or subordinated indebtedness; engage in transactions with affiliates; sell assets, including capital stock of the ~~nine months ended September 30, 2017~~Company’s subsidiaries; alter the business conducted; enter into agreements restricting the Company’s subsidiaries’ ability to pay dividends; and ~~2016, respectively. Amortization expense of original issuance discount costs were $0.1 million and $0.4 million for~~consolidate or merge.

In addition, the ~~three months ended September 30, 2017 and 2016, respectively, and were $0.3 million and $1.1 million for the nine months ended September 30, 2017 and 2016, respectively.~~

~~On January 26, 2016, the Company amended its then existing~~ credit agreement governing the senior secured credit facilities requires Bright Horizons Capital Corp., the Company’s direct subsidiary, to ~~increase~~be a passive holding company, subject to certain exceptions. Effective as of April 24, 2020, the revolving credit facility ~~from $100.0 million~~requires Bright Horizons Family Solutions LLC, the borrower, and its restricted subsidiaries, to ~~$225.0 million,~~comply with a maximum first lien gross leverage ratio for four fiscal quarters starting with the second quarter of 2020, followed by a maximum first lien net leverage ratio in the quarters thereafter. The maximum first lien gross leverage ratio was 7.50 to ~~extend~~1.00 for the ~~maturity date on~~fiscal quarter ending March 31, 2021. Beginning with the ~~revolving~~fiscal quarter ending June 30, 2021, the Company will be required to comply with its previous maximum first lien net leverage ratio of 4.25 to 1.00. A breach of the applicable covenant is subject to certain equity cure rights. Prior to the April 2020 credit ~~facility from January 30, 2018~~amendment, the Company was required to ~~July 31, 2019, and~~comply with a maximum first lien net leverage ratio.

Future principal payments of long-term debt are as follows for the years ending December 31:


	Term Loan

	(In thousands)
Remainder of 2021	$	8,062
2022	10,750
2023	1,013,188


Total future principal payments	$	1,032,000

Derivative Financial Instruments

The Company is subject to ~~modify the~~ interest rate ~~applicable to borrowings.~~

~~On November 7, 2016,~~risk as all borrowings under the ~~Company modified its then existing~~ senior secured credit facilities ~~and refinanced all of its outstanding term loans into a new seven year term loan facility, which resulted in the issuance of $1.1 billion in new term loans, a portion of which were used~~are subject to ~~repay $922.5 million in outstanding term loans under the previous term loan facility, and $150.0 million of which was used to fund the acquisition of a business. The terms,~~variable interest ~~rate and availability of the revolving credit facility were not modified in the November 2016 debt refinancing.~~

On May 8, 2017, the Company amended its existing senior credit facilities to, among other changes, reduce the applicable interest rates of the term loan facility and the revolving credit facility. The Company also extended the maturity date on the revolving credit facility from July 31, 2019 to July 31, 2022. The amended term loan facility continues to have a maturity date of November 7, 2023.

Onrates. In October ~~16,~~ 2017, the Company entered into variable-to-fixed interest rate swap agreements to mitigate the exposure to variable interest arrangements on $500 million notional amount of the outstanding term loan borrowings. These swap agreements, designated and accounted for as cash flow hedges from inception, are scheduled to mature on October 31, 2021. The Company is required to make monthly payments on the notional amount at a fixed average interest rate, plus the applicable rate for eurocurrency loans. Effective as of May 31, 2018, the notional amount is subject to a total interest rate of approximately ~~1.90%~~3.65%. In exchange, the Company receives interest on the notional amount at a variable rate based on the one-month LIBOR rate, subject to a 0.75% floor.

In June 2020, the Company entered into interest rate cap agreements with a total notional value of $800 million, designated and accounted for as cash flow hedges from inception, to provide the Company with interest rate protection in the event the one-month LIBOR rate increases above 1%. Interest rate cap agreements for $300 million notional value have an effective date of June 30, 2020 and expire on October 31, 2023, while interest rate cap agreements for another $500 million notional amount have a forward starting effective date of October 29, 2021, which coincides with the maturity of the interest rate swap agreements, and expire on October 31, 2023.

The ~~future principal payments under~~interest rate swaps and interest rate caps are recorded on the Company’s consolidated balance sheet at fair value and classified based on the instruments’ maturity dates. The Company records gains and losses resulting from changes in the fair value of the interest rate swaps and interest rate caps to accumulated other comprehensive income or loss. These gains and losses are subsequently reclassified into earnings and recognized to interest expense in the Company’s consolidated statement of income in the period that the hedged interest expense on the term ~~loans at September 30, 2017 are~~loan facility is recognized. The premium paid for the interest rate cap was recorded as ~~follows (in thousands):~~an asset and will be allocated to each of the individual hedged interest payments on the basis of their relative fair values. The change in each respective allocated fair value amount will be reclassified out of accumulated other comprehensive income when each of the hedged forecasted transactions impacts earnings and recognized to interest expense in the Company's consolidated statement of income.

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Remainder of 2017 $ 2,688
2018 10,750
2019 10,750
2020 10,750
2021 10,750
Thereafter 1,023,937
$ 1,069,625
The fair value of the derivative financial instruments was as follows:


Derivative financial instruments	Consolidated balance sheet classification	March 31, 2021		December 31, 2020

		(In thousands)
Interest rate swaps - liability	Other current liabilities	$	3,353	$	4,775
Interest rate caps - asset	Other assets	$	1,270	$	277

5.The effect of the derivative financial instruments on other comprehensive income (loss) was as follows:


Derivatives designated as cash flow hedging instruments	Amount of gain (loss) recognized in other comprehensive income (loss)		Consolidated statement of income classification	Amount of net gain (loss) reclassified into earnings		Total effect on other comprehensive income (loss)

	(In thousands)			(In thousands)
Three months ended March 31, 2021
Cash flow hedges	$	978	Interest expense — net	$	(1,450)	$	2,428
Income tax effect	(261)		Income tax expense	387		(648)
Net of income taxes	$	717		$	(1,063)	$	1,780

Three months ended March 31, 2020
Cash flow hedges	$	(6,302)	Interest expense — net	$	(285)	$	(6,017)
Income tax effect	1,695		Income tax expense	77		1,618
Net of income taxes	$	(4,607)		$	(208)	$	(4,399)

During the next twelve months, the Company estimates that a net loss of $3.6 million, pre-tax, will be reclassified from accumulated other comprehensive income (loss) and recorded to interest expense related to these derivative financial instruments.

7. 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.

~~Earnings per Share - Basic~~

The following ~~table sets~~tables set forth the computation of ~~earnings per share using the two-class method (in thousands, except share~~basic and ~~per share amounts):~~

Three months ended
September 30, Nine months ended
September 30,
2017 2016 2017 2016
Basic earnings per share:
Net income $ 31,105
$ 22,510
$ 105,519
$ 77,640
Allocation of net income to common stockholders:
Common stock $ 30,905
$ 22,306
$ 104,884
$ 76,954
Unvested participating shares 200
204
635
686
$ 31,105
$ 22,510
$ 105,519
$ 77,640
Weighted average number of common shares:
Common stock 58,811,488
58,928,264
59,039,931
59,326,525
Unvested participating shares 380,950
538,795
361,055
528,887
Earnings per share:
Common stock $ 0.53
$ 0.38
$ 1.78
$ 1.30

~~Earnings per Share - Diluted~~

~~The Company calculates diluted earnings per share for common stock using the more dilutive of the treasury stock method or the two-class method. The following table sets forth the computation of~~ diluted earnings per share using the two-class ~~method (in thousands, except share and per share amounts):~~method:


	Three months ended March 31,
	2021		2020

	(In thousands, except share data)
Basic earnings per share:
Net income	$	7,132	$	30,732
Allocation of net income to common stockholders:
Common stock	$	7,105	$	30,587
Unvested participating shares	27		145
Net income	$	7,132	$	30,732

Weighted average common shares outstanding:
Common stock	60,594,947		57,930,909
Unvested participating shares	235,184		274,801
Earnings per common share:
Common stock	$	0.12	$	0.53

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														Three months ended March 31,
														2021		2020
	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016				(In thousands, except share data)
Diluted earnings per share:													Diluted earnings per share:
Earnings allocated to common stock	$	30,905		$	22,306		$	104,884		$	76,954		Earnings allocated to common stock	$	7,105	$	30,587
Plus earnings allocated to unvested participating shares	200			204			635			686
Less adjusted earnings allocated to unvested participating shares	(196		)	(199		)	(620		)	(670		)
Plus: earnings allocated to unvested participating shares													Plus: earnings allocated to unvested participating shares	27		145
Less: adjusted earnings allocated to unvested participating shares													Less: adjusted earnings allocated to unvested participating shares	(27)		(143)
Earnings allocated to common stock	$	30,909		$	22,311		$	104,899		$	76,970		Earnings allocated to common stock	$	7,105	$	30,589
Weighted average number of common shares:

Weighted average common shares outstanding:													Weighted average common shares outstanding:
Common stock	58,811,488			58,928,264			59,039,931			59,326,525			Common stock	60,594,947		57,930,909
Effect of dilutive securities	1,276,590			1,347,638			1,417,073			1,410,660			Effect of dilutive securities	731,026		947,875
	60,088,078			60,275,902			60,457,004			60,737,185
Earnings per share:
Weighted average common shares outstanding — diluted													Weighted average common shares outstanding — diluted	61,325,973		58,878,784
Earnings per common share:													Earnings per common share:
Common stock	$	0.51		$	0.37		$	1.74		$	1.27		Common stock	$	0.12	$	0.52

Options outstanding to purchase ~~0.6~~0.8 million and ~~0.7~~0.5 million shares of common stock were excluded from diluted earnings per share for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021 and 2020, respectively, ~~and 0.5 million shares were excluded from both the three and nine months ended September 30, 2016,~~ since their effect was anti-dilutive. These options may become dilutive in the future.

6.8. INCOME TAXES

The ~~Company~~’sCompany’s effective income tax rates were ~~8.9%~~(52.0)% and ~~34.2%~~7.1% for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively, and 12.7% and 34.4% for the nine months ended September 30, 2017 and 2016,~~2020, 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 to quarter for various reasons, including changes to income (loss) before income tax, jurisdictional mix of income (loss) before income tax, valuation allowances, jurisdictional income tax rate changes, as well as discrete items such as the settlement of foreign, ~~Federal~~federal and ~~State~~state tax issues and ~~beginning January 1, 2017, for~~ the effects of ~~including the~~ excess tax benefits associated with the exercise of stock options and vesting of restricted stock, which is included as a reduction of tax ~~expense, in accordance with ASU 2016-09:~~ ~~Compensation-Stock Compensation (Topic 718),~~ ~~which was adopted prospectively as of January 1, 2017 (see Note 1).~~expense. During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021 and 2020, the excess tax benefit from stock-based compensation expense decreased tax expense by ~~$3.4~~$3.9 million and ~~$21.9~~$6.9 million, respectively. ~~Also in~~For the ~~quarter~~three months ended ~~September 30, 2017, a~~March 31, 2021 and 2020, prior to the inclusion of the excess tax benefit ~~of approximately $7.0 million was recorded from~~and other discrete items, the ~~loss on investment of a subsidiary related to the disposition of our remaining assets in Ireland. The~~ effective income tax rate approximated 36% in the three and nine months ended September 30, 2017, prior to the inclusion of both the excess tax benefit from stock compensation related to the new accounting guidance and the benefit from the loss on investment.28%.

The Company’s unrecognized tax benefits were ~~$1.7 million and $1.1~~$4.1 million at ~~September 30, 2017~~March 31, 2021 and $4.0 million at December 31, ~~2016, respectively. There were no interest and penalties related to unrecognized tax benefits at September 30, 2017 and December 31, 2016.~~

2020, inclusive of interest. 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~~statute of limitations ~~lapse.~~lapses. The impact of the amount of such changes to previously recorded uncertain tax positions could range from ~~zero~~0 to ~~$1.7 million, exclusive of interest and penalties.~~$2.8 million.

