~~Table of Contents~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended March 31, ~~2020~~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~~ Number: 001-35780

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

(Exact name of registrant as specified in its charter)



~~Delaware~~				~~80-0188269~~
~~(State or other jurisdiction~~ ~~of incorporation)~~				~~(I.R.S. Employer~~ ~~Identification Number)~~

~~200 Talcott Avenue~~Delaware

80-0188269

~~Watertown,~~(State or other jurisdiction
of incorporation)

~~Massachusetts~~

(I.R.S. Employer
Identification Number)

~~02472~~

~~(Address~~2 Wells Avenue

Newton, Massachusetts

02459

(Address of principal executive offices)

(Zip code)

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

Not Applicable

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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

BFAM

New York Stock Exchange

Indicate by check mark whether the registrant (1) has ~~(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 ☒ No ☐

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of April ~~24, 2020,~~30, 2021, there were ~~60,319,026~~61,029,675 shares of common stock outstanding.

Table of Contents

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

FORM 10-Q

For the quarterly period ended March 31, ~~2020~~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)
March 31, 2020 December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents $ 49,230
$ 27,872
Accounts receivable — net of allowance for credit losses of $1,836 and $1,226 at March 31, 2020 and December 31, 2019, respectively 171,566
148,855
Prepaid expenses and other current assets 63,369
52,161
Total current assets 284,165
228,888
Fixed assets — net 609,459
636,153
Goodwill 1,389,649
1,412,873
Other intangible assets — net 295,337
304,673
Operating lease right-of-use assets 724,053
700,956
Other assets 48,331
46,877
Total assets $ 3,350,994
$ 3,330,420
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt $ 10,750
$ 10,750
Accounts payable and accrued expenses 188,423
167,059
Current portion of operating lease liabilities 86,252
83,123
Deferred revenue 184,400
191,117
Other current liabilities 27,356
31,241
Total current liabilities 497,181
483,290
Long-term debt — net 1,025,844
1,028,049
Operating lease liabilities 722,602
685,910
Other long-term liabilities 101,352
92,865
Deferred revenue 10,484
10,098
Deferred income taxes 56,003
58,940
Total liabilities 2,413,466
2,359,152
Stockholders’ equity:
Preferred stock, $0.001 par value; 25,000,000 shares authorized and no shares issued or outstanding at March 31, 2020 and December 31, 2019 —
—
Common stock, $0.001 par value; 475,000,000 shares authorized; 57,920,154 and 57,884,020 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively 58
58
Additional paid-in capital 627,337
648,031
Accumulated other comprehensive loss (94,109 ) (50,331 )
Retained earnings 404,242
373,510
Total stockholders’ equity 937,528
971,268
Total liabilities and stockholders’ equity $ 3,350,994
$ 3,330,420
(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 March 31,
2020 2019
Revenue $ 506,323
$ 501,758
Cost of services 397,464
374,811
Gross profit 108,859
126,947
Selling, general and administrative expenses 57,369
55,875
Amortization of intangible assets 8,209
8,162
Income from operations 43,281
62,910
Interest expense — net (10,206 ) (11,948 )
Income before income tax 33,075
50,962
Income tax expense (2,343 ) (8,920 )
Net income $ 30,732
$ 42,042

Earnings per common share:
Common stock — basic $ 0.53
$ 0.73
Common stock — diluted $ 0.52
$ 0.71

Weighted average common shares outstanding:
Common stock — basic 57,930,909
57,679,041
Common stock — diluted 58,878,784
58,752,384

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	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 (LOSS)
(In thousands)
(Unaudited)

Three months ended March 31,
2020 2019
Net income $ 30,732
$ 42,042
Other comprehensive income (loss):
Foreign currency translation adjustments (39,508 ) 6,978
Unrealized loss on interest rate swaps and investments, net of tax (4,270 ) (2,867 )
Total other comprehensive income (loss) (43,778 ) 4,111
Comprehensive income (loss) $ (13,046 ) $ 46,153

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


	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 CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except share data)
(Unaudited)

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
Balance at January 1, 2020 57,884,020
$ 58
$ 648,031
$ —
$ (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
—
Other comprehensive loss (43,778 ) (43,778 )
Net income 30,732
30,732
Balance at March 31, 2020 57,920,154
$ 58
$ 627,337

$ —
$ (94,109 ) $ 404,242
$ 937,528

Three months ended March 31, 2019
Common Stock
Additional
Paid-in
Capital
Treasury Stock, at Cost
Accumulated
Other
Comprehensive
Income (Loss)
Retained Earnings
Total
Stockholders’
Equity
Shares Amount
Balance at January 1, 2019 57,494,468
$ 57
$ 648,651
$ —
$ (62,355 ) $ 193,124
$ 779,477
Stock-based compensation expense 3,106
3,106
Issuance of common stock under the Equity Incentive Plan 303,929
1
11,054
11,055
Shares received in net share settlement of stock option exercises and vesting of restricted stock (24,718 ) —
(2,779 ) (2,779 )
Other comprehensive income 4,111
4,111
Net income 42,042
42,042
Balance at March 31, 2019 57,773,679
$ 58
$ 660,032
$ —
$ (58,244 ) $ 235,166
$ 837,012
BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


	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.

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

Three months ended March 31,
2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 30,732
$ 42,042
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 28,221
26,462
Impairment losses on long-lived assets 4,970
—
Stock-based compensation expense 4,283
3,106
Deferred income taxes (5,048 ) 3,796
Other non-cash adjustments — net (691 ) 1,460
Changes in assets and liabilities:
Accounts receivable (23,421 ) 2,587
Prepaid expenses and other current assets (11,422 ) 565
Accounts payable and accrued expenses 24,529
(1,099 )
Income taxes 1,367
2,073
Deferred revenue (5,299 ) 23,927
Leases 16,839
2,551
Other assets 1,894
(1,307 )
Other current and long-term liabilities (2,871 ) 850
Net cash provided by operating activities 64,083
107,013

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (17,094 ) (24,195 )
Proceeds from the disposal of fixed assets 4,454
3,134
Proceeds from the maturity of debt securities and sale of other investments 3,247
—
Purchases of other investments and debt securities (42 ) (20,011 )
Payments and settlements for acquisitions — net of cash acquired (3,529 ) (19,490 )
Net cash used in investing activities (12,964 ) (60,562 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facility 10,500
110,500
Payments under revolving credit facility (10,500 ) (178,650 )
Principal payments of long-term debt (2,688 ) (2,688 )
Purchase of treasury stock (32,658 ) (60 )
Taxes paid related to the net share settlement of stock options and restricted stock (5,231 ) (2,779 )
Proceeds from issuance of common stock upon exercise of options and restricted stock upon purchase 15,962
11,414
Payments of contingent consideration for acquisitions (1,088 ) —
Net cash used in financing activities (25,703 ) (62,263 )
Effect of exchange rates on cash, cash equivalents and restricted cash (1,203 ) 548
Net increase (decrease) in cash, cash equivalents and restricted cash 24,213
(15,264 )
Cash, cash equivalents and restricted cash — beginning of period 31,192
38,478
Cash, cash equivalents and restricted cash — end of period $ 55,405
$ 23,214

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.

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

Three months ended March 31,
2020 2019
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS:
Cash and cash equivalents $ 49,230
$ 20,129
Restricted cash and cash equivalents, included in prepaid expenses and other current assets 6,175
3,085
Total cash, cash equivalents and restricted cash — end of period $ 55,405
$ 23,214

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments of interest $ 9,535
$ 11,383
Cash payments of income taxes $ 6,026
$ 3,094
Cash paid for amounts included in the measurement of lease liabilities $ 29,130
$ 30,034
NON-CASH TRANSACTIONS:
Fixed asset purchases recorded in accounts payable and accrued expenses $ 3,514
$ 4,869
Contingent consideration issued for acquisitions $ —
$ 16,375
Operating right-of-use assets obtained in exchange for operating lease liabilities — net $ 56,825
$ 24,496

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

Basis of Presentation — The accompanying unaudited condensed consolidated balance sheet as of March 31, ~~2020~~2021 and the condensed consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the interim periods ended March 31, ~~2020~~2021 and ~~2019~~2020 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange ~~Commission.~~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, ~~2019.~~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 ~~operating section of the~~ condensed consolidated ~~statements~~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 March 31, ~~2020~~2021 and the condensed consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the interim periods ended March 31, ~~2020~~2021 and ~~2019,~~2020, reflect all adjustments (consisting only of normal and recurring adjustments) necessary to present fairly the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year.