The Company and its domestic subsidiaries are subject to audit for U.S. ~~Federal~~federal income tax as well as multiple state jurisdictions. U.S. ~~Federal~~federal income tax returns are typically subject to examination by the Internal Revenue Service ~~(IRS)~~(“IRS”) and ~~have a~~the statute of limitations offor federal tax returns is three ~~years; therefore, tax~~years. The Company’s filings for ~~2014~~the tax years 2017 through ~~2016~~2020 are subject to ~~audit.~~audit based upon the federal statute of limitations.

State income tax returns are generally subject to examination for a period of three to ~~five~~four years after filing of the respective return. The state impact of any ~~Federal~~federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. As of ~~September 30, 2017,~~March 31, 2021, there ~~was one audit~~were 3 income tax audits in process and the tax years from ~~2013~~2016 to ~~2016~~2020 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~~five years.

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9. FAIR VALUE ~~OF FINANCIAL INSTRUMENTS~~MEASUREMENTS

~~The Company defines fair~~Fair value is defined 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~~date. Fair value measurements are classified using a three-level 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).~~inputs. The Company uses observable inputs where relevant and whenever possible. The three levels of the hierarchy are defined as follows:

Level ~~1—Quoted~~1 — Fair value is derived using quoted prices ~~are available in~~from active markets for identical ~~investments as of the reporting date.~~instruments.

Level ~~2—Quoted~~2 — Fair value is derived using quoted prices for similar instruments infrom active ~~markets; quoted prices~~markets or for identical or similar instruments in markets that are not active; ~~and~~or, fair value is based on model-derived valuations in which all significant inputs and significant value drivers are observable infrom active markets.

Level ~~3—Valuations~~3 — Fair value is derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The ~~Company’s financial instruments consist primarily~~carrying value of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable ~~borrowings on the revolving credit facility,~~ and ~~long-term debt. The~~accrued expenses approximates their fair value because of ~~the Company’s financial instruments, other than long-term debt, approximates~~ their ~~carrying value.~~

~~The carrying value and estimated fair value of the Company’s long-term debt as of September 30, 2017 and December 31, 2016 were as follows (in thousands):~~

September 30, 2017 December 31, 2016
Financial liabilities Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value
Term loans $ 1,069,625
$ 1,079,000
$ 1,075,000
$ 1,084,400

~~The estimated fair value of the Company’s long-term debt is based on current bid prices for our term loans. As such, our long-term debt is classified as Level 1, as defined under U.S. GAAP.~~short-term nature.

Financial instruments that potentially expose the Company to concentrations of credit risk ~~consist~~consisted 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~~is derived primarily from the services it provides, ~~are~~and the related credit risk is dispersed across many clients in various industries with no single client accounting for more than 10% of the ~~Company’s~~Company's net revenue or accounts receivable. No significant credit concentration risk existed at March 31, 2021.

Long-term Debt — The Company’s long-term debt is recorded at adjusted cost, net of original issue discounts and deferred financing costs. The fair value of the Company’s long-term debt is based on current bid prices, which approximates carrying value. As such, the Company’s long-term debt was classified as Level 1. The carrying value and estimated fair value of long-term debt were $1.03 billion and $1.02 billion, respectively, as of both March 31, 2021 and December 31, 2020.

Derivative Financial Instruments —The Company’s interest rate swap agreements and interest rate cap agreements are recorded at fair value, which were estimated using market-standard valuation models. Such models project future cash flows and discount the future amounts to a present value using market-based observable inputs. Additionally, the fair value of the interest rate swaps and interest rate caps included consideration of credit risk. The Company ~~believes that no~~used a potential future exposure model to estimate this credit valuation adjustment (“CVA”). The inputs to the CVA were largely based on observable market data, with the exception of certain assumptions regarding credit worthiness. As the magnitude of the CVA was not a significant ~~credit risk exists~~component of the fair value of the interest rate swaps and interest rate caps, it was not considered a significant input. The fair value of the interest rate swaps and interest rate caps are classified as Level 2. As of March 31, 2021 and December 31, 2020, the fair value of the interest rate swap agreements was $3.4 million and $4.8 million, respectively, which were recorded in other current liabilities on the consolidated balance sheet. As of March 31, 2021 and December 31, 2020, the fair value of the interest rate cap agreements was $1.3 million and $0.3 million, respectively, which were recorded in other assets on the consolidated balance sheet.

Debt Securities — The Company’s investments in debt securities, which are classified as available-for-sale, consist of U.S. Treasury and U.S. government agency securities and certificate of deposits. These securities are held in escrow by the Company’s wholly-owned captive insurance company and were purchased with restricted cash. As such, these securities are not available to fund the Company’s operations. These securities are recorded at ~~September 30, 2017.~~fair value using quoted prices available in active markets and are classified as Level 1. As of March 31, 2021, the fair value of the available-for-sale debt securities was $26.0 million and was classified based on the instruments’ maturity dates, with $21.6 million included in prepaid expenses and other current assets and $4.4 million in other assets on the consolidated balance sheet. As of December 31, 2020, the fair value of the available-for-sale debt securities was $27.9 million, with $21.5 million included in prepaid expenses and other current assets and $6.4 million in other assets on the consolidated balance sheet. At March 31, 2021 and December 31, 2020, the amortized cost was $26.0 million and $27.9 million, respectively. The debt securities held at March 31, 2021 had remaining maturities ranging from less than one year to approximately 1.5 years. Unrealized gains and losses, net of tax, on available-for-sale debt securities were immaterial for the three months ended March 31, 2021 and 2020. The Company did not realize any gains or losses on its debt securities during the three months ended March 31, 2021 and 2020.

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~~8. SEGMENT INFORMATION~~Liabilities for Contingent Consideration —The Company is subject to contingent consideration arrangements in connection with certain business combinations. Liabilities for contingent consideration are measured at fair value each reporting period, with the acquisition-date fair value included as part of the consideration payable for the related business combination and subsequent changes in fair value recorded to selling, general and administrative expenses on the Company’s consolidated statement of income. The fair value of contingent consideration was generally calculated using customary valuation models based on probability-weighted outcomes of meeting certain future performance targets and forecasted results. The key inputs to the valuations are the projections of future financial results in relation to the businesses and the company-specific discount rates. The Company classified the contingent consideration liabilities as a Level 3 fair value measurement due to the lack of observable inputs used in the model. The contingent consideration liabilities outstanding as of March 31, 2021 related to 2019 and 2021 acquisitions. See Note 4, Acquisitions, for additional information.

~~Bright Horizons' workplace~~The following table provides a roll forward of the recurring Level 3 fair value measurements:


	Three months ended March 31, 2021

	(In thousands)
Balance at January 1, 2021	$	13,721
Issuance of contingent consideration in connection with acquisitions	6,518



Foreign currency translation	100
Balance at March 31, 2021	$	20,339

Nonrecurring Fair Value Estimates — During the three months ended March 31, 2020, the Company recognized impairment losses of $5.0 million on fixed assets for certain centers. The impairment losses were included in cost of services ~~are comprised~~on the consolidated statement of income, which have been allocated to the full service center-based child care segment. The estimated fair value of the applicable center long-lived assets was based on the fair value of the asset groups, calculated using a discounted cash flow model, with unobservable inputs. The fair value of the fixed assets was insignificant given the current and expected cash flows for these centers. The Company classified the center long-lived assets as a Level 3 fair value measurement due to the lack of observable inputs used in the model.

10. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss), which is included as a component of stockholders’ equity, is comprised of foreign currency translation adjustments and unrealized gains (losses) on cash flow hedges and investments, net of tax.

The changes in accumulated other comprehensive income (loss) by component were as follows:


	Three months ended March 31, 2021
	Foreign currency translation adjustments (1)		Unrealized gain (loss) on cash flow hedges		Unrealized gain (loss) on investments		Total

	(In thousands)
Balance at January 1, 2021	$	(22,332)	$	(4,785)	$	48	$	(27,069)
Other comprehensive income (loss) before reclassifications — net of tax	(127)		717		(28)		562
Less: amounts reclassified from accumulated other comprehensive income (loss) — net of tax	387		(1,063)		—		(676)
Net other comprehensive income (loss)	(514)		1,780		(28)		1,238
Balance at March 31, 2021	$	(22,846)	$	(3,005)	$	20	$	(25,831)

(1)Taxes are not provided for the currency translation adjustments related to the undistributed earnings of foreign subsidiaries that are intended to be indefinitely reinvested.

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	Three months ended March 31, 2020
	Foreign currency translation adjustments (1)		Unrealized gain (loss) on cash flow hedges		Unrealized gain (loss) on investments		Total

	(In thousands)
Balance at January 1, 2020	$	(47,835)	$	(2,566)	$	70	$	(50,331)
Other comprehensive income (loss) before reclassifications — net of tax	(39,508)		(4,607)		129		(43,986)
Less: amounts reclassified from accumulated other comprehensive income (loss) — net of tax	0		(208)		—		(208)
Net other comprehensive income (loss)	(39,508)		(4,399)		129		(43,778)
Balance at March 31, 2020	$	(87,343)	$	(6,965)	$	199	$	(94,109)

(1)Taxes are not provided for the currency translation adjustments related to the undistributed earnings of foreign subsidiaries that are intended to be indefinitely reinvested.

11. SEGMENT INFORMATION

The Company’s reportable segments are comprised of (1) full service center-based child care, (2) back-up ~~dependent~~ care, and ~~other~~(3) educational advisory and other services. ~~Full~~The full service center-based child care segment includes the traditional center-based child care and early education, 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.education. The Company’s back-up ~~dependent~~ care ~~services consist~~segment consists of center-based back-up child care, in-home ~~care, mildly ill~~child and adult/elder care, and ~~adult/elder~~self-sourced reimbursed care. The Company’s ~~other~~ educational advisory and other services ~~consist~~segment consists of ~~college preparation~~tuition assistance and ~~admissions counseling, tuition reimbursement~~student loan repayment program ~~management, and related~~administration, educational consulting services, and college admissions advisory services, and an online marketplace for families and caregivers, which have ~~similar operating characteristics and~~been aggregated as they do not meet the ~~criteria~~thresholds for ~~aggregation.~~separate disclosure. The Company and its chief operating decision ~~makers~~maker evaluate performance based on revenues and income from operations.

Intercompany activity is eliminated in the segment results. The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements; therefore, no ~~additional~~segment asset 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, 2017
Revenue $ 358,094
$ 60,085
$ 15,137
$ 433,316
Amortization of intangible assets 7,625
385
181
8,191
Income from operations (1) 24,742
15,886
4,335
44,963
Three months ended September 30, 2016
Revenue $ 318,821
$ 53,229
$ 11,879
$ 383,929
Amortization of intangible assets 6,586
411
144
7,141
Income from operations (2) 28,107
14,183
2,425
44,715
Revenue and income from operations by reportable segment were as follows:


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

	(In thousands)
Three months ended March 31, 2021
Revenue	$	290,319	$	76,355	$	24,166	$	390,840
Income (loss) from operations	(17,967)		27,190		4,485		13,708

Three months ended March 31, 2020
Revenue	$	411,391	$	74,167	$	20,765	$	506,323
Income from operations (1)	16,747		22,239		4,295		43,281

(1)For the three months ended ~~September 30, 2017,~~March 31, 2020, income from operations ~~includes $3.7 million of expenses related to the disposition of our remaining assets in Ireland, which have been allocated to~~for the full service center-based child care ~~segment.~~

~~(2) For the three months ended September 30, 2016, income from operations includes $0.2~~segment included $5.0 million of ~~expenses related to completed acquisitions, which have been allocated~~impairment costs for long-lived assets due to the ~~full service center-based care segment.~~impact of COVID-19 on the Company’s operations.