Stockholders’ Equity — The board of directors of the Company authorized a share repurchase program of up to $300 million of the Company’s outstanding common stock, effective June 12, 2018. The share repurchase program has no expiration date. The shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions, under Rule 10b5-1 plans, or by other means in accordance with federal securities laws. AtDuring the three months ended March 31, ~~2020,~~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 ~~has temporarily suspended share repurchases due~~subsequently filed a registration statement to register the ~~impact~~resale of ~~COVID-19 as~~these shares in accordance with the terms of the purchase agreement. The Company ~~prioritizes investments to~~received net proceeds from the ~~most critical operating areas.~~offering of $249.8 million.

COVID-19 Pandemic — InSince March 2020, the ~~Company began to experience the impact of~~Company's global operations have been significantly impacted by the COVID-19 pandemic on its global operations, as required business and school closures and shelter-in-place government mandates in response to the pandemic resulted in the temporary closure of a significant portion of the Company’s child care centers. The Company continues to operate critical health care client and “hub” centers to provide care and support services to the children and families of first responders, scientists, health care and medical professionals, and other essential workers, as well as the many support industries facilitating their work.pandemic. As of March 31, ~~2020,~~2021, the Company operated ~~1,094~~1,015 child care and early education centers, ~~with the capacity to serve approximately 120,000 children and their families,~~ of which approximately ~~250~~900 child care and early education centers ~~with~~were open. The Company remains focused on the capacity to serve approximately 32,000 children remained open after the temporary center closures in response to the COVID-19 pandemic. These open centers are operating with special COVID-19 protocols in place in order to protect the health and safety of the children and staff, including social distancing procedures for pick-up and drop-off, daily health checks, the use of face masks by the Company’s staff, limited capacity, and enhanced hygiene and cleaning practices. The Company’s back-up care and educational advisory services remain operational and available to clients.

~~As a result of the economic effects of the COVID-19 pandemic, including the Company’s temporary closure of a significant portion~~re-enrollment of its centers and the ~~related negative financial impact to its results~~phased re-opening of ~~operations,~~the limited number of centers that remain temporarily closed, which the Company ~~considered whether these conditions indicated it was more likely than not that the Company’s $1.4 billion in goodwill~~expects will continue throughout 2021. The broad and $180.6 million in indefinite-lived intangible assets were impaired. Based on the facts and circumstances as of March 31, 2020, the Company determined it was more likely than not that the fair value of its reporting units and indefinite-lived intangible assets exceeded their carrying amount and therefore, interim impairment analysis was not required.

In addition, the Company reviewed its long-lived assets, including amortizable intangible assets, to determine whether these conditions indicated that the carrying amount of such assets may not be recoverable. During the three months ended March 31, 2020, the Company recognized a $5.0 million impairment loss on long-lived assets for certain centers that are unlikely to recover the carrying amount as a result of the operational disruption caused by recent closures and events. Given the current risks and uncertainties associated with the COVID-19 pandemic, additional impairment losses may occur.

~~The broad~~long-term effects of COVID-19, its duration and scope of the ongoing disruption, ~~including the pace of re-opening temporarily closed centers,~~ cannot be predicted and is affected by many interdependent variables and decisions by government authorities and the Company’s client partners. Based on the current guidance and directives of state and local health authorities, in conjunction with recommendations from medical experts and the Centers for Disease Control and Prevention, the temporary closure of the Company’s centers is expected to continue in the second quarter of 2020 and, potentially, in subsequent periods. The timing and cadence of re-opening the temporarily closed centers will vary by jurisdiction and other factors and the Company cannot anticipate when the majority of our centers will re-open. The Company will continue to evaluate the conditions and factors which would govern the re-opening of temporarily closed centers, including health and safety protocols. While the Company recently experienced increased demand for back-up care services, such as in-home care, and minimal disruption to providing educational advisory services, these conditions and trends may not continue in subsequent periods.predicted. Given these factors, the Company currently expects the effects of COVID-19 ~~to its business~~ 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 ~~second quarter of 2020, and potentially in subsequent periods.~~

~~In response~~United States, which is an economic aid package to ~~these developments, the Company has implemented measures in an effort to manage costs and improve liquidity and access to financial resources, and thereby~~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 ~~Company~~’~~s financial position and operations.~~ ~~These measures include, but are not limited~~consolidated statement of income as a reduction to the ~~following:~~

~~furloughing~~related expenses that the assistance is intended to defray. During the three months ended March 31, 2021, $9.6 million was recorded as a ~~significant portion~~reduction to cost of ~~the Company’s employees~~services in ~~proportion~~relation to ~~the number~~these benefits. As of ~~center closures, including center personnel for temporarily closed centers~~March 31, 2021 and ~~related support functions~~December 31, 2020, $13.1 million and $8.4 million was recorded in ~~the Company’s corporate offices;~~

~~reducing discretionary spending~~prepaid expenses and ~~overhead costs, while prioritizing investments that support~~other current ~~operations and deferring to future periods nonessential and discretionary investments;~~

~~temporary voluntary reductions in compensation to certain executive officers and board members;~~

~~temporary suspension of share repurchases;~~

~~amending the Company’s credit agreement in April 2020 and May 2020 to increase the borrowing capacity of its revolving credit facility from $225 million to $400 million; and,~~

~~raising $250 million in gross proceeds from the issuance and sale of common stock in April 2020.~~

~~In light of these actions and based~~assets on the ~~Company’s assumptions about the continued impact of COVID-19 on its operations,~~consolidated balance sheet for amounts due from government support programs, respectively. Additionally, the Company ~~believes it has sufficient liquidity to satisfy its obligations for at least the next twelve months. Refer to Note 12,~~ ~~Subsequent Events, for additional information on the issuance~~had payroll tax deferrals totaling $20.4 million as of March 31, 2021 and ~~sale~~December 31, 2020, of ~~common stock~~which $10.2 million was recorded in accounts payable and ~~the amendments to the Company’s credit agreement.~~accrued expenses and $10.2 million was included in other long-term liabilities.

Recently Adopted ~~Pronouncements~~ ~~— On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13,~~ ~~Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,~~ which amends the existing guidance on the accounting for credit losses of certain financial instruments. This guidance requires entities to recognize the expected credit loss over the lifetime of certain financial instruments and modifies the impairment model for available-for-sale debt securities. This standard is applied by recording a cumulative effect adjustment to retained earnings upon adoption. There was no impact to the Company’s consolidated financial statements from the adoption of this guidance.

The Company generates accounts receivable from fees charged to parents and employer sponsors, which are generally billed monthly as services are rendered or in advance, and are classified as short term. The Company monitors collections and maintains a provision for expected credit losses based on historical trends, current conditions, and relevant forecasted information, in addition to provisions established for specific collection issues that have been identified. Activity in the allowance for credit losses is as follows (in thousands):

Three months ended
March 31, 2020
Beginning balance at January 1, 2020 $ 1,226
Provision 910
Write offs and recoveries (300 )
Ending balance at March 31, 2020 $ 1,836

~~The Company’s investments in debt securities, which were classified as available-for-sale, are further disclosed in Note 9,~~ ~~Fair Value Measurements. As of March 31, 2020, the available-for-sale debt securities are not in an unrealized loss position, and therefore there is no allowance for credit losses.~~

~~Recently Issued Pronouncements~~Pronouncement — In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The standard removes certain exceptions to the general principles in Topic 740 and improves the consistent application of U.S. GAAP by clarifying and amending certain areas of the existing guidance. ~~This ASU is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, with early adoption permitted.~~The Company adopted the new guidance on January 1, 2021. The adoption of this standard isdid not ~~expected to~~ have a material impact on the Company’s consolidated financial statements and related disclosures.