Full service
center-based care Back-up
dependent care Other educational
advisory services Total
(In thousands)
Nine months ended September 30, 2017
Revenue $ 1,094,911
$ 164,171
$ 41,944
$ 1,301,026
Amortization of intangible assets 22,505
1,154
582
24,241
Income from operations (1) 99,921
43,794
9,458
153,173
Nine months ended September 30, 2016
Revenue $ 991,133
$ 146,009
$ 34,162
$ 1,171,304
Amortization of intangible assets 20,133
773
432
21,338
Income from operations (2) 101,584
41,741
6,565
149,890
12. CONTINGENCIES

~~(1) For~~Litigation

The Company is a defendant in certain legal matters in the ~~nine months ended September 30, 2017, income from~~ordinary course of business. Management believes the resolution of such pending legal matters will not have a material adverse effect on the Company’s financial condition, results of operations ~~includes $5.6 million~~or cash flows, although the Company cannot predict the ultimate outcome of ~~expenses related~~any such actions. The Company is currently subject to a governmental investigation and may be subject to one or more potential health and safety charges in the ~~disposition of our remaining assets in Ireland, an amendment to the credit agreement, and a secondary offering, which have been allocated to the full service center-based care segment.~~

~~(2) For the nine months ended September 30, 2016, income from operations includes $0.8 million of expenses~~United Kingdom related to an ~~amendment~~incident at a Company nursery in July 2019. The Company is unable to estimate a range of loss associated with this unasserted matter at this time, but does not expect that this matter will have a material adverse effect on the ~~credit agreement, completed acquisitions and a secondary offering, which have been allocated to the full service center-based care segment.~~Company’s consolidated financial position.

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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 and liquidity, ~~prospects,~~the impact of COVID-19 on our near and long- term operations, our expectations around the timing to open temporarily closed centers, permanent center closures, the continued operation of currently open centers, timing to re-enroll and re-ramp centers as well as certain back-up care services, enrollment recovery, our cost management and cost-saving initiatives and capital spending, labor costs, impact of government mandates, continued performance and contributions from our back-up care segment, use of back-up care solutions, access to and impact of government relief and support programs including tax deferrals and credits, leases, lease deferrals and timing for payment, ability to respond to changing market conditions, our growth, ~~strategies, the industries in which we and~~ our ~~partners operate,~~strategies, demand for services, macroeconomic trends, the impact of accounting principles, pronouncements and policies, acquisitions and ~~the subsequent integration and~~ expected synergies, our fair value estimates, impairment losses, goodwill from business combinations, ~~the vesting~~estimates and impact of ~~Company~~ equity transactions, unrecognized tax benefits and the impact of uncertain tax positions, our effective tax rate, the outcome of tax audits, settlements and tax liabilities, future impact of excess tax ~~benefit,~~benefits, estimates and adjustments, amortization expense, the impact of foreign currency exchange rates, our credit risk, ~~the impact of seasonality on results of operations,~~ our share repurchase program, the outcome of litigation, legal proceedings and our insurance coverage, debt securities, our interest rate ~~swap,~~swaps and caps, interest rates and projections, interest expense, the use of derivatives or other market risk sensitive instruments, our indebtedness, borrowings under our senior credit facility and revolving credit facility, the need for additional debt or equity financings and our ability to obtain such financing, our sources and uses of cash flow, our ability to fund operations, and 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 senior 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~~disclosed in ~~the Company’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2016 and~~2020, including with respect to the impacts from the ongoing COVID-19 pandemic, as well as other factors disclosed from time to time in our other filings with the ~~Securities and Exchange Commission.~~SEC.

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 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, 2017~~March 31, 2021, as compared to the three ~~and nine~~ months ended ~~September 30, 2016.~~March 31, 2020. This discussion should be read in conjunction with 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~~our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2020.

~~Our business is subject to seasonal~~

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We are a leading provider of high-quality education and ~~quarterly fluctuations. Demand for~~care, including child care and early education, back-up care and ~~elementary school~~workforce education services ~~has historically decreased during the summer months when school is not in session, at which time families~~that are ~~often on vacation or have alternative~~designed to help client employees better integrate work and family life, as well as grow their careers. We provide services primarily under multi-year contracts with employers who offer child care, ~~arrangements. In addition,~~back-up care, and educational advisory and other services as part of their employee benefits packages in an effort to support employees across life and career stages and improve employee recruitment, employee engagement, productivity, retention and career advancement. As of March 31, 2021, we had more than 1,300 client relationships with employers across a diverse array of industries, including more than 190 Fortune 500 companies and more than 80 of Working Mother magazine’s 2020 “100 Best Companies.”

At March 31, 2021, we operated 1,015 child care and early education centers, compared to 1,094 centers at March 31, 2020, and had the capacity to serve approximately 114,000 children and their families in the United States, the United Kingdom, the Netherlands, and India. At March 31, 2021, approximately 900, or 90%, of our ~~enrollment declines~~child care centers were open.

Our reportable segments are comprised of (1) full service center-based child care, (2) back-up care, and (3) educational advisory and other services, which includes tuition assistance and student loan repayment program administration, workforce education, related educational advising, and college admissions advisory services, and an online marketplace for families and caregivers.

Since March 2020, our global operations have been significantly impacted by the COVID-19 pandemic and the measures to prevent its spread, such as ~~older children transition to elementary schools. Demand for~~periodically reinstated lockdowns and required business and school closures. We remain focused on the re-enrollment of our ~~services generally increases in September~~centers and ~~October coinciding with~~ the ~~beginning~~phased re-opening of the ~~new school year~~limited number of centers that remain temporarily closed, which we expect will continue throughout 2021. The broad and ~~remains relatively stable throughout the rest~~long-term effects of COVID-19, its duration and scope of the ~~school year. In addition, use~~ongoing disruption cannot be predicted and is affected by many interdependent variables and decisions by government authorities and our client partners, as well as demand, economic and workforce trends, the adoption and effectiveness of a vaccine, and developments in the persistence and treatment of COVID-19. We cannot anticipate how long it will take for re-opened centers to reach typical enrollment levels and there is no assurance that centers currently open will continue to operate. Additionally, as we continue to analyze the current environment, we may decide to not re-open certain centers in locations where demand, economic and workforce trends have shifted. We currently expect the effects of COVID-19 to our business to continue to adversely impact our results of operations for the remainder of 2021.

We will continue to monitor and respond to the changing conditions, challenges and disruptions resulting from the COVID-19 pandemic, and the changing needs of clients, families and children, while remaining focused on our strategic priorities to deliver high quality education and care services, connect across our service lines, extend our impact on new customers and clients, and preserve our strong culture. These challenging times have demonstrated our crisis management abilities, our critical role in the business continuity plans of our ~~back-up dependent care services tends~~client partners, our leadership in developing and implementing enhanced health and safety protocols, and the value that our unique service offering provides to ~~be higher when schools are not~~the families and clients we serve. We remain confident in ~~session~~our business model, the strength of our client partnerships, the strength of our balance sheet and ~~during holiday periods, which can increase the operating costs~~liquidity position, and our ability to continue to respond to changing market conditions.

Table 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 required for new centers to achieve profitability, center closings, refurbishment or relocation, the contract model mix (profit andContents

~~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 income data as a percentage of revenue for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016 (in thousands, except percentages):~~

2020:


													Three Months Ended March 31,
													2021			%				2020			%
	Three Months Ended September 30,
	2017			%		2016			%				(In thousands, except percentages)
Revenue	$	433,316		100.0	%	$	383,929		100.0	%	Revenue		$	390,840		100.0	%			$	506,323		100.0	%
Cost of services (1)	330,122			76.2	%	292,457			76.2	%
Cost of services											Cost of services		309,482			79.2	%			397,464			78.5	%
Gross profit	103,194			23.8	%	91,472			23.8	%	Gross profit		81,358			20.8	%			108,859			21.5	%
Selling, general and administrative expenses (2)	46,369			10.7	%	39,616			10.3	%
Selling, general and administrative expenses											Selling, general and administrative expenses		60,110			15.4	%			57,369			11.4	%
Amortization of intangible assets	8,191			1.9	%	7,141			1.9	%	Amortization of intangible assets		7,540			1.9	%			8,209			1.6	%
Other expenses	3,671			0.8	%	—			—	%
Income from operations	44,963			10.4	%	44,715			11.6	%	Income from operations		13,708			3.5	%			43,281			8.5	%
Interest expense, net	(10,824		)	(2.5	)%	(10,502		)	(2.7	)%
Interest expense — net											Interest expense — net		(9,016)			(2.3)	%			(10,206)			(2.0)	%
Income before income tax	34,139			7.9	%	34,213			8.9	%	Income before income tax		4,692			1.2	%			33,075			6.5	%
Income tax expense	(3,034		)	(0.7	)%	(11,703		)	(3.0	)%
Income tax benefit (expense)											Income tax benefit (expense)		2,440			0.6	%			(2,343)			(0.4)	%
Net income	$	31,105		7.2	%	$	22,510		5.9	%	Net income		$	7,132		1.8	%			$	30,732		6.1	%

Adjusted EBITDA ~~(3)~~(1)	$	76,646		17.7	%	$	69,686		18.2	%	$	46,296			11.8	%		$	81,458			16.1	%
Adjusted income from operations ~~(3)~~(1)	$	48,634		11.2	%	$	44,873		11.7	%	$	13,708			3.5	%		$	48,954			9.7	%
Adjusted net income ~~(3)~~(1)	$	37,071		8.6	%	$	29,266		7.6	%	$	13,855			3.5	%		$	43,646			8.6	%

~~The following table sets forth statement~~(1) Adjusted EBITDA, adjusted income from operations and adjusted net income are non-GAAP financial measures and are not determined in accordance with accounting principles generally accepted in the United States (“GAAP”). Refer to “Non-GAAP Financial Measures and Reconciliation” below for a reconciliation of ~~income data as a percentage~~these non-GAAP financial measures to their respective measures determined under GAAP and for information regarding our use of ~~revenue for the nine months ended September 30, 2017 and 2016 (in thousands, except percentages):~~

non-GAAP measures.

Nine Months Ended September 30,
2017 % 2016 %
Revenue $ 1,301,026
100.0 % $ 1,171,304
100.0 %
Cost of services (1) 978,557
75.2 % 879,673
75.1 %
Gross profit 322,469
24.8 % 291,631
24.9 %
Selling, general and administrative expenses (2) 141,384
10.9 % 120,403
10.3 %
Amortization of intangible assets 24,241
1.8 % 21,338
1.8 %
Other expenses 3,671
0.3 % —
— %
Income from operations 153,173
11.8 % 149,890
12.8 %
Interest expense, net (32,252 ) (2.5 )% (31,490 ) (2.7 )%
Income before income tax 120,921
9.3 % 118,400
10.1 %
Income tax expense (15,402 ) (1.2 )% (40,760 ) (3.5 )%
Net income $ 105,519
8.1 % $ 77,640
6.6 %

Adjusted EBITDA (3) $ 241,502
18.6 % $ 222,838
19.0 %
Adjusted income from operations (3) $ 158,789
12.2 % $ 150,658
12.9 %
Adjusted net income (3) $ 118,472
9.1 % $ 97,282
8.3 %

~~(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, payroll 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 (“SGA”) 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 under “Non-GAAP Financial Measures and Reconciliation.”~~

Three Months Ended ~~September 30, 2017~~March 31, 2021 Compared to the Three Months Ended ~~September 30, 2016~~March 31, 2020

Revenue. Revenue ~~increased $49.4~~decreased by $115.5 million, or ~~13%~~23%, to ~~$433.3~~$390.8 million for the three months ended ~~September 30, 2017~~March 31, 2021 from ~~$383.9~~$506.3 million for the same period in ~~2016. Revenue growth is primarily attributable to contributions from new~~2020. The following table summarizes the revenue and ~~ramping child care and early education centers, expanded sales~~percentage of total revenue for each of our ~~back-up dependent care services~~segments for the three months ended March 31, 2021 and ~~other educational advisory services, and typical annual tuition increases of 3-4%.~~ 2020:


	Three Months Ended March 31,
	2021				2020				Change 2021 vs 2020

	(In thousands, except percentages)
Full-service center-based child care	$	290,319	74.3	%	$	411,391	81.3	%	$	(121,072)	(29.4)	%
Tuition	250,252		86.2	%	372,773		90.6	%	(122,521)		(32.9)	%
Management fees and operating subsidies	40,067		13.8	%	38,618		9.4	%	1,449		3.8	%
Back-up care	76,355		19.5	%	74,167		14.6	%	2,188		3.0	%
Educational advisory and other services	24,166		6.2	%	20,765		4.1	%	3,401		16.4	%
Total revenue	$	390,840	100.0	%	$	506,323	100.0	%	$	(115,483)	(22.8)	%

Revenue generated by the full service center-based child care segment in the three months ended ~~September 30, 2017, increased~~March 31, 2021 decreased by ~~$39.3~~$121.1 million, or ~~12%~~29%, when compared to the same period in ~~2016, due~~2020. The decrease was attributable to the continued impact of the COVID-19 pandemic on our operations, the associated reduction in ~~part to overall~~ enrollment ~~increases of approximately 15%. Our acquisition of Conchord Limited (“Asquith”), an operator of 90~~in our open child care centers and ~~programs in~~ the ~~United Kingdom on November 10, 2016, contributed approximately $23.5 million~~continued temporary closure of ~~incremental revenue in the three months ended September 30, 2017.~~

~~At September 30, 2017, we operated 1,037~~certain child care ~~and early education centers, an increase of 10%~~centers. Tuition revenue decreased by $122.5 million, or 32.9%, when compared to ~~940 centers at September 30, 2016. At September 30, 2017, we no longer operated~~the prior year, on a decrease in enrollment of 35%. As the economy continues to recover, enrollment in our child care centers had modest improvements during the quarter compared to the previous quarter. However, our centers continue to operate below pre-COVID-19 enrollment levels during this re-ramping period. We expect enrollment recovery to continue throughout 2021. Tuition revenue decreases were partially offset by the effect of higher foreign currency exchange rates for our United Kingdom and Netherlands operations, which increased 2021 tuition revenue by approximately 2%, or $7.4 million. Management fees and operating subsidies from employer sponsors increased $1.4 million, or 3.8%, due to additional operating subsidies received to support center operations in ~~Ireland.~~connection with the decrease in tuition revenue.

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Revenue generated by back-up ~~dependent~~ care services in the three months ended ~~September 30, 2017~~March 31, 2021 increased by ~~$6.9~~$2.2 million, or ~~13%~~3%, when compared to the same period in ~~2016. Additionally, revenue~~2020. Revenue growth in this segment was primarily attributable to expanded sales to new clients and increased utilization from existing clients, partially offset by decreases in utilization of traditional in-center and in-home use. While traditional in-center and in-home use continues to recover, usage remains below pre-COVID-19 levels and we expect it to continue ramping throughout 2021.

Revenue generated by ~~other~~ educational advisory and other services in the three months ended ~~September 30, 2017~~March 31, 2021 increased by ~~$3.3~~$3.4 million, or ~~27%~~16%, when compared to the same period in ~~2016.~~the prior year. Revenue growth in this segment is primarily attributable to contributions from sales to new clients and increased utilization from existing clients. An acquisition completed in 2020 also contributed $2.0 million to the growth of this segment in 2021.

Cost of Services.Cost of services ~~increased $37.7~~decreased by $88.0 million, or ~~13%~~22%, to ~~$330.1~~$309.5 million for the three months ended ~~September 30, 2017~~March 31, 2021 from ~~$292.5~~$397.5 million for the same period in ~~2016.~~ 2020.

Cost of services in the full service center-based child care segment ~~increased $32.0~~decreased $85.3 million, or ~~13%~~25%, to ~~$286.7~~$261.2 million in the three months ended ~~September 30, 2017~~March 31, 2021 when compared to the same period in ~~2016. Personnel costs, which typically represent approximately 70% of total~~2020. The decrease in cost of services is primarily associated with reductions of 20% in personnel costs, which generally represent 70% of the costs for this segment, ~~increased 11%~~and reductions of 26% in program supplies, materials, and facility costs, which generally represent the remaining 30% of costs for this segment, in connection with the reduced enrollment at our centers. Funding from government support programs reduced certain payroll and other operating expenses by $9.6 million. These decreases were partially offset by reduced efficiencies associated with lower enrollment and COVID-19 protocols.

Cost of services in the back-up care segment decreased by $3.9 million, or 10%, to $36.2 million in the three months ended March 31, 2021, when compared to the ~~same period~~prior year. The decrease is primarily due to reductions in ~~2016 as a result of enrollment growth at new~~personnel costs and existing centers, routine wage and benefit cost increases, and labor costs associated with centers we have added since September 30, 2016 that are in the ramping stage. In addition, program supplies, materials, food and facilities costs,care provider fees, which ~~typically represent~~represented approximately ~~30%~~70% of total costs of services for this segment, ~~increased 22% in connection with~~as traditional utilization levels were lower than the ~~enrollment growth, certain~~prior year. This reduction was partially offset by marketing and technology ~~investments in program supplies~~spending to support our customer user experience and ~~services, and the incremental occupancy costs associated with centers that have been added since September 30, 2016.~~ service delivery.

Cost of services in the ~~back-up dependent care~~educational advisory and other services segment increased ~~$4.6~~by $1.2 million, or ~~14%~~11%, to ~~$36.6~~$12.1 million in the three months ended ~~September 30, 2017, primarily for investments in information technology and personnel, and increased care provider fees associated~~March 31, 2021 when compared to the prior year, which is broadly consistent with the revenue growth. The increase is primarily due to personnel costs related to delivering services ~~provided~~ to the expanding ~~revenue~~customer base. ~~Cost of services in the other educational advisory services segment increased $1.1~~

Gross Profit.Gross profit decreased by $27.5 million, or ~~18%~~25%, to ~~$6.9 million in the three months ended September 30, 2017 due to personnel and technology costs related to the incremental sales of these services.~~

~~Gross Profit.~~ ~~Gross profit increased $11.7 million, or 13%, to $103.2~~$81.4 million for the three months ended ~~September 30, 2017~~March 31, 2021 from ~~$91.5~~$108.9 million for the same period in ~~2016.~~2020. Gross profit margin ~~as a percentage of revenue~~ was 24% for the three months ended September 30, 2017, which is consistent with the three months ended September 30, 2016. 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 dependent care and other educational advisory services.

~~Selling, General and Administrative Expenses (~~“~~SGA~~”). ~~SGA increased $6.8 million, or 17%, to $46.4 million for the three months ended September 30, 2017 compared to $39.6 million for the same period in 2016, and was 11%~~21% of revenue for the three months ended ~~September 30, 2017, which represents an increase~~March 31, 2021, a decrease of approximately 1% from ~~10%~~the three months ended March 31, 2020. The decrease is primarily due to reduced margins in the full service center-based child care segment from reduced enrollment at open centers, as well as the continued temporary closure of certain child care centers, partially offset by increases in gross profit from expanded back-up care and educational advisory and other services, and funding received from government support programs.

Selling, General and Administrative Expenses (“SGA”).SGA increased by $2.7 million, or 5%, to $60.1 million for the three months ended March 31, 2021 from $57.4 million for the same period in ~~2016.~~2020, in order to support the business throughout the pandemic and as it re-ramps. SGA ~~increased over~~was 15% of revenue for the ~~comparable 2016~~three months ended March 31, 2021, compared to 11% for the same period in 2020 due to ~~increases in personnel costs including annual wage increases, continued investments in technology, and costs associated with~~ the ~~integration~~lower revenue base.

Amortization of ~~the Asquith child care centers, which were acquired in the fourth quarter of 2016.~~

~~Amortization.~~ Intangible Assets.Amortization expense on intangible assets ofwas $7.5 million for the three months ended March 31, 2021, a decrease from $8.2 million for the three months ended ~~September 30, 2017 increased from $7.1 million for the same period in 2016~~March 31, 2020, due to ~~the acquisitions completed in 2016 and 2017, partially offset by~~ decreases from certain intangible assets becoming fully amortized during the ~~period.~~period, partially offset by increases from the acquisitions completed in 2020 and 2021.

~~Other Expenses.~~ ~~The Company incurred losses~~

Table of ~~$3.7 million during the three months ended September 30, 2017, associated with the disposition of our remaining assets in Ireland, which included three centers.~~Contents

Income from Operations.Income from operations ~~increased~~decreased by ~~$0.2~~$29.6 million, or 68%, to ~~$45.0~~$13.7 million for the three months ended ~~September 30, 2017~~March 31, 2021 when compared to the ~~same period in 2016. Income~~prior year. The following table summarizes income from operations ~~was 10%~~and percentage of revenue for each of our segments for the three months ended ~~September 30, 2017, which is a~~March 31, 2021 and 2020:


	Three Months Ended March 31,
	2021				2020				Change 2021 vs 2020

	(In thousands, except percentages)
Full-service center-based child care	$	(17,967)	(6.2)	%	$	16,747	4.1	%	$	(34,714)	(207.3)	%
Back-up care	27,190		35.6	%	22,239		30.0	%	4,951		22.3	%
Educational advisory and other services	4,485		18.6	%	4,295		20.7	%	190		4.4	%
Income from operations	$	13,708	3.5	%	$	43,281	8.5	%	$	(29,573)	(68.3)	%

The decrease ~~from 12% in the three months ended September 30, 2016. The change~~ in income from operations was due to the following:

•Income from operations for the full service center-based child care segment decreased ~~$3.4~~$34.7 million, or ~~12%~~207%, in the three months ended ~~September 30, 2017~~March 31, 2021 when compared to the same period in 2016. Results for the three months ended September 30, 2017, included $3.7 million associated with the loss on the disposition of our remaining assets in Ireland during the quarter compared to $0.2 million of completed acquisition expenses included in the three months ended September 30, 2016. After taking these charges into account, income from operations increased $0.1 million, or 1%, over the comparable period2020 primarily due to reduced tuition ~~increases and~~revenue from reduced enrollment ~~gains over the prior year, contributions from new~~in our centers, ~~that have been added since September 30, 2016, and effective cost management,~~as well as continued temporary center closures, partially offset by ~~the costs incurred during the ramp-up of~~reduced operating expenses and contributions from government support programs that reduced certain ~~new lease/consortium centers opened during 2016~~payroll and ~~2017, and incremental costs associated with technology investments in our centers and the amortization expense for intangible assets acquired in business combinations.~~operating expenses.

•Income from operations for the back-up ~~dependent~~ care segment increased ~~$1.7~~$5.0 million, or ~~12%~~22%, in the three months ended ~~September 30, 2017~~March 31, 2021 when compared to the same period in ~~2016~~2020 due to the expanding revenue base from increased sales and utilization of our back-up care services as clients and families pursued additional supports, and reduced care provider fees associated with lower utilization of traditional care options in relation to the prior year, partially offset by investments in technology to support our customer user experience and service delivery.

•Income from operations for the educational advisory and other services segment increased $0.2 million, or 4%, in the three months ended March 31, 2021 when compared to the same period in 2020 due to contributions from the expanding revenue ~~base, partially offset by investments in information technology and personnel.~~base.

Income from operations for the other educational advisory services segment increased $1.9 million, or 79%, for the three months ended September 30, 2017 compared to the same period in 2016 due to contributions from the expanding revenue base.