2. REVENUE RECOGNITION

Disaggregation of Revenue

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

Full service
center-based child care Back-up care Educational
advisory services Total
Three months ended March 31, 2020
North America $ 298,067
$ 70,557
$ 20,765
$ 389,389
Europe 113,324
3,610
—
116,934
$ 411,391
$ 74,167
$ 20,765
$ 506,323
Three months ended March 31, 2019
North America $ 304,312
$ 62,007
$ 18,744
$ 385,063
Europe 114,008
2,687
—
116,695
$ 418,320
$ 64,694
$ 18,744
$ 501,758


	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, ~~Canada,~~Puerto Rico, and ~~Puerto Rico~~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 ~~are~~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. ~~During the three months ended March 31, 2019, $113.4 million was recognized as revenue related to the deferred revenue balance recorded at December 31, 2018.~~

Remaining Performance Obligations

~~The transaction price allocated to the remaining performance obligations relates to services that are paid or invoiced in advance.~~ 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, and Canada.~~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, ~~2020.~~2021.

Lease Expense

The components of lease expense were as ~~follows (in thousands):~~follows:


						Three months ended March 31,
						2021		2020
	Three months ended March 31,
	2020		2019			(In thousands)
Operating lease expense ⁽¹⁾	$	33,861	$	30,960	Operating lease expense (1)	$	33,625	$	33,861
Variable lease expense ⁽¹⁾	9,233		8,333		Variable lease expense (1)	6,942		9,233
Total lease expense	$	43,094	$	39,293	Total lease expense	$	40,567	$	43,094

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

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

March 31, 2020 December 31, 2019
Weighted average remaining lease term (in years) 10 10
Weighted average discount rate 6.1% 6.2%


	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, ~~2020 (in thousands):~~2021:

Operating Leases
Remainder of 2020 $ 90,468
2021 124,795
2022 120,283
2023 111,985
2024 101,015
Thereafter 555,120
Total lease payments 1,103,666
Less imputed interest (294,812 )
Present value of lease liabilities 808,854
Less current portion of operating lease liabilities (86,252 )
Long-term operating lease liabilities $ 722,602


	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, ~~2020,~~2021, the Company had entered into additional operating leases that have not yet commenced with total fixed payment obligations of ~~$52.0~~$24.5 million. The leases are expected to commence between the second quarter of fiscal ~~2020~~2021 and the fourth quarter of fiscal ~~2021~~2022 and have initial lease terms of approximately 10 to 15 years.

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.

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.

~~2020~~2021 Acquisitions

During the three months ended March 31, ~~2020,~~2021, the Company acquired ~~1 center~~2 centers as well as a camp and back-up care provider in the United States, in 2 separate business acquisitions, which ~~was~~were each accounted for as a business combination. ~~The center was~~These businesses were acquired for an aggregate cash consideration of ~~$3.5~~$8.6 million, ~~including fixed assets~~net of ~~$2.3~~cash acquired of $0.4 million, and consideration payable of $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 ~~the real estate acquired.~~these contingent consideration arrangements at acquisition. The Company recorded goodwill of ~~$1.2~~$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, all of which will be deductible for tax purposes. In addition, the Company recorded intangible assets of $1.8 million that will be amortized over five years, as well as fixed assets of $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 March 31, ~~2020,~~2021, the purchase price ~~allocation~~allocations for ~~this acquisition remains~~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 ~~business~~businesses are included in the consolidated results of operations from the date of acquisition, and were not material to the Company’s financial results.

~~During the three months ended March 31,~~ 2020 ~~the Company paid $1.1 million for contingent consideration related to an acquisition completed in 2018, which had been recorded as a liability at the date of acquisition.~~

~~2019~~ Acquisitions

During the year ended December 31, ~~2019,~~2020, the Company acquired 32 child care centers and the ~~tuition program management division of another company~~Sittercity business, an online marketplace for families and caregivers, in the United States, ~~4 centers~~ in ~~the Netherlands, and 1 back-up care provider in the United Kingdom, in 8~~3 separate business acquisitions, which were each accounted for as a business ~~combinations.~~combination. These businesses were acquired for cash consideration of ~~$53.3~~$8.1 million, net of cash acquired of ~~$1.2~~$1.3 million, and consideration payable of $0.1 million, and included fixed assets and technology of $4.1 million, as well as a trade name of $0.7 ~~million. Additionally, contingent consideration of up to $20.0~~ million ~~may~~that will be ~~payable~~amortized over ~~the next three years if certain future performance targets are met. The Company recorded a fair value estimate of the contingent consideration of $13.9 million.~~five years. The Company recorded goodwill of ~~$25.4 million related to the back-up care segment, which will not be deductible for tax purposes, $14.0~~$2.0 million related to the educational advisory and other services segment and $2.1 million related to the full-service center-based child care segment, all of which will be deductible for tax ~~purposes, and $15.2 million related to the full service center-based child care segment, of which $3.9 million will be deductible for tax~~ purposes. In addition, the Company recorded intangible assets of $14.6 million primarily consisting of customer relationships that will be amortized over five years, as well as fixed assets and technology of $3.1 million, and deferred tax liabilities of $1.9 million in relation to these acquisitions.

During the year ended December 31, ~~2019,~~2020, the Company paid ~~$4.2~~$1.2 million for ~~deferred and~~ contingent consideration related to acquisitions completed in 2018 and 2019, which ~~were accrued~~had been recorded as a liability at the date of acquisition. Of this settlement, $3.5 million was for deferred consideration payable related to an acquisition completed in 2018, and $0.7 million was the final installment for contingent consideration related to an acquisition completed in 2016.

5. GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill 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

Full service
center-based
child care
Back-up care
Educational
advisory services
Total
Balance at January 1, 2019 $ 1,155,705
$ 168,105
$ 23,801
$ 1,347,611
Additions from acquisitions 15,228
25,350
14,000
54,578
Adjustments to prior year acquisitions (83 ) —
—
(83 )
Effect of foreign currency translation 10,380
387
—
10,767
Balance at December 31, 2019 1,181,230
193,842
37,801
1,412,873
Additions from acquisitions 1,167
—
—
1,167
Adjustments to prior year acquisitions (328 ) —
(125 ) (453 )
Effect of foreign currency translation (22,196 ) (1,742 ) —
(23,938 )
Balance at March 31, 2020 $ 1,159,873
$ 192,100
$ 37,676
$ 1,389,649

The Company also has intangible assets, which consisted of the following at March 31, ~~2020~~2021 and December 31, ~~2019 (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, 2019
Weighted average
amortization period
Cost
Accumulated
amortization

Net carrying
amount
Definite-lived intangibles:
Customer relationships 14 years $ 404,667
$ (283,597 ) $ 121,070
Trade names 6 years 10,656
(8,144 ) 2,512
415,323
(291,741 ) 123,582
Indefinite-lived intangibles:
Trade names N/A 181,091
—
181,091
$ 596,414
$ (291,741 ) $ 304,673

~~The Company estimates that it will record amortization expense related to intangible assets existing as of March 31, 2020 as follows (in thousands):~~

Estimated amortization expense
Remainder of 2020 $ 23,200
2021 $ 28,077
2022 $ 25,774
2023 $ 24,905
2024 $ 11,051

6. CREDIT ARRANGEMENTS AND DEBT OBLIGATIONS

Senior Secured Credit Facilities

The Company’s ~~$1.3 billion~~ senior secured credit facilities consist of a ~~$1.1 billion~~ secured term loan facility (“term loan facility”) and a ~~$225~~$400 million multi-currency revolving credit 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. ~~Refer to~~ ~~Note 12,~~ ~~Subsequent Events, for changes to the~~ ~~Company’s~~ ~~senior secured credit facilities.~~

Outstanding term loan borrowings were as ~~follows (in thousands):~~follows:

March 31, 2020
December 31, 2019
Term loans $ 1,042,750
$ 1,045,438
Deferred financing costs and original issue discount (6,156 ) (6,639 )
Total debt 1,036,594
1,038,799
Less current maturities 10,750
10,750
Long-term debt $ 1,025,844
$ 1,028,049


	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 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. There were 0 borrowings outstanding on the revolving credit facility at March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

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 0.75% over the base rate, or 1.75% 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. 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 0.50% to 0.75% over the base rate, or 1.50% to 1.75% over the eurocurrency rate. Refer to ~~Note 12,~~ ~~Subsequent Events, for changes to interest rates applicable to the~~ ~~Company’s~~ ~~revolving credit facility.~~

The effective interest rate for the term ~~loans~~loan was ~~2.74% and 3.55%~~2.50% at March 31, ~~2020~~2021 and December 31, ~~2019, respectively,~~2020, and the weighted average interest rate was ~~3.42%~~2.50% and ~~4.25%~~3.42% for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively, prior to the effects of any interest rate ~~swap~~hedge arrangements. The weighted average interest rate for the revolving credit facility was ~~5.41%~~4.50% and ~~4.10%~~5.41% for the three months ended March 31, 2021 and 2020, ~~and 2019,~~ 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 was $0.4 million for the three months ended March 31, 2020 and 2019. Amortization expense of original issue discount costs was $0.1 million for the three months ended March 31, 2020 and 2019.