Net Interest Expense.Net interest expense ~~increased~~decreased to ~~$10.8~~$9.0 million for the three months ended ~~September 30, 2017~~March 31, 2021 from ~~$10.5~~$10.2 million for the same period in ~~2016. The increase~~2020, due to decreases in ~~interest expense relates to~~ the ~~increase in debt from the issuance of $150.0 million in additional term loans in conjunction with the November 2016 debt refinancing, partially offset by a decrease in the effective~~ interest rates applicable ~~in conjunction with~~to our debt. Including the ~~May 2017~~effects of the interest rate swap arrangements, the weighted average interest rates for the term loan and revolving credit ~~agreement amendment.~~facility were 3.1% and 3.5% for the three months ended March 31, 2021 and 2020, respectively. Based on our current interest rate projections, we estimate that our overall weighted average interest rate will approximate 3.0% for the remainder of 2021.

Income Tax ~~Expense.~~ Expense (Benefit).We recorded an income tax ~~expense~~benefit of ~~$3.0~~$2.4 million during the three months ended ~~September 30, 2017~~March 31, 2021, at an effective income tax rate of (52)%, compared to income tax expense of ~~$11.7~~$2.3 million during ~~the comparable period in 2016 at an effective tax rate of 9% for~~ the three months ended ~~September 30, 2017 and~~March 31, 2020, at an effective income tax rate of ~~34% for the three months ended September 30, 2016.~~7%. The difference between the effective income tax ~~rates~~rate as compared to the statutory income tax rate is primarily ~~attributable~~due to the ~~$7.0 million tax benefit recorded during the quarter from the loss on the disposition~~effects of ~~our investment in Ireland associated with the sale of all remaining assets, and the~~ excess tax benefits associated with the exercise of stock options and vesting of restricted stock, which had a more significant impact to the effective tax rate for the three months ended March 31, 2021 due to the lower income before tax. During the three months ended March 31, 2021 and 2020, the excess tax benefits reduced income tax expense by ~~$3.4~~$3.9 million ~~in 2017 due to the adoption of ASU 2016-09:~~ ~~Compensation - Stock Compensation (Topic 718) (“ASU 2016-09”)~~ ~~effective January 1, 2017. The tax benefit from stock compensation was recorded to the balance sheet in the prior year.~~and $6.9 million, respectively. The effective income tax rate ~~would have approximated 36% for the three months ended September 30, 2017~~ prior to the inclusion of the ~~benefit from the loss on investment and the~~ excess tax ~~benefit~~benefits from ~~stock~~stock-based compensation ~~related to the new accounting guidance. The Company expects the excess tax benefit to approximate $1.5 million to $2.0 million~~and other discrete items was approximately 28% for the ~~remainder of 2017.~~three months ended March 31, 2021 and 2020.

Adjusted EBITDA and Adjusted Income from Operations.Adjusted EBITDA and adjusted income from operations ~~increased $7.0~~decreased $35.2 million, or ~~10%~~43%, and ~~$3.8~~$35.2 million, or 8%72%, respectively, for the three months ended ~~September 30, 2017~~March 31, 2021 over the ~~same~~comparable period in ~~2016~~2020 primarily as a result of the ~~increase~~decrease in gross profit ~~due to additional contributions from full-service centers, including~~in the ~~impact of new and acquired centers, as well as the~~full service center-based child care segment, partially offset by growth in the back-up ~~dependent~~ care ~~and other educational advisory services.~~segment.

Adjusted Net Income.Adjusted net income ~~increased $7.8~~decreased $29.8 million, or ~~27%~~68%, for the three months ended ~~September 30, 2017~~March 31, 2021 when compared to the same period in ~~2016~~2020, primarily due to the ~~incremental gross profit described above and the reduction to adjusted income tax expense in 2017 associated with the adoption of ASC 2016-09.~~

~~Nine Months Ended September 30, 2017 Compared to the Nine Months Ended September 30, 2016~~

~~Revenue.~~ Revenue increased $129.7 million, or 11%, to $1.3 billion for the nine months ended September 30, 2017 from $1.2 billion for the same period in 2016. 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 other educational advisory services, and typical annual tuition increases of 3-4%. Revenue generated by the full service center-based care segment in the nine months ended September 30, 2017 increased by $103.8 million, or 10%, when compared to the same period in 2016, due in part to overall enrollment increases of 14%, partially offset by the effect of lower foreign exchange rates for our United Kingdom operations which reduced revenue growth in the full service segment by approximately 1% for the nine month period. Our acquisition of Asquith contributed approximately $69.3 million of incremental revenue in the nine months ended September 30, 2017.

Revenue generated by back-up dependent care services in the nine months ended September 30, 2017 increased by $18.2 million, or 12%, when compared to the same period in 2016. Additionally, revenue generated by other educational advisory services in the nine months ended September 30, 2017 increased by $7.8 million, or 23%, when compared to the same period in 2016.

~~Cost of Services.~~ Cost of services increased $98.9 million, or 11%, to $978.6 million for the nine months ended September 30, 2017 from $879.7 million for the same period in 2016. Cost of services in the full service center-based care segment increased $82.1 million, or 11%, to $859.5 million in the nine months ended September 30, 2017 when compared to the same period in 2016. Personnel costs increased 9% when compared to the same period in 2016 as a result of enrollment growth at new and existing centers, routine wage and benefit cost increases, and labor costs associated with centers we have added since September 30, 2016 that are in the ramping stage. In addition, program supplies, materials, food and facilities costs increased 16% in connection with the enrollment growth, certain technology investments in program supplies and services, and the incremental occupancy costs associated with centers that have been added since September 30, 2016. Cost of services in the back-up dependent care segment increased $13.7 million, or 16%, to $98.6 million in the nine months ended September 30, 2017, primarily for investments in information technology and personnel, and increased care provider fees associated with the services provided to the expanding revenue base. Cost of services in the other educational advisory services segment increased by $3.1 million, or 18%, to $20.5 million in the nine months ended September 30, 2017 due to personnel and technology costs related to the incremental sales of these services.

~~Gross Profit.~~ Gross profit increased $30.8 million, or 11%, to $322.5 million for the nine months ended September 30, 2017 from $291.6 million for the same period in 2016. Gross profit margin as a percentage of revenue was 25% for the nine months ended September 30, 2017, which is consistent with the nine months ended September 30, 2016. 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 dependent care and other educational advisory services.

~~Selling, General and Administrative Expenses.~~ SGA increased $21.0 million, or 17%, to $141.4 million for the nine months ended September 30, 2017 compared to $120.4 million for the same period in 2016, and was 11% of revenue for the nine months ended September 30, 2017, which represents an increase from 10% in the same period in 2016. Results for the nine months ended September 30, 2017 included $1.9 million of costs associated with the May 2017 credit agreement amendment and a secondary offering compared to $0.8 million of costs related to the January 2016 credit agreement amendment, and costs associated with a secondary offering and completed acquisitions included in the nine months ended September 30, 2016. After taking these charges into account, SGA increased over the comparable 2016 period due to increases in personnel costs including annual wage increases, continued investments in technology and costs associated with the addition and integration of the Asquith child care centers, which were acquired in the fourth quarter of 2016.

~~Amortization.~~ Amortization expense on intangible assets of $24.2 million for the nine months ended September 30, 2017, increased from $21.3 million for the nine months ended September 30, 2016 due to the acquisitions completed in 2016 and 2017, partially offset by decreases from certain intangibles becoming fully amortized during the period.

~~Other Expenses.~~ ~~The Company incurred losses of $3.7 million during the nine months ended September 30, 2017, associated with the disposition of our remaining assets in Ireland, which included three centers.~~

~~Income from Operations.~~ Income from operations increased by $3.3 million, or 2%, to $153.2 million for the nine months ended September 30, 2017 when compared to the same period in 2016. Income from operations was 12% of revenue for the nine months ended September 30, 2017, which is decrease ~~from 13% in the nine months ended September 30, 2016. The change~~ in income from operations, ~~was due to the following:~~

Income from operations for the full service center-based care segment decreased $1.7 million, or 2%, in the nine months ended September 30, 2017 when compared to the same period in 2016. Results for the nine months ended September 30, 2017 included $5.6 million of costs associated with the loss on the disposition of our remaining assets in Ireland, costs related to the May 2017 credit agreement amendment, and costs associated with a secondary offering compared to $0.8 million of costs related to the January 2016 credit agreement amendment, and costs associated with a secondary offering and completed acquisitions included in the nine months ended September 30, 2016. After taking these charges into account, income from operations increased $3.2 million, or 3%, over the comparable 2016 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, 2016, and effective cost management, partially offset by the costs incurred during the ramp-up of certain new lease/consortium centers opened during 2016 and 2017, the incremental costs associated with technology investments in our centers, the amortization expense for intangible assets acquired in business combinations, and the effect of lower foreign exchange rates for our United Kingdom operations which reduced revenue growth in the full service segment by approximately 1% for the nine month period.

Income from operations for the back-up dependent care segment increased $2.1 million, or 5%, in the nine months ended September 30, 2017 when compared to the same period in 2016 due to contributions from the expanding revenue base partially offset by investments in information technology and personnel, and increased care provider fees associated with the incremental revenue.

Income from operations for the other educational advisory services segment increased $2.9 million, or 44%, for the nine months ended September 30, 2017 when compared to the same period in 2016 due to contributions from the expanding revenue base.

~~Net Interest Expense.~~ Net interest expense increased to $32.3 million for the nine months ended September 30, 2017 from $31.5 million for the same period in 2016. The increase in interest expense relates to the increase in debt from the issuance of $150.0 million in additional term loans in conjunction with the November 2016 debt refinancing, partially offset by a ~~decrease in the~~higher effective ~~interest rates applicable in conjunction with the May 2017 credit agreement amendment.~~tax rate.

~~Income Tax Expense.~~ ~~We recorded income tax expense~~

Table of $15.4 million during the nine months ended September 30, 2017 compared to income tax expense of $40.8 million during the comparable period in 2016 at an effective income tax rate of 13% for the nine months ended September 30, 2017 and of 34% for the nine months ended September 30, 2016. The difference between the effective income tax rates is primarily attributable to the $7.0 million tax benefit recorded in 2017 from the loss on the disposition of our investment in Ireland associated with the sale of all remaining assets, and the excess tax benefits associated with the exercise of stock options which decreased tax expense by $21.9 million in 2017 due to the adoption of ASU 2016-09. The effective income tax rate would have approximated 36% for the nine months ended September 30, 2017 prior to the inclusion of the benefit from the loss on investment and the excess tax benefit from stock compensation related to the new accounting guidance. We expect the annual effective income tax rate in 2017 to approximate 17% to 19%, depending on the timing and amounts of excess tax benefits from stock compensation that are ultimately realized.Contents

~~Adjusted EBITDA and Adjusted Income from Operations.~~ Adjusted EBITDA and adjusted income from operations increased $18.7 million, or 8%, and $8.1 million, or 5% respectively, for the nine months ended September 30, 2017 over the comparable period in 2016 primarily as a result of the increase in gross profit due to additional contributions from full-service centers, including the impact of new and acquired centers, as well as the growth in back-up dependent care and other educational advisory services.

~~Adjusted Net Income.~~ Adjusted net income increased $21.2 million, or 22%, for the nine months ended September 30, 2017 when compared to the same period in 2016 primarily due to the incremental gross profit described above and the reduction to adjusted income tax expense in 2017 associated with the adoption of ASU 2016-09.