All obligations under the senior secured credit facilities are secured by substantially all the assets of the Company’s U.S. subsidiaries. The senior secured credit facilities contain a number of covenants that, among other things and subject to certain exceptions, may restrict the ability of Bright Horizons Family Solutions LLC, the Company’s wholly-owned subsidiary, and its restricted subsidiaries, to: incur certain liens; make investments, loans, advances and acquisitions; incur additional indebtedness or guarantees; pay dividends on capital stock or redeem, repurchase or retire capital stock or subordinated indebtedness; engage in transactions with affiliates; sell assets, including capital stock of ~~our~~the Company’s subsidiaries; alter the business conducted; enter into agreements restricting the Company’s subsidiaries’ ability to pay dividends; and consolidate or merge.

In addition, the credit agreement governing the senior secured credit facilities requires Bright Horizons Capital Corp., the Company’s direct subsidiary, to be a passive holding company, subject to certain exceptions. ~~The~~Effective as of April 24, 2020, the revolving credit facility requires Bright Horizons Family Solutions LLC, the borrower, and its restricted subsidiaries, to comply with a maximum ~~consolidated~~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 ~~that is a quarterly maintenance based financial covenant.~~in the quarters thereafter. The maximum first lien gross leverage ratio was 7.50 to 1.00 for the fiscal quarter ending March 31, 2021. Beginning with the 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 ~~this~~the applicable covenant is subject to certain equity cure rights. ~~Refer to~~ ~~Note 12,~~ ~~Subsequent Events, for changes~~Prior to the ~~financial covenant applicable~~April 2020 credit amendment, the Company was required to ~~the~~ ~~Company’s~~ ~~revolving credit facility.~~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 (in thousands):~~31:

Term Loans
Remainder of 2020 $ 8,062
2021 10,750
2022 10,750
2023 1,013,188
Total future principal payments $ 1,042,750


	Term Loan

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


Total future principal payments	$	1,032,000

~~Interest Rate Swap Agreements~~Derivative Financial Instruments

The Company is subject to interest rate risk as all borrowings under the senior secured credit facilities are subject to variable interest rates. In October 2017, the Company entered into variable-to-fixed interest rate swap agreements to mitigate the exposure to variable interest arrangements on $500 million notional amount of the outstanding term loan borrowings. These swap agreements, designated and accounted for as cash flow hedges from inception, 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. ~~The~~Effective as of May 31, 2018, the notional amount is subject to a total interest rate of approximately 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 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 orand 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 orand losses are subsequently reclassified into earnings and recognized to interest expense in the Company’s consolidated statement of income in the period that the hedged interest expense on the term loan facility is recognized. The premium paid for the interest rate cap was recorded as an asset and will be allocated to each of the individual hedged interest payments on the basis of their relative fair values. The change in each respective allocated fair value amount will be reclassified out of accumulated other comprehensive income when each of the hedged forecasted transactions impacts earnings and recognized to interest expense in the Company's consolidated statement of income.

The fair value of the ~~interest rate swap agreements~~derivative financial instruments was ~~a liability of $8.9 million and $2.9 million, respectively, which was recorded in other long-term liabilities on the consolidated balance sheet.~~as follows:

~~For the three months ended March 31, 2020, the~~


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

The effect of the ~~interest rate swap agreements~~derivative financial instruments on other comprehensive income (loss) was as ~~follows (in thousands):~~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)
Interest rate swaps $ (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 )

~~For the three months ended March 31, 2019, the effect of the interest rate swap agreements on other comprehensive income (loss) was as follows (in thousands):~~

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)
Interest rate swaps $ (3,189 ) Interest expense — net $ 757
$ (3,946 )
Income tax effect 858
Income tax expense (203 ) 1,061
Net of income taxes $ (2,331 ) $ 554
$ (2,885 )

During the next twelve months, the Company estimates that a net loss of ~~$5.7~~$3.6 million, pre-tax, will be reclassified from accumulated other comprehensive income (loss) and recorded to interest expense related to these ~~interest rate swap agreements.~~derivative financial instruments.

7. EARNINGS PER SHARE

The following tables set forth the computation of basic and 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

Basic earnings per share: Three months ended March 31,
2020 2019
Net income $ 30,732
$ 42,042
Allocation of net income to common stockholders:
Common stock $ 30,587
$ 41,845
Unvested participating shares 145
197
$ 30,732
$ 42,042

Weighted average number of common shares:
Common stock 57,930,909
57,679,041
Unvested participating shares 274,801
271,153
Earnings per common share:
Common stock $ 0.53
$ 0.73

Diluted earnings per share: Three months ended March 31,
2020 2019
Earnings allocated to common stock $ 30,587
$ 41,845
Earnings allocated to unvested participating shares 145
197
Adjusted earnings allocated to unvested participating shares (143 ) (193 )
Earnings allocated to common stock $ 30,589
$ 41,849

Weighted average number of common shares:
Common stock 57,930,909
57,679,041
Effect of dilutive securities 947,875
1,073,343
58,878,784
58,752,384
Earnings per common share:
Common stock $ 0.52
$ 0.71


	Three months ended March 31,
	2021		2020

	(In thousands, except share data)
Diluted earnings per share:
Earnings allocated to common stock	$	7,105	$	30,587
Plus: earnings allocated to unvested participating shares	27		145
Less: adjusted earnings allocated to unvested participating shares	(27)		(143)
Earnings allocated to common stock	$	7,105	$	30,589

Weighted average common shares outstanding:
Common stock	60,594,947		57,930,909
Effect of dilutive securities	731,026		947,875
Weighted average common shares outstanding — diluted	61,325,973		58,878,784
Earnings per common share:
Common stock	$	0.12	$	0.52

Options outstanding to purchase ~~0.5~~0.8 million and ~~0.8~~0.5 million shares of common stock were excluded from diluted earnings per share for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively, since their effect was anti-dilutive. These options may become dilutive in the future.

The Company’s effective income tax rates were ~~7.1%~~(52.0)% and ~~17.5%~~7.1% for the three months ended March 31, 2021 and 2020, ~~and 2019,~~ respectively. For the three months ended March 31, 2020, the Company’s annual effective tax rate is highly sensitive to change in estimates of total ordinary income (or loss), and therefore a reliable estimate cannot be made. Accordingly, the actual effective tax rate for the year-to-date period has been used. The effective income tax rate may fluctuate from quarter to quarter for various reasons, including changes to ~~estimated~~ income (loss) before income tax, jurisdictional mix of ~~estimated~~ income (loss) before income tax, valuation allowances, jurisdictional income tax rate changes, as well as discrete items such as the settlement of foreign, federal and state tax issues and the effects of excess tax benefits associated with the exercise of stock options and vesting of restricted stock, which is included as a reduction of tax expense. During the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, the excess tax benefit from stock-based compensation expense decreased tax expense by ~~$6.9~~$3.9 million and ~~$4.6~~$6.9 million, respectively. For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, prior to the inclusion of the excess tax benefit and other discrete items, the effective income tax rate approximated 28% ~~and 26%, respectively.~~.

The Company’s unrecognized tax benefits were ~~$4.5~~$4.1 million at March 31, ~~2020~~2021 and ~~$4.3~~$4.0 million at December 31, ~~2019,~~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 statute of limitations lapses. The impact of the amount of such changes to previously recorded uncertain tax positions could range from 0 to ~~$0.8~~$2.8 million.

The Company and its domestic subsidiaries are subject to audit for U.S. federal income tax as well as multiple state jurisdictions. U.S. federal income tax returns are typically subject to examination by the Internal Revenue Service (“IRS”) and the statute of limitations for federal tax returns is three years. The Company’s filings for the tax years ~~2016~~2017 through ~~2019~~2020 are subject to audit based upon the federal statute of limitations.

State income tax returns are generally subject to examination for a period of three to four years after filing of the respective return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. ~~The Company’s filings for~~As of March 31, 2021, there were 3 income tax audits in process and the tax years from ~~2015~~2016 to ~~2019~~2020 are subject to ~~audit and, as of March 31, 2020, there was 1 state audit in process.~~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 five years.

9. FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement 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 and the lowest priority to unobservable inputs. The Company uses observable inputs where relevant and whenever possible. The three levels of the hierarchy are defined as follows:

Level 1 — Fair value is derived using quoted prices from active markets for identical ~~investments.~~instruments.

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

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

The carrying value of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable and accrued expenses ~~and borrowings under the revolving credit facility~~ approximates their fair value because of their 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. ~~There were no significant changes to~~The Company mitigates its exposure by maintaining its cash in financial institutions of high credit standing. The Company’s accounts receivable is derived primarily from the ~~Company’s exposure to~~services it provides, and the related credit risk ~~during~~is dispersed across many clients in various industries with no single client accounting for more than 10% of the ~~three months ended~~Company's net revenue or accounts receivable. No significant credit concentration risk existed at March 31, ~~2020.~~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, as defined under U.S. GAAP. As of March 31, 2020, the~~1. The carrying value and estimated fair value of long-term debt ~~was $1.04~~were $1.03 billion and ~~$1.0~~$1.02 billion, ~~respectively. As~~respectively, as of both March 31, 2021 and December 31, ~~2019, the carrying value and estimated fair value of long-term debt was $1.05 billion.~~2020.

~~Interest Rate Swap Agreements~~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 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 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 isand interest rate caps are classified as Level ~~2, as defined under U.S. GAAP.~~2. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the fair value of the interest rate swap agreements was ~~a liability of $8.9~~$3.4 million and ~~$2.9~~$4.8 million, respectively, which were recorded in other ~~long-term~~current liabilities on the consolidated balance ~~sheets.~~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.~~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 fair value using quoted prices available in active ~~markets. As such, the Company’s debt securities~~markets and are classified as Level ~~1, as defined under U.S. GAAP.~~1. As of March 31, ~~2020,~~2021, the fair value of the available-for-sale debt securities was ~~$22.1~~$26.0 million and was classified based on the instruments’ maturity dates, with ~~$16.2~~$21.6 million included in prepaid expenses and other current assets and ~~$5.9~~$4.4 million in other assets on the consolidated balance sheet. As of December 31, ~~2019,~~2020, the fair value of the available-for-sale debt securities was ~~$24.9~~$27.9 million, with ~~$17.0~~$21.5 million included in prepaid expenses and other current assets and ~~$7.9~~$6.4 million in other assets on the consolidated balance sheet. At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the amortized cost was ~~$21.9~~$26.0 million and ~~$24.9~~$27.9 million, respectively. The debt securities held at March 31, ~~2020~~2021 had remaining maturities ranging from less than one year to approximately ~~1.75~~1.5 years. Unrealized gains and losses, net of tax, on available-for-sale debt securities ~~are included in accumulated other comprehensive income (loss), and~~ were immaterial for the three months ended March 31, ~~2020~~2021 and 2019. During the three months ended March 31, 2020, the Company received proceeds from the maturity of debt securities of $3.0 million, which are included in prepaid expenses and other current assets on the consolidated balance sheet at March 31, 2020 as restricted cash.2020. The Company did not realize any gains or losses on its debt securities during the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020.

Liabilities for Contingent Consideration — The Company is subject to contingent consideration arrangements in connection with certain business ~~combinations as disclosed in Note 4,~~ ~~Acquisitions~~.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 inon the Company’s consolidated statement of income. The fair value of ~~the~~ contingent consideration was generally calculated using ~~a real options model~~customary valuation models based on probability-weighted outcomes of meeting certain future performance ~~targets.~~targets and forecasted results. The key inputs to the ~~valuation~~valuations are the projections of future financial results in relation to the ~~business.~~businesses and the company-specific discount rates. The ~~Company~~Company classified the contingent consideration ~~liability~~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.

The following table provides a roll forward of the ~~fair value of~~ recurring Level 3 fair value measurements~~(in thousands)~~:

Three months ended
March 31, 2020
Balance at January 1, 2020 $ 15,987
Settlement of contingent consideration liabilities (1,088 )
Changes in fair value 422
Foreign currency translation (1,044 )
Balance at March 31, 2020 $ 14,277


	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~~ Fair Value Estimates —During the three months ended March 31, 2020, the Company recognized aimpairment losses of $5.0 million ~~impairment loss~~ on ~~long-lived~~fixed assets for certain centers. The impairment ~~loss was~~losses were included in cost of services on the consolidated statement of income, which ~~has~~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 ~~assets,~~asset groups, calculated using a discounted cash flow model, with unobservable inputs. The fair value of ~~such~~the fixed assets was ~~insignificant.~~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 ~~or losses from interest rate swaps~~(losses) on cash flow hedges and investments, net of tax.

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

Three months ended March 31, 2020
Foreign currency translation adjustments Unrealized gain (loss) on interest rate swaps Unrealized gain (loss) on investments Total
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 )
Amounts reclassified from accumulated other comprehensive income (loss), net of tax —
208
—
208
Net current period other comprehensive income (loss) (39,508 ) (4,399 ) 129
(43,778 )
Balance at March 31, 2020 $ (87,343 ) $ (6,965 ) $ 199
$ (94,109 )


	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)

Three months ended March 31, 2019
Foreign currency translation adjustments Unrealized gain (loss) on interest rate swaps Unrealized gain (loss) on investments Total
Balance at January 1, 2019 $ (67,648 ) $ 5,293
$ —
$ (62,355 )
Other comprehensive income (loss) before reclassifications, net of tax 6,978
(2,331 ) 18
4,665
Amounts reclassified from accumulated other comprehensive income (loss), net of tax —
(554 ) —
(554 )
Net current period other comprehensive income (loss) 6,978
(2,885 ) 18
4,111
Balance at March 31, 2019 $ (60,670 ) $ 2,408
$ 18
$ (58,244 )

(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 ~~services~~reportable segments are comprised of (1) full service center-based child care, (2) back-up care, and (3) educational advisory ~~services, which also represent the Company’s 3 operating~~ and ~~reportable segments.~~other services. The full service center-based child care segment includes the traditional center-based child care and early education, preschool, and elementary education. The Company’s back-up care segment consists of center-based back-up child care, ~~and~~ in-home child and adult/elder ~~dependent~~care, and self-sourced reimbursed care. The Company’s educational advisory and other services segment consists of tuition assistance and student loan repayment program administration, educational consulting services, and college admissions advisory ~~services.~~services, and an online marketplace for families and caregivers, which have been aggregated as they do not meet the thresholds for separate disclosure. The Company and its chief operating decision 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 segment asset information is produced or included herein.

Revenue and income from operations by reportable segment ~~was~~were as ~~follows (in thousands):~~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

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

Three months ended March 31, 2019
Revenue $ 418,320
$ 64,694
$ 18,744
$ 501,758
Income from operations ⁽²⁾
41,530
17,117
4,263
62,910
(1)For the three months ended March 31, 2020, income from operations for the full service center-based child care segment included $5.0 million of impairment costs for long-lived assets due to the impact of COVID-19 on the Company’s operations.

12. ~~SUBSEQUENT EVENTS~~CONTINGENCIES

~~On April 21, 2020, the Company issued and sold 2,138,580 shares of unregistered common stock, par value $0.001 per share, to Durable Capital Master Fund LP at a price of $116.90 per share.~~ Litigation

The Company is ~~required to file~~ a ~~registration statement to register~~defendant in certain legal matters in the ~~resale~~ordinary course of ~~these shares within 90 days~~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 or cash flows, although the Company cannot predict the ultimate outcome of any such actions. The Company is currently subject to ~~liquidated damages.~~a governmental investigation and may be subject to one or more potential health and safety charges in the United Kingdom related to an incident at a Company nursery in July 2019. The Company ~~received gross proceeds from the offering of $250 million. The proceeds may be used for working capital and general corporate purposes.~~

~~On April 24, 2020, the Company amended its existing senior credit facilities~~is unable to among other things, increase the borrowing capacity of its revolving credit facility from $225 million to $385 million, modify the interest rates applicable to borrowings under the revolving credit facility fromestimate a range of ~~50 to 75 basis points over~~loss associated with this unasserted matter at this time, but does not expect that this matter will have a material adverse effect on the ~~base rate (as defined in the Credit Agreement) or a range~~Company’s consolidated financial position.