Non-GAAP Financial Measures and Reconciliation

In our quarterly and annual reports, earnings press releases and conference calls, we discuss key financial measures that are not calculated in accordance with ~~generally accepted accounting principles in the United States (“GAAP” or “U.S. GAAP”)~~GAAP to supplement our consolidated financial statements presented on a GAAP basis. These non-GAAP financial ~~measures are not in accordance with GAAP and a reconciliation of the non-GAAP~~ measures of adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share are reconciled from their respective measures determined under GAAP as ~~follows (in thousands, except share data):~~follows:


	Three Months Ended March 31,
	2021		2020

	(In thousands, except share data)
Net income	$	7,132	$	30,732
Interest expense — net	9,016		10,206
Income tax expense (benefit)	(2,440)		2,343
Depreciation	19,742		20,012
Amortization of intangible assets (a)	7,540		8,209
EBITDA	40,990		71,502
Additional adjustments:
COVID-19 related costs (b)	—		4,970
Stock-based compensation expense (c)	5,306		4,283
Other costs (d)	—		703

Total adjustments	5,306		9,956
Adjusted EBITDA	$	46,296	$	81,458

Income from operations	$	13,708	$	43,281
COVID-19 related costs (b)	—		4,970
Other costs (d)	—		703
Adjusted income from operations	$	13,708	$	48,954

Net income	$	7,132	$	30,732
Income tax expense (benefit)	(2,440)		2,343
Income before income tax	4,692		33,075
Amortization of intangible assets (a)	7,540		8,209
COVID-19 related costs (b)	—		4,970
Stock-based compensation expense (c)	5,306		4,283
Other costs (d)	—		703
Adjusted income before income tax	17,538		51,240
Adjusted income tax expense (e)	(3,683)		(7,594)
Adjusted net income	$	13,855	$	43,646

Weighted average common shares outstanding — diluted	61,325,973		58,878,784
Diluted adjusted earnings per common share	$	0.23	$	0.74

(a)Represents amortization of intangible assets, including amortization expense of $5.0 million associated with intangible assets recorded in connection with our going private transaction in May 2008.

(b)COVID-19 related costs in 2020 represent impairment costs for long-lived assets incurred as a result of center closures and decreases in the fair values of certain centers due to the impact of COVID-19 on our operations.

(c)Represents non-cash stock-based compensation expense in accordance with Accounting Standards Codification Topic 718, Compensation-Stock Compensation.

(d)Other costs in 2020 relate to occupancy costs incurred for our new corporate headquarters during the construction period, which represent duplicative office costs while we also continued to carry the costs for our previous corporate headquarters.

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Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Net income $ 31,105
$ 22,510
$ 105,519
$ 77,640
Interest expense, net 10,824
10,502
32,252
31,490
Income tax expense 3,034
11,703
15,402
40,760
Depreciation 15,494
13,858
46,048
40,752
Amortization of intangible assets (a) 8,191
7,141
24,241
21,338
EBITDA 68,648
65,714
223,462
211,980
Additional Adjustments:
Deferred rent (b) 1,064
984
3,647
1,614
Stock-based compensation expense (c) 3,263
2,830
8,777
8,476
Transaction costs (d) 3,671
158
5,616
768
Total adjustments 7,998
3,972
18,040
10,858
Adjusted EBITDA $ 76,646
$ 69,686
$ 241,502
$ 222,838

Income from operations $ 44,963
$ 44,715
$ 153,173
$ 149,890
Transaction costs (d) 3,671
158
5,616
768
Adjusted income from operations $ 48,634
$ 44,873
$ 158,789
$ 150,658

Net income $ 31,105
$ 22,510
$ 105,519
$ 77,640
Income tax expense 3,034
11,703
15,402
40,760
Income before tax 34,139
34,213
120,921
118,400
Stock-based compensation expense (c) 3,263
2,830
8,777
8,476
Amortization of intangible assets (a) 8,191
7,141
24,241
21,338
Transaction costs (d) 3,671
158
5,616
768
Adjusted income before tax 49,264
44,342
159,555
148,982
Adjusted income tax expense (e) (12,193 ) (15,076 ) (41,083 ) (51,700 )
Adjusted net income $ 37,071
$ 29,266
$ 118,472
$ 97,282

Weighted average number of common shares—diluted 60,088,078
60,275,902
60,457,004
60,737,185
Diluted adjusted earnings per common share $ 0.62
$ 0.49
$ 1.96
$ 1.60


~~(a)~~	Represents amortization of intangible assets, including approximately $4.5 million for the three months ended September 30, 2017 and 2016, and $13.7 million and $13.5 million for the nine months ended September 30, 2017 and 2016, respectively, associated with intangible assets recorded in connection with our going private transaction in May 2008.


~~(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 in accordance with Accounting Standards Codification Topic 718,~~ ~~Compensation-Stock Compensation~~.

~~(d)~~

~~Represents costs incurred in connection with the disposition of assets in Ireland during the three months ended September 30, 2017, the May 2017 and January 2016 amendments~~(e)Represents income tax expense calculated on adjusted income before income tax at an effective tax rate of approximately 21% and 15% for the three months ended March 31, 2021 and 2020, respectively. The tax rate for 2021 represents a tax rate of approximately 27% applied to the ~~credit agreement, secondary offerings, and completed acquisitions.~~


~~(e)~~	Represents income tax expense calculated on adjusted income before tax at a tax rate of approximately 25% and 26% for the three and nine months ended September 30, 2017, respectively, and of approximately 34% and 35% for the three and nine months ended September 30, 2016, respectively. The tax rate for 2017 represents an effective tax rate of approximately 36% applied to the

expected adjusted income before income tax, less the estimated effect of excess tax benefits related to equity transactions. However, the jurisdictional mix of the expected adjusted income before income tax for the full year, ~~less the effect of the known excess tax benefit of $3.4 million~~and$21.9 million associated with stock option exercises and vesting of restricted stock which were recorded in the three and nine months ended September 30, 2017, respectively, as well as an estimate of additional excess tax benefits related to such equity transactions for the remainder of 2017, which the Company estimates in the range of $1.5 million to $2.0 million for the remainder of the year. However, the timing and volume ~~and~~of the tax benefits associated with such future equity activity will affect these estimates and the estimated effective tax rate for the year.

Adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share (collectively referred to as the “non-GAAP financial measures”) 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.~~companies and may not be comparable to other similarly titled measures. We believe the non-GAAP financial measures provide investors with useful information with respect to our historical operations. We present the non-GAAP financial measures 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~~impairment costs, other costs incurred due to the ~~expenses related to secondary offerings, debt financing transaction expenses, dispositions~~impact of COVID-19 including center closing costs, and ~~acquisitions.~~duplicative corporate office costs. 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 non-GAAP financial measures also function as key performance indicators used to evaluate our operating performance internally, and they are used in connection with the determination of incentive compensation for management, including executive officers. Adjusted EBITDA is also used in connection with the determination of certain ratio requirements under our credit agreement. 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 (used in) 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. Consequently, our non-GAAP financial measures should ~~not be evaluated in isolation or supplant comparable GAAP measures, but rather, should~~ be considered together with our consolidated financial statements, which are prepared in accordance with GAAP and included in Part I, Item 1 of this Quarterly Report on Form 10-Q. ~~The Company understands~~We understand 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~~our 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~~our 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; and

•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, ~~services~~educational advisory 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 existing cash, cash flows from operations and borrowings available under our ~~$225.0 million~~ revolving credit facility. ~~Borrowings outstanding on our revolving credit facility~~We had $442.1 million in cash ($447.8 million including restricted cash) at ~~September 30, 2017 and~~March 31, 2021, of which $44.5 million was held in foreign jurisdictions, compared to $384.3 million in cash ($388.5 million including restricted cash) at December 31, ~~2016 were $65.5~~2020, of which $43.6 million was held in foreign jurisdictions. Operations outside of North America accounted for 26% and ~~$76.0 million,~~23% of our consolidated revenue in the three months ended March 31, 2021 and 2020, respectively.

The net impact on our liquidity from changes in foreign currency exchange rates was not material for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, and ~~the Company does~~we do not currently expect that the effects of ~~continued potentially unfavorable~~ changes in foreign currency exchange rates will have a material net impact on ~~the Company’s~~our liquidity,

capital resources or results from operations for the remainder of ~~2017.~~2021.

Table of Contents

On April 21, 2020, we completed the issuance and sale of 2,138,580 shares of common stock to Durable Capital Master Fund LP at a price of $116.90 per share. We ~~had $42.3~~raised net proceeds from the offering of $249.8 million, inwhich further strengthened our liquidity and financial position and increased our cash ~~at September 30, 2017,~~and cash equivalents.

Our revolving credit facility is part of ~~which $39.2 million was held in foreign jurisdictions. Operations outside of North America accounted for 22% of the Company’s consolidated revenue for the nine months ended September 30, 2017.~~

We had a working capital deficit of $202.7 million and $233.2 million at September 30, 2017 and December 31, 2016, respectively. Our working capital deficit has arisen from using cash generated from operations to make long-term investments in fixed assets and acquisitions, and from share repurchases. 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 other educational advisory segments, as well as to make scheduled principal and interest payments and for share repurchases.

~~The Company’s $1.3 billion~~ senior secured credit facilities, which consist of ~~$1.1 billion in~~ a secured term loan facility and a ~~$225.0~~$400 million revolving credit facility. ~~In January 2016, the Company amended its existing credit agreement to increase the~~There were no borrowings outstanding on our revolving credit facility at March 31, 2021 and December 31, 2020.

We had working capital of $123.4 million and $93.4 million at March 31, 2021 and December 31, 2020, respectively. We anticipate that our cash flows from ~~$100.0 million~~operating activities will continue to ~~$225.0 million. In November 2016, the Company modified its~~be impacted while our re-opened centers ramp enrollment and while certain centers remain temporarily closed. During this re-enrollment and re-opening phase, cash flows from operating activities will be supplemented with our existing senior credit facilities and refinanced all of its outstanding term loans into a new seven year term loan facility, which resulted in the issuance of $1.1 billion in new term loans, of which $922.5 million was used to repay outstanding term loanscash, as well as borrowings available under the previous term loan facility, and $150.0 million of which was used to fund the acquisition of a business. On May 8, 2017, the Company amended its existing senior credit facilities to, among other changes, reduce the applicable interest rates of the term loan facility and theour revolving credit facility, ~~and extend the maturity date~~as needed. As we focus on the ~~revolving credit facility~~re-enrollment and ramping of re-opened centers, as well as re-opening our remaining temporarily closed centers, we will continue to manage our discretionary operating and capital spending and prioritize investments that support current operations and strategic opportunities, as well as the principal and interest payments on our debt.

We have participated in certain government support programs, including certain tax deferrals and tax credits allowed pursuant to the CARES Act and the CAA in the United States, as well as certain tax deferrals, tax credits, and employee wage support in the United Kingdom, and may continue to do so in the future. During the three months ended March 31, 2021, $9.6 million was recorded as a reduction to cost of services in relation to these benefits. As of March 31, 2021 and December 31, 2020, $13.1 million and $8.4 million, respectively, was recorded in prepaid expenses and other current assets on the consolidated balance sheet for amounts receivable from ~~July~~government support programs. Additionally, the Company had payroll tax deferrals totaling $20.4 million as of March 31, ~~2019~~2021 and December 31, 2020, of which $10.2 million was included in accounts payable and accrued expenses and $10.2 million was included in other long-term liabilities. There is no assurance that these government support programs will continue in the future at current levels, or at all.

In response to ~~July~~the broad effects of COVID-19, we have re-negotiated certain payment terms with lessors to mitigate the impact on our financial position and operations. As of March 31, ~~2022. The Company’s senior secured credit facilities~~2021 and December 31, 2020, we had $3.5 million and $7.7 million, respectively, in lease payment deferrals of which the majority are ~~further discussed below under “Debt.”~~payable over the next year.

~~On August 2, 2016, the~~The board of directors ~~of the Company~~ authorized a share repurchase program of up to ~~$300.0~~$300 million of ~~the Company’s~~our outstanding common stock, effective ~~August 5, 2016. The Company repurchased 1.0 million shares of common stock for $74.9 million in~~June 12, 2018. During the ~~nine~~three months ended ~~September 30, 2017 under this authorization,~~March 31, 2021 there were no share repurchases and ~~$207.9~~$194.9 million remained available ~~at September 30, 2017.~~under the repurchase program. During the three months ended March 31, 2020, we repurchased 0.2 million shares for $32.2 million. All repurchased shares have been retired. The share repurchase program, which has no expiration date, replaced the prior $250.0 million authorization announced February 4, 2015, of which $26.3 million remained available at the date the program was replaced.