Table of 150 to 175 basis points over the eurocurrency rate (as defined in the Credit Agreement) to a range of 50 to 125 basis points over the base rate or 150 to 225 basis points over the eurocurrency rate, and modify the unused commitment fee applicable to the revolving credit commitments from a range of 30 to 32.5 basis points to a range of 30 to 50 basis points. In addition, the amendment modifies the financial covenant applicable to the revolving credit facility for the following 4 fiscal quarters by requiring the Company, in lieu of complying with a maximum first lien net leverage ratio of 4.50 to 1.00, to comply with a maximum first lien gross leverage ratio of 6.00 to 1.00 for the fiscal quarter ending June 30, 2020, 7.50 to 1.00 for the fiscal quarter ending September 30, 2020, 8.00 to 1.00 for the fiscal quarter ending December 31, 2020 and 7.50 to 1.00 for the fiscal quarter ending March 31, 2021. Beginning with the 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.Contents

On May 7, 2020, the Company amended its existing senior credit facilities to increase the borrowing capacity of its revolving credit facility from $385 million to $400 million. Refer to Item 5 of this Quarterly Report on Form 10-Q for additional information on this amendment.

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, the impact of COVID-19 on our near ~~term or longer~~and long- term operations, our expectations ~~about~~around the timing to open temporarily closed centers, permanent center closures, the continued operation of currently open centers, timing to re-enroll and ~~timing of center re-openings,~~re-ramp centers as well as certain back-up care services, enrollment recovery, our ~~reductions in discretionary spending~~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, ~~statements regarding~~ acquisitions ~~and the subsequent integration~~ and expected synergies, our fair value estimates, impairment losses, goodwill from business combinations, ~~the vesting of Company equity,~~ estimates and impact of 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 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 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 our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, including with respect to the impacts from the ongoing COVID-19 pandemic, as well as ~~the risks listed in Part II, Item 1A, “Risk Factors,” of this Quarterly Report, and~~ 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,~~ Overview ~~and COVID-19 Update~~

The following is a discussion of the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of Bright Horizons Family Solutions Inc. (“we” or the “Company”) for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019.~~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, ~~2019.~~2020.

Table of Contents

We are a leading provider of high-quality education and care, including child care and early education, ~~dependent~~back-up care and workforce education services that are designed to help ~~employers and their~~client employees better integrate work and family life, as well as to grow their careers. ~~Our operating and reporting segments are comprised of full service center-based child care, back-up care, and educational advisory services.~~

We provide services primarily under multi-year contracts with employers who offer child care, 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, ~~recruitment~~retention and ~~retention.~~career advancement. As of March 31, ~~2020,~~2021, we had more than ~~1,200~~1,300 client relationships with employers across a diverse array of industries, including more than ~~175~~190 Fortune 500 companies and more than 80 of Working Mother magazine’s ~~2019~~2020 “100 Best Companies.”

At March 31, ~~2020,~~2021, we operated ~~1,094~~1,015 child care and early education centers, compared to ~~1,079~~1,094 centers at March 31, ~~2019,~~2020, and had the capacity to serve approximately ~~120,000~~114,000 children and their families in the United States, ~~as well as in~~ the United Kingdom, the Netherlands, ~~Canada~~ and India.

In At March 2020, we began to experience the impact of the COVID-19 pandemic on our business, which has now substantially disrupted our global operations. Our primary focus and attention is on the well-being, health and safety of the children and families we serve, along with the teachers and staff at our centers. Our services continue to be critically important to first responders, scientists, health care and medical professionals, and other essential workers, as well as the many support industries facilitating their work, all of whom are working tirelessly to respond to COVID-19. In mid-March, as a result of the required business and school closures and shelter-in-place government mandates in response to the pandemic, we began the temporary closure of a significant portion31, 2021, approximately 900, or 90%, of our child care centers ~~while continuing to operate critical health~~were open.

Our reportable segments are comprised of (1) full service center-based child care, ~~client and “hub” centers to provide~~(2) back-up care, and ~~support~~(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 ~~the children whose parents are working~~prevent its spread, such as periodically reinstated lockdowns and required business and school closures. We remain focused on the ~~front lines~~re-enrollment of our centers and the phased re-opening of the ~~response. As~~limited number of ~~March 31, 2020, approximately 250 of our child care~~ centers remained open globally after the temporary center closures. These open centers are operating with special COVID-19 protocols in place in order to protect the health and safety of the children and staff, including social distancing procedures for pick-up and drop-off, daily health checks, the use of face masks by our staff, limited capacity, and enhanced hygiene and cleaning practices. The status of our operations is as follows:

•

~~United States:~~ We are operating approximately 150 centers, most of which are employer-sponsored centers, and have temporarily closed approximately 570 centers. We are continuously monitoring guidance and taking direction from medical experts, the Centers for Disease Control and Prevention (“CDC”) and local, state and federal government authorities in order to determine the timing and cadence of re-opening our temporarily closed centers.


•	~~United Kingdom:~~We are operating approximately 35 centers, and have temporarily closed approximately 280 centers. We are continuously monitoring guidance from the U.K. health authorities in order to determine the timing and cadence of re-opening our temporarily closed centers.

•

~~Netherlands:~~ We operate approximately 60 centers in the Netherlands which have remained operational under the Dutch government mandate that requires nurseries to remain open to serve the children of parents who work in vital professions, such as health care or emergency services. On April 21, 2020, the Dutch government announced updated protocols to begin re-opening their economy, specifically announcing that schools will begin to re-open May 11, and we expect that centers will be open to all families as of that date.


•	~~Back-up Care and Educational Advisory:~~ ~~Our back-up care and educational advisory segments currently remain operational and available for our clients and their employees.~~

~~This is a fluid and continuously changing environment.~~that remain temporarily closed, which we expect will continue throughout 2021. The broad and long-term effects of COVID-19, its duration and ~~full impact to our operations are difficult to predict, due in large part to~~scope of the ~~interdependence of our operations with the operating~~ongoing disruption cannot be predicted and is affected by many interdependent variables and decisions by government authorities and ~~requirements of~~ our client partners, as well as ~~social distancing guidelines~~demand, economic and ~~government mandates for continued school~~workforce trends, the adoption and business closures that impact the timing and cadence of center re-openings. Therefore, the negative financial impact to our results and future financial or operational performance cannot be reasonably estimated. Based on the current guidance and directives of state and local health authorities, in conjunction with recommendations from medical experts and the CDC, the temporary closureeffectiveness of a ~~significant portion of our centers is expected to continue~~vaccine, and developments in the ~~second quarter~~persistence and treatment of ~~2020 and, potentially, in subsequent periods. The timing and cadence of re-opening our temporarily closed centers will vary by jurisdiction and other factors and we~~COVID-19. We cannot anticipate ~~when the majority of our~~how long it will take for re-opened centers ~~will re-open~~to reach typical enrollment levels and there is no assurance that centers currently open will continue to ~~fully~~ operate. ~~While~~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 recently experienced increased demand for back-up care services and minimal disruption to providing educational advisory services, these conditions and trends may not continue in subsequent periods. Given these factors, weshifted. We currently expect the effects of COVID-19 to our business to continue to adversely impact our results of operations infor the ~~second quarter~~remainder of ~~2020, and potentially in subsequent periods.~~2021.

In response to these developments, we have implemented measures in an effort to manage costs and improve liquidity and access to financial resources, and thereby mitigate the impact on our financial position and operations. ~~These measures include, but are not limited to, the following:~~

furloughing a significant portion of our employees in proportion to the number of center closures, including center personnel for temporarily closed centers and related support functions in our corporate offices;

~~reducing discretionary spending and overhead costs, while prioritizing investments that support current operations and deferring to future periods nonessential and discretionary investments;~~

~~temporary voluntary reductions in compensation to certain executive officers and board members;~~

~~temporary suspension of share repurchases;~~

~~amending our credit agreement in April 2020 and May 2020 to increase the borrowing capacity of our revolving credit facility from $225 million to $400 million; and,~~

~~raising $250 million in gross proceeds from the issuance and sale of common stock in April 2020.~~

We will continue to ~~work with~~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 ~~local teams~~strategic priorities to deliver high quality education and care services, connect across our service lines, extend our impact on ~~the operational decisions~~new customers and ~~prudently managing~~clients, and preserve our ~~spending to support the current operations, while preparing for the re-opening of our centers.~~strong culture. These challenging times ~~highlight~~have demonstrated our crisis management abilities, our critical role in the business continuity plans of our client partners, our leadership in developing and implementing enhanced health and safety protocols, and the value that our unique service offering provides to the families and clients we serve. We remain confident in our business model, the strength of our client partnerships, the strength of our balance sheet and liquidity position, and our ability to continue to respond to changing market conditions. ~~Refer to Note 1,~~

~~Organization and Basis~~Table of ~~Presentation~~Contents~~, in our condensed consolidated financial statements for additional information on the impact of COVID-19 to our business.~~

Results of Operations

The following table sets forth statement of income data as a percentage of revenue for the three months ended March 31, ~~2020~~2021 and ~~2019 (in thousands, except percentages):~~2020:


	Three Months Ended March 31,
	2021		%		2020		%

	(In thousands, except percentages)
Revenue	$	390,840	100.0	%	$	506,323	100.0	%
Cost of services	309,482		79.2	%	397,464		78.5	%
Gross profit	81,358		20.8	%	108,859		21.5	%
Selling, general and administrative expenses	60,110		15.4	%	57,369		11.4	%
Amortization of intangible assets	7,540		1.9	%	8,209		1.6	%
Income from operations	13,708		3.5	%	43,281		8.5	%
Interest expense — net	(9,016)		(2.3)	%	(10,206)		(2.0)	%
Income before income tax	4,692		1.2	%	33,075		6.5	%
Income tax benefit (expense)	2,440		0.6	%	(2,343)		(0.4)	%
Net income	$	7,132	1.8	%	$	30,732	6.1	%

Adjusted EBITDA (1)	$	46,296	11.8	%	$	81,458	16.1	%
Adjusted income from operations (1)	$	13,708	3.5	%	$	48,954	9.7	%
Adjusted net income (1)	$	13,855	3.5	%	$	43,646	8.6	%

Three Months Ended March 31,
2020 % 2019 %
Revenue $ 506,323
100.0 % $ 501,758
100.0 %
Cost of services 397,464
78.5 % 374,811
74.7 %
Gross profit 108,859
21.5 % 126,947
25.3 %
Selling, general and administrative expenses 57,369
11.4 % 55,875
11.1 %
Amortization of intangible assets 8,209
1.6 % 8,162
1.6 %
Income from operations 43,281
8.5 % 62,910
12.6 %
Interest expense — net (10,206 ) (2.0 )% (11,948 ) (2.4 )%
Income before income tax 33,075
6.5 %
50,962

10.2 %
Income tax expense (2,343 ) (0.4 )% (8,920 ) (1.8 )%
Net income $ 30,732
6.1 % $ 42,042
8.4 %

Adjusted EBITDA ⁽¹⁾
$ 81,458
16.1 % $ 93,838
18.7 %
Adjusted income from operations ⁽¹⁾
$ 48,954
9.7 % $ 63,343
12.6 %
Adjusted net income ⁽¹⁾
$ 43,646
8.6 % $ 47,812
9.5 %
(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 these non-GAAP financial measures to their respective measures determined under GAAP and for information regarding our use of non-GAAP measures.


~~(1)~~	~~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 March 31, ~~2020~~2021 Compared to the Three Months Ended March 31, ~~2019~~2020

Revenue. Revenue ~~increased $4.6~~decreased by $115.5 million, or 1%23%, to ~~$506.3~~$390.8 million for the three months ended March 31, ~~2020~~2021 from ~~$501.8~~$506.3 million for the same period in ~~2019. 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 and utilization~~percentage of total revenue for each of our ~~back-up care~~segments for the three months ended March 31, 2021 and educational advisory services, typical annual tuition and price increases in the range of 3% to 4%, and contributions from acquisitions completed since the first quarter of 2019. The increases were offset by a decrease in tuition revenue in our full service child care centers as we began the temporary closure of a significant portion centers in March 2020 as a result of required school and business closures and shelter-in-place mandates in response to the COVID-19 pandemic. 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 March 31, ~~2020~~2021 decreased by ~~$6.9~~$121.1 million, or 2%29%, when compared to the same period in ~~2019, due~~2020. The decrease was attributable to the ~~decrease~~continued impact of the COVID-19 pandemic on our operations, the associated reduction in ~~tuitions from~~enrollment in our open child care centers and the continued temporary closure of certain child care centers. Tuition revenue decreased by $122.5 million, or 32.9%, when compared to the prior year, on a decrease in enrollment of 35%. As the economy continues to recover, enrollment in our child care centers ~~and related tuition credits given~~had modest improvements during the quarter compared to ~~parents and,~~the previous quarter. However, our centers continue to ~~a lesser extent,~~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 ~~lower~~higher foreign currency exchange rates for our United Kingdom and Netherlands operations, which ~~decreased~~increased 2021 tuition revenue ~~in the full service center-based child care segment~~ by approximately ~~1% during~~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 connection with the ~~three months ended March 31, 2020. We expect to see the negative financial impact~~decrease in tuition revenue.

Table of the COVID-19 related center closures to be more pronounced in the second quarter of 2020 with full service revenue contracting in line with center closures, compared to the partial quarter impact in the first quarter of 2020.Contents

Revenue generated by ~~the~~ back-up care ~~segment~~services in the three months ended March 31, ~~2020~~2021 increased by ~~$9.5~~$2.2 million, or ~~15%~~3%, when compared to the same period in ~~2019.~~2020. Revenue growth in ~~the back-up care~~this segment iswas primarily attributable to expanded sales to new clients and increased utilization ~~due~~from existing clients, partially offset by decreases in ~~part~~utilization of traditional in-center and in-home use. While traditional in-center and in-home use continues to ~~increased demand for our back-up care services (in-home care~~recover, usage remains below pre-COVID-19 levels and ~~reimbursed self-sourced care) as clients and families seek additional supports as a result of business and school closures. There is no assurance that the increased demand will~~we expect it to continue ~~as businesses and schools re-open. Additionally, revenue~~ramping throughout 2021.

Revenue generated by educational advisory and other services in the three months ended March 31, ~~2020~~2021 increased by ~~$2.0~~$3.4 million, or ~~11%~~16%, when compared to the same period in the prior year. Revenue growth in ~~the educational advisory services~~this segment is primarily attributable to ~~expanded~~contributions from sales to new clients and increased utilization ~~and contributions~~ from anexisting clients. An acquisition completed in 2020 also contributed $2.0 million to the ~~fourth quarter~~growth of ~~2019.~~this segment in 2021.

Cost of Services. Cost of services ~~increased $22.7~~decreased by $88.0 million, or 6%22%, to ~~$397.5~~$309.5 million for the three months ended March 31, ~~2020~~2021 from ~~$374.8~~$397.5 million for the same period in ~~2019.~~ 2020.

Cost of services in the full service center-based child care segment ~~increased $18.1~~decreased $85.3 million, or 6%25%, to ~~$346.5~~$261.2 million in the three months ended March 31, ~~2020~~2021 when compared to the same period in ~~2019. 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 6% as a result~~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 ~~growth~~ at ~~new~~our centers. Funding from government support programs reduced certain payroll and ~~existing centers prior~~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 temporary center closures, routine wage and benefit cost increases, and labor costs associated with centers we have added since March 31, 2019 that are in the ramping stage. While we temporarily closed a significant portion of our centers beginning in March 2020, we did not see a reductionprior year. The decrease is primarily due to reductions in personnel costs ~~during the quarter as we continued to pay our staff during the transition notice period of~~and care provider fees, which represented approximately two-weeks prior to their eligibility for unemployment insurance and other benefits. We expect to see a decrease in labor costs in the second quarter as a result of these temporary closures. Program supplies, materials, food and facilities costs, which typically represent approximately 30%70% of total costs of services for this segment, ~~increased 4% in connection with~~as traditional utilization levels were lower than the ~~enrollment growth~~ prior ~~to the temporary center closures, certain technology expenses for programs and services, the incremental occupancy costs associated with centers that have been added since March 31, 2019,~~year. This reduction was partially offset by the effects of lower variable costs as a result of the temporary center closures. In addition, facilities costs include $5.0 million in impairment costs for long-lived assets incurred as a result of the impact of COVID-19 on operations. marketing and technology spending to support our customer user experience and service delivery.