We believe that funds provided by operations, our existing cash balances, and borrowings available under our revolving credit facility will be adequate to ~~meet planned operating~~fund all obligations and ~~capital expenditures~~liquidity requirements for at least the next ~~12 months under current operating conditions.~~twelve months. However, ~~if we were~~prolonged disruptions to ~~undertake any significant acquisitions or investments in the purchase~~our operations, including as a result of ~~facilities for new or existing~~periodically reinstated lockdowns, required school, child care and ~~early education centers, which requires~~business closures and government mandates in response to the COVID-19 pandemic, may require financing beyond our existing cash and borrowing capacity, and 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, orif at all.


Cash Flows	Nine Months Ended September 30,						Cash Flows	Three Months Ended March 31,
	2017			2016				2021		2020
	(In thousands)
								(In thousands)
Net cash provided by operating activities	$	201,211		$	164,953		Net cash provided by operating activities	$	68,295	$	64,083
Net cash used in investing activities	$	(80,596	)	$	(72,773	)	Net cash used in investing activities	$	(22,284)	$	(12,964)
Net cash used in financing activities	$	(95,067	)	$	(83,025	)
Cash and cash equivalents (beginning of period)	$	14,633		$	11,539
Cash and cash equivalents (end of period)	$	42,265		$	19,484
Net cash provided by (used in) financing activities							Net cash provided by (used in) financing activities	$	13,899	$	(25,703)
Cash, cash equivalents and restricted cash — beginning of period							Cash, cash equivalents and restricted cash — beginning of period	$	388,465	$	31,192
Cash, cash equivalents and restricted cash — end of period							Cash, cash equivalents and restricted cash — end of period	$	447,836	$	55,405

Cash Provided by Operating Activities

Cash provided by operating activities was ~~$201.2~~$68.3 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, compared to ~~$165.0~~$64.1 million for the same period in ~~2016.~~2020. The increase in cash provided by operating activities primarily resulted from changes in working capital arising from the timing of billings and payments when compared to the prior year, including improved timing of collections, and increases associated with growth in the back-up care segment and tuition fees collected in advance at full service centers as children re-enroll at our centers. The increase in cash provided by operating activities was partially offset by the $23.6 million decrease in net income of $27.9 million, which includes the $21.9 million excess tax benefit associated with the exercise of stock options and vesting of restricted stock recognized during the year upon the adoption of new accounting guidance for the accounting of stock-based compensation, as well as the $7.0 million tax benefit recorded in 2017 from the loss on investment of a subsidiary related to the disposition of our remaining assets in Ireland. The tax benefit from stock-based compensation was recorded to the balance sheet and reported as an increase to cash from financing activities in the prior year. ~~The excess tax benefit for the nine months ended September 30, 2017 was significant due to the vesting~~

Table of ~~certain restricted stock and the volume of stock option exercises. The Company expects the excess tax benefit to approximate $1.5 million to $2.0 million for the remainder of 2017.~~Contents

Cash Used in Investing Activities

Cash used in investing activities was ~~$80.6~~$22.3 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021, compared to $13.0 million for the same period in 2020, and was ~~primarily~~ related to fixed asset additions, acquisitions, and other investments. The increase in cash used in investing activities was primarily related to acquisitions, as we used $9.0 million for the acquisition of two centers as well as a camp and back-up care provider, and to a lesser extent, settlements of prior year acquisitions in the three months ended March 31, 2021, compared to $3.5 million used to acquire one center in the prior year. During the three months ended March 31, 2021, we invested $17.9 million in fixed asset purchases for new child care centers, and maintenance and refurbishments in our existing centers, ~~and continued investments~~which was consistent with the prior year. Proceeds from the sale of fixed assets of $3.9 million were lower in ~~technology, equipment and furnishings. In~~ the ~~nine~~three months ended ~~September 30, 2017, the Company used $17.5~~March 31, 2021 compared to $4.5 million ~~to acquire ten centers~~ in the ~~Netherlands~~prior year. In addition, proceeds generated from the maturity of debt securities held by our wholly-owned captive insurance company and sales of investments were $0.7 million and $3.2 million for the three ~~in the United States.~~ months ended March 31, 2021 and 2020, respectively, net of purchases.

Cash ~~used in investing~~Provided by (Used in) Financing Activities

Cash provided by financing activities was ~~$72.8~~$13.9 million for the three months ended March 31, 2021 compared to cash used of $25.7 million for the same period in ~~2016 and~~2020. The increase in cash provided by financing activities was primarily related to fixed asset additions for new child care centers, maintenance and refurbishments in our existing centers, and investments in technology, equipment and furnishings. In the nine months ended September 30, 2016, the Company used $22.3 million to acquire eight centersan increase in the ~~United Kingdom and a provider of back-up care in the United States.~~

~~Cash Used in Financing Activities~~

Cash used in financing activities amounted to $95.1 million for the nine months ended September 30, 2017 compared to $83.0 million for the same period in 2016. The increase in cash used in financing activities for the nine months ended September 30, 2017 was primarily due to share repurchases of $74.9 million, taxes paid related to the net share settlement of stock awards totaling $25.8 million, and net repayments of borrowings on the revolving credit facility totaling $10.5 million. These uses of cash were offset by proceeds ~~primarily~~ from the exercise of stock options ~~to purchase common stock of $18.7 million~~ and ~~from~~ the issuance and sale of restricted stock, ~~of $4.4 million. Cash used~~which were $22.4 million in ~~financing activities for~~ the ~~nine~~three months ended ~~September 30, 2016 consisted principally of~~March 31, 2021 compared to $16.0 million in the prior year, and having no share repurchases and payments of ~~$95.7~~contingent consideration in the three months ended March 31, 2021 compared to $32.7 million and ~~taxes paid related to the net share settlement of stock awards totaling $7.7 million. These uses of cash were offset by proceeds primarily from the tax benefit of stock-based compensation~~$1.1 million, respectively, in the ~~amount of $10.5 million, the exercise of options to purchase common stock of $9.1 million, and net borrowings on the revolving credit facility of $6.0 million.~~prior year.

Debt

~~As of September 30, 2017, the Company’s $1.3 billion~~Our senior secured credit facilities ~~consisted~~consist of ~~$1.1 billion in~~ a secured term loan facility and a ~~$225.0~~$400 million multi-currency revolving credit facility. The term ~~loans mature~~loan matures on November 7, 2023 and ~~require~~requires quarterly principal payments of $2.7 million, with the remaining principal balance due on November 7, 2023.

Outstanding term loan borrowings were as ~~follows at September 30, 2017~~follows:


	March 31, 2021		December 31, 2020

	(In thousands)
Term loan	$	1,032,000	$	1,034,688
Deferred financing costs and original issue discount	(3,466)		(3,801)
Total debt	1,028,534		1,030,887
Less current maturities	(10,750)		(10,750)
Long-term debt	$	1,017,784	$	1,020,137

In April and ~~December 31, 2016 (in thousands):~~

September 30, 2017 December 31, 2016
Term loans $ 1,069,625
$ 1,075,000
Deferred financing costs and original issue discount (10,232 ) (10,241 )
Total debt 1,059,393
1,064,759
Less current maturities 10,750
10,750
Long-term debt $ 1,048,643
$ 1,054,009

~~Borrowings~~May 2020, we amended our existing senior credit facilities to, among other things, increase the borrowing capacity of our revolving credit facility from $225 million to $400 million, modify the interest rates applicable to borrowings outstanding on the revolving credit facility, and modify the terms of the applicable covenants. The revolving credit facility matures on July 31, 2022. There were ~~$65.5 million~~no borrowings outstanding on the revolving credit facility at ~~September 30, 2017~~March 31, 2021 and ~~$76.0 million at~~ December 31, ~~2016.~~2020, with the full line available for borrowings.

~~All borrowings~~Borrowings under the credit agreement are subject to variable interest. Borrowings under the term loan facility bear interest at a rate per annum of 1.25% over the base rate, or 2.25% over the Eurocurrency rate, which is the one, two, three or six month LIBOR rate or, with applicable lender approval, the twelve month or less than one month LIBOR rate. The base rate is subject to anWe mitigate our interest rate ~~floor of 1.75% and the Eurocurrency rate is subject to an interest rate floor of 0.75%, but only~~exposure with respect to the term loan facility. Borrowings under the revolving credit facility bear interest at a rate per annum ranging from 0.75% to 1.25% over the base rate, or 1.75% to 2.25% over the Eurocurrency rate.

On January 26, 2016, the Company amended its then existing credit agreement to increase the revolving credit facility from $100.0 million to $225.0 million, to extend the maturity date on the revolving credit facility from January 30, 2018 to July 31, 2019, and to modify the interest rate applicable to borrowings.

On November 7, 2016, the Company modified its then existing senior credit facilities and refinanced all of its outstanding term loans into a new seven year term loan facility, which resulted in the issuance of $1.1 billion in new term loans, of which $922.5 million was used to repay outstanding term loans under the previous term loan facility, and $150.0 million of which was used to fund the acquisition of a business. The terms, interest rate and availability of the revolving credit facility were not modified in the November 2016 debt refinancing.

~~credit facility from July 31, 2019 to July 31, 2022. The amended term loan facility continues to have a maturity date of November 7, 2023.~~

~~On October 16, 2017, the Company entered into~~ variable-to-fixed interest rate swap agreements ~~to mitigate the exposure to variable interest arrangements on~~with an underlying fixed notional value of $500 million, ~~notional amount of the outstanding term loan borrowings. These swap agreements~~designated and accounted for as cash flow hedges from inception, that are scheduled to mature on October 31, 2021. The ~~Company is required to make monthly payments on the notional amount at a fixed~~weighted average interest rate for the term loan was 3.06% and 3.53% for the three months ended March 31, 2021 and 2020, respectively, including the impact of ~~approximately 1.90%. In exchange,~~ the ~~Company receives~~ interest onrate swap agreements. We have interest rate cap agreements with a total notional value of $800 million, designated and accounted for as cash flow hedges from inception, that provide us with interest rate protection in the ~~notional amount at a variable rate based on~~event the one-month LIBOR rate ~~subject to~~increases above 1%. Interest rate cap agreements for $300 million notional value have an effective date of June 30, 2020 and expire on October 31, 2023, while interest rate cap agreements for another $500 million notional amount have a ~~0.75% floor.~~

~~All obligations under~~forward starting effective date of October 29, 2021, which coincides with the senior secured credit facilities are secured by substantially all of the assets of the Company’s U.S. based subsidiaries. The senior secured credit facilities contain a number of covenants that, among other things and subject to certain exceptions, may restrict the ability of Bright Horizons Family Solutions LLC, 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 stockmaturity of our ~~subsidiaries; alter the business conducted; enter into~~existing interest rate swap agreements, ~~restricting our subsidiaries’ ability to pay dividends;~~ and ~~consolidate or merge.~~expire on October 31, 2023.

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 ~~amended~~ 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~~quarterly maintenance based financial ~~maintenance covenant on the last day of each fiscal quarter. The~~covenant. A breach of this covenant is subject to certain equity cure rights.

The credit agreement governing the senior secured credit facilities contains certain customary affirmative covenants and events of default. We were in compliance with our financial ~~covenants~~covenant at ~~September 30, 2017.~~March 31, 2021. Refer to Note 6, Credit Arrangements and Debt Obligations, in our condensed consolidated financial statements for additional information on our debt and credit arrangements, and covenant requirements.

Table of Contents

Off-Balance Sheet Arrangements

As of ~~September 30, 2017,~~March 31, 2021, we had no off-balance sheet arrangements.

Critical Accounting Policies

For a discussion of our “Critical Accounting Policies,” refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to our critical accounting policies since December 31, 2020.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from changes in interest rates and fluctuations in foreign currency ~~rate fluctuations. Since December 31, 2016,~~exchange rates. Other than the broad effects of the COVID-19 pandemic and its negative impact on the global economy and major financial markets, there have been no material changes in ~~the Company’s exposures~~our exposure to interest rate or foreign currency exchange rate ~~fluctuations.~~fluctuations since December 31, 2020. See Part II, Item ~~7A. “Quantitative~~7A, “Quantitative and Qualitative Disclosures about Market Risk,” in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 for further information regarding market risk.

On October 16, 2017, the Company entered into variable-to-fixed interest rate swap agreements to mitigate the exposure to variable interest arrangements on $500 million notional amount of the outstanding term loan borrowings. These swap agreements are scheduled to mature on October 31, 2021. The Company is required to make monthly payments on the notional amount at a fixed average interest rate of approximately 1.90%. In exchange, the Company receives interest on the notional amount at a variable rate based on the one-month LIBOR rate, subject to a 0.75% floor. The Company may enter into additional derivatives or other market risk sensitive instruments in the future for the purpose of hedging or for trading purposes.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of ~~September 30, 2017, the Company~~March 31, 2021, we conducted an evaluation under the supervision and with the participation of ~~the Company’s~~ management, including ~~the Company’s~~our Chief Executive Officer and Chief Financial Officer ~~(its~~(our principal executive officer and principal financial officer, respectively), regarding the effectiveness of the design and operation of ~~the Company’s~~our 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 that are designed to ensure that information required to be disclosed ~~by the Company~~ in reports that we file or submit under the Exchange Act ~~are~~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 we file or submit under the Exchange Act ~~are~~is accumulated and communicated to our management, including our 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 effective as of ~~September 30, 2017.~~

March 31, 2021.

Changes in Internal Control over Financial Reporting

There have been no changes in ~~the Company’s~~our internal control over financial reporting that occurred during the quarter ended ~~September 30, 2017~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are, from time to time, subject to claims, suits, and ~~suits~~matters arising in the ordinary course of ~~business, some of which have not been fully adjudicated.~~business. 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,insurance, but there can be no assurance that our insurance will be adequate to cover all liabilities that may arise out of claims or matters brought against us. We believe the resolution of such legal matters will not have a material adverse effect on our financial position, results of operations, or cash flows, although we cannot predict the ultimate outcome of any such actions. Refer to Note 12, Contingencies, to the consolidated financial statements in Part I, Item 1, of this Quarterly Report on Form 10-Q for additional information.

Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties, ~~including~~which could adversely affect our business, financial condition and operating results. We believe that these risks and uncertainties include, but are not limited to, those disclosed in Part I, Item ~~1A. “Risk Factors” included in~~1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016, which could adversely affect~~2020, including with respect to the impacts from the ongoing COVID-19 pandemic. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties, not presently known to us or that we currently deem immaterial, may also materially impair our business, financial condition ~~and operating results.~~or results of operations. There have been no material changes to our risk factors since our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020.

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

Issuer Purchases of Equity Securities

The table below sets forth information regarding purchases of our common stock during the three months ended ~~September 30, 2017:~~March 31, 2021:


Period	Total Number of Shares Purchased (a)	Average Price Paid per Share (b)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) (c)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (In thousands) (1) (d)

January 1, 2021 to January 31, 2021	—	$	—	—	$	194,850
February 1, 2021 to February 28, 2021 (2)	11,303	$	169.10	—	$	194,850
March 1, 2021 to March 31, 2021	—	$	—	—	$	194,850
	11,303			—

(1) The board of directors authorized a share repurchase program of up to $300 million of our outstanding common stock effective June 12, 2018. The share repurchase program has no expiration date. All repurchased shares have been retired.

(2) During the three months ended March 31, 2021, we retired a total of 11,303 shares that had been issued pursuant to restricted stock award agreements in connection with the payment of tax withholding obligations arising as a result of the vesting of such restricted stock awards. The shares were valued using the transaction date and closing stock price for purposes of such tax withholdings. Shares retired in connection with the payment of tax withholding obligations are not included in, and are not counted against, our $300 million share repurchase authorization.

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, 2017 to July 31, 2017 22,425
$ 76.30
22,425
$ 207,868
August 1, 2017 to August 31, 2017 —
$ —
—
$ 207,868
September 1, 2017 to September 30, 2017 —
$ —
—
$ 207,868
22,425
22,425

~~(1)~~

On August 2, 2016, the board of directors of the Company authorized a share repurchase program of up to $300 million of the Company’s common stock, effective August 5, 2016. The share repurchase program, which has no expiration date, replaced the February 2015 authorization. The share repurchases during the three months ended September 30, 2017 were open market transactions pursuant to the August 2016 authorization. All repurchased shares have been retired.

Item 3. Defaults Upon Senior Securities

~~Not applicable.~~None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Table of Contents

Item 6. Exhibits

(a) Exhibits:



Exhibit Number						Exhibit Title
31.1*						Principal Executive Officer Certification Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) 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(a) and 15d-14(a) 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.
101.INS*						Inline XBRL Instance Document - the instance document does not appear in Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*						Inline XBRL Taxonomy Extension Schema ~~Document~~Document.
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document~~Document.
101.LAB101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase ~~Document~~Document.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.
101.DEF*104						Cover Page Interactive Data File (formatted as inline XBRL ~~Taxonomy Extension Definition Linkbase Document~~with applicable taxonomy extension information contained in Exhibits 101).



*			Exhibits filed herewith.
**			Exhibits furnished herewith.

Table of Contents

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 7, 2017~~May 10, 2021	By:	/s/ Elizabeth Boland
			Elizabeth Boland
			Chief Financial Officer
			(Duly Authorized Officer)

3132



					~~Page~~
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	1720
Item 3.			Quantitative and Qualitative Disclosures About Market Risk	2729
Item 4.			Controls and Procedures	2729

PART II. OTHER INFORMATION
Item 1.			Legal Proceedings	2930
Item 1A.			Risk Factors	2930
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds	2930
Item 3.			Defaults Upon Senior Securities	2930
Item 4.			Mine Safety Disclosures	29
~~Item 5.~~	~~Other Information~~	29
~~Item 6.~~	~~Exhibits~~	30
~~Signatures~~Item 5.			Other Information	30
Item 6.			Exhibits	31
Signatures				32

BRIGHT HORIZONS FAMILY SOLUTIONS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited)

	September 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	42,265		$	14,633
Accounts receivable—net	96,105			97,212
Prepaid expenses and other current assets	57,416			42,554
Total current assets	195,786			154,399
Fixed assets—net	567,747			529,432
Goodwill	1,302,549			1,267,705
Other intangibles—net	356,469			374,566
Other assets	40,599			32,915
Total assets	$	2,463,150		$	2,359,017
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	10,750		$	10,750
Borrowings on revolving credit facility	65,500			76,000
Accounts payable and accrued expenses	143,779			125,400
Deferred revenue	151,283			146,692
Other current liabilities	27,129			28,738
Total current liabilities	398,441			387,580
Long-term debt—net	1,048,643			1,054,009
Deferred rent and related obligations	65,673			59,518
Other long-term liabilities	56,749			52,048
Deferred revenue	8,043			6,284
Deferred income taxes	111,088			111,711
Total liabilities	1,688,637			1,671,150
Stockholders’ equity:
Preferred stock, $0.001 par value; 25,000,000 shares authorized and no shares issued or outstanding at September 30, 2017 and December 31, 2016	—			—
Common stock, $0.001 par value; 475,000,000 shares authorized; 58,886,706 and 58,910,282 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	59			59
Additional paid-in capital	831,174			899,076
Accumulated other comprehensive loss	(40,419		)	(89,448		)
Accumulated deficit	(16,301		)	(121,820		)
Total stockholders’ equity	774,513			687,867
Total liabilities and stockholders’ equity	$	2,463,150		$	2,359,017



	At acquisition date As reported December 31, 2016			Measurement period adjustments			At acquisition date As reported September 30, 2017
Cash	$	5,210		$	75		$	5,285
Prepaid expenses and other assets	5,700			(237		)	5,463
Fixed assets	96,868			(720		)	96,148
Intangible assets	10,540			1,860			12,400
Goodwill	122,714			(6,028		)	116,686
Total assets acquired	241,032			(5,050		)	235,982
Accounts payable and accrued expenses	(18,696		)	1,719			(16,977		)
Deferred revenue and parent deposits	(5,394		)	342			(5,052		)
Deferred tax liabilities	(7,793		)	2,993			(4,800		)
Other long-term liabilities	(3,048		)	(4		)	(3,052		)
Total liabilities assumed	(34,931		)	5,050			(29,881		)
Purchase price	$	206,101		$	—		$	206,101



	Pro forma (Unaudited)
	Nine Months Ended September 30, 2016
Revenue	$	1,241,675
Net income	$	77,002



	Full service center-based care			Back-up dependent care			Other educational advisory services		Total
Balance at January 1, 2016	$	965,114		$	158,894		$	23,801	$	1,147,809
Additions from acquisitions	139,539			9,214			—		148,753
Adjustments to prior year acquisitions	73			—			—		73
Effect of foreign currency translation	(28,930		)	—			—		(28,930		)
Balance at December 31, 2016	1,075,796			168,108			23,801		1,267,705
Additions from acquisitions	13,072			—			—		13,072
Adjustments to prior year acquisitions	(5,821		)	(3		)	—		(5,824		)
Effect of foreign currency translation	27,596			—			—		27,596
Balance at September 30, 2017	$	1,110,643		$	168,105		$	23,801	$	1,302,549



September 30, 2017	Weighted average amortization period	Cost		Accumulated amortization			Net carrying amount
Definite-lived intangibles:
Customer relationships	14 years	$	400,105	$	(230,730	)	$	169,375
Trade names	7 years	10,157		(4,207		)	5,950
Non-compete agreements	N/A	50		(50		)	—
		410,312		(234,987		)	175,325
Indefinite-lived intangibles:
Trade names	N/A	181,144		—			181,144
		$	591,456	$	(234,987	)	$	356,469



December 31, 2016	Weighted average amortization period	Cost		Accumulated amortization			Net carrying amount
Definite-lived intangibles:
Customer relationships	15 years	$	392,820	$	(205,342	)	$	187,478
Trade names	7 years	8,283		(2,961		)	5,322
Non-compete agreements	N/A	49		(49		)	—
		401,152		(208,352		)	192,800
Indefinite-lived intangibles:
Trade names	N/A	181,766		—			181,766
		$	582,918	$	(208,352	)	$	374,566



	Estimated amortization expense
Remainder of 2017	$	7,955
2018	$	29,791
2019	$	27,497
2020	$	26,620
2021	$	25,113



	September 30, 2017			December 31, 2016
Term loans	$	1,069,625		$	1,075,000
Deferred financing costs and original issue discount	(10,232		)	(10,241		)
Total debt	1,059,393			1,064,759
Less current maturities	10,750			10,750
Long-term debt	$	1,048,643		$	1,054,009



Remainder of 2017	$	2,688
2018	10,750
2019	10,750
2020	10,750
2021	10,750
Thereafter	1,023,937
	$	1,069,625



	September 30, 2017				December 31, 2016
Financial liabilities	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Term loans	$	1,069,625	$	1,079,000	$	1,075,000	$	1,084,400



	Full service center-based care		Back-up dependent care		Other educational advisory services		Total
	(In thousands)
Three months ended September 30, 2017
Revenue	$	358,094	$	60,085	$	15,137	$	433,316
Amortization of intangible assets	7,625		385		181		8,191
Income from operations (1)	24,742		15,886		4,335		44,963
Three months ended September 30, 2016
Revenue	$	318,821	$	53,229	$	11,879	$	383,929
Amortization of intangible assets	6,586		411		144		7,141
Income from operations (2)	28,107		14,183		2,425		44,715



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, 2017 to July 31, 2017	22,425	$	76.30	22,425	$	207,868
August 1, 2017 to August 31, 2017	—	$	—	—	$	207,868
September 1, 2017 to September 30, 2017	—	$	—	—	$	207,868
	22,425			22,425