Cost of services in the ~~back-up care~~educational advisory and other services segment increased ~~$2.8~~by $1.2 million, or 8%11%, to ~~$40.1~~$12.1 million in the three months ended March 31, ~~2020, primarily due~~2021 when compared to ~~personnel and increased care provider fees associated~~the prior year, which is broadly consistent with the services provided to the expanding customer base and increased utilization, as well as marketing and technology spending which supports our customer user experience, service delivery and operating efficiency. Cost of services in the educational advisory services segment increased $1.8 million, or 20%, to $10.9 million in the three months ended March 31, 2020revenue growth. The increase is primarily due to personnel costs related to delivering services to the expanding customer base.

Gross Profit. Gross profit decreased ~~$18.0~~by $27.5 million, or ~~14%~~25%, to ~~$108.9~~$81.4 million for the three months ended March 31, ~~2020~~2021 from ~~$126.9~~$108.9 million for the same period in ~~2019.~~2020. Gross profit margin ~~as a percentage~~was 21% of revenue ~~was 22%~~ for the three months ended March 31, ~~2020, and decreased~~2021, a decrease of approximately 4%1% from the three months ended March 31, ~~2019.~~2020. The decrease is primarily due to reduced margins in the full service center-based child care segment from ~~the temporary closure of~~reduced enrollment at open centers, as well as ~~related impairment charges on long-lived assets,~~the continued temporary closure of certain child care centers, partially offset by increases in gross profit from expanded back-up care ~~services.~~and educational advisory and other services, and funding received from government support programs.

Selling, General and Administrative Expenses (“SGA”). SGA increased ~~$1.5~~by $2.7 million, or 3%5%, to ~~$57.4~~$60.1 million for the three months ended March 31, ~~2020 compared to $55.9~~2021 from $57.4 million for the same period in ~~2019.~~2020, in order to support the business throughout the pandemic and as it re-ramps. SGA was ~~11%~~15% of revenue for the three months ended March 31, ~~2020, which is consistent with~~2021, compared to 11% for the same period in ~~2019. SGA increased over the comparable 2019 period primarily~~2020 due to ~~increases in personnel costs, including annual wage increases.~~the lower revenue base.

Amortization of Intangible Assets. Amortization expense on intangible assets was $7.5 million for the three months ended March 31, 2021, a decrease from $8.2 million for the three months ended March 31, 2020, ~~which is consistent with~~due to decreases from certain intangible assets becoming fully amortized during the ~~three months ended March 31, 2019, due to~~period, partially offset by increases from the acquisitions completed in ~~2019~~2020 and ~~2020, offset by decreases from certain intangibles becoming fully amortized during the period.~~2021.

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Income from Operations. Income from operations decreased by ~~$19.6~~$29.6 million, or 68%, to ~~$43.3~~$13.7 million for the three months ended March 31, ~~2020~~2021 when compared to the ~~same period in 2019. Income~~prior year. The following table summarizes income from operations ~~was 9%~~and percentage of revenue for each of our segments for the three months ended March 31, ~~2020, compared to 13% for the three months ended March 31, 2019.~~ 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 in income from operations was due to the following:

•Income from operations for the full service center-based child care segment decreased ~~$24.8~~$34.7 million, or ~~60%~~207%, in the three months ended March 31, ~~2020~~2021 when compared to the same period in ~~2019~~2020 primarily due to reduced ~~margins~~tuition revenue from ~~the~~reduced enrollment in our centers, as well as continued temporary center closures, beginning in March 2020 as well as related impairment charges on long-lived assets of $5.0 million, and costs incurred during the pre-opening and ramp-up of certain new lease/consortium centers opened during 2019 and 2020. These reductions were partially offset by ~~tuition increases and enrollment gains over the prior year prior to the temporary center closures,~~reduced operating expenses and contributions from ~~new centers~~government support programs that ~~have been added since March 31, 2019.~~reduced certain payroll and operating expenses.

•Income from operations for the back-up care segment increased ~~$5.1~~$5.0 million, or ~~30%~~22%, in the three months ended March 31, ~~2020~~2021 when compared to the same period in ~~2019~~2020 due to the expanding revenue base from increased sales and utilization ~~partially offset by increased~~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 ~~incremental revenue, and spending for~~prior year, partially offset by investments in technology to support our customer user experience and service ~~delivery and operating efficiency.~~delivery.

•Income from operations for the educational advisory and other services segment increased 1%$0.2 million, or 4%, in the three months ended March 31, ~~2020~~2021 when compared ~~with~~to the same period in ~~2019~~2020 due to contributions from the expanding revenue base.

Net Interest Expense. Net interest expense decreased to ~~$10.2~~$9.0 million for the three months ended March 31, ~~2020~~2021 from ~~$11.9~~$10.2 million for the same period in ~~2019,~~2020, due to ~~decreased borrowings on our revolving credit facility as well as~~ decreases in the interest rates applicable ~~interest rates.~~to our debt. Including the effects of the interest rate swap arrangements, the weighted average interest rates for the term ~~loans~~loan and revolving credit facility were ~~3.5%~~3.1% and ~~4.0%~~3.5% for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. Based on our current ~~projections of~~ interest ~~rates,~~rate projections, we estimate that our overall weighted average interest rate will approximate 3.0% for the remainder of ~~2020.~~2021.

Income Tax ~~Expense.~~Expense (Benefit). We recorded an income tax benefit of $2.4 million during the three months ended March 31, 2021, at an effective income tax rate of (52)%, compared to income tax expense of $2.3 million during the three months ended March 31, 2020, at an effective income tax rate of 7%~~, compared to income tax expense of $8.9 million during the three months ended March 31, 2019, at an effective income tax rate of 18%~~. For the three months ended March 31, 2020, our annual effective tax rate was highly sensitive to change in estimates of total ordinary income (or loss), and therefore a reliable estimate could not be made. Accordingly, the actual effective tax rate for the year-to-date period has been used. The difference between the effective income tax ~~rates~~rate as compared to the statutory income tax ~~rates~~rate is primarily due to the effects of excess tax benefits associated with the exercise of stock options and vesting of restricted ~~stock.~~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, ~~2020~~2021 and ~~2019,~~2020, the excess tax benefits reduced income tax expense by ~~$6.9~~$3.9 million and ~~$4.6~~$6.9 million, respectively. The effective income tax rate ~~would have approximated 28% and 26% for the three months ended March 31, 2020 and 2019, respectively,~~ prior to the inclusion of the excess tax benefits from stock-based ~~compensation.~~compensation and other discrete items was approximately 28% for the three months ended March 31, 2021 and 2020.

Adjusted EBITDA and Adjusted Income from Operations. Adjusted EBITDA and adjusted income from operations decreased ~~$12.4~~$35.2 million, or ~~13%~~43%, and ~~$14.4~~$35.2 million, or ~~23%~~72%, respectively, for the three months ended March 31, ~~2020~~2021 over the comparable period in ~~2019~~2020 primarily as a result of the decrease in gross profit in the full service center-based child care segment, partially offset by growth in the back-up care segment.

Adjusted Net Income. Adjusted net income decreased ~~$4.2~~$29.8 million, or 9%68%, for the three months ended March 31, ~~2020~~2021 when compared to the same period in ~~2019,~~2020, primarily due to the decrease in income from operations, partially offset by a ~~lower~~higher effective tax rate.

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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 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 March 31,
2020 2019
Net income $ 30,732
$ 42,042
Interest expense — net 10,206
11,948
Income tax expense 2,343
8,920
Depreciation 20,012
18,300
Amortization of intangible assets^(a)
8,209
8,162
EBITDA 71,502
89,372
Additional Adjustments:
Non-cash operating lease expense ^(b)
—
927
Stock-based compensation expense ^(c)
4,283
3,106
Other costs ^(d)
703
433
COVID-19 related costs ^(f)
4,970
—
Total adjustments 9,956
4,466
Adjusted EBITDA $ 81,458
$ 93,838

Income from operations $ 43,281
$ 62,910
Other costs ^(d)
703
433
COVID-19 related costs ^(f)
4,970
—
Adjusted income from operations $ 48,954
$ 63,343

Net income $ 30,732
$ 42,042
Income tax expense 2,343
8,920
Income before income tax 33,075
50,962
Stock-based compensation expense ^(c)
4,283
3,106
Amortization of intangible assets ^(a)
8,209
8,162
Other costs ^(d)
703
433
COVID-19 related costs ^(f)
4,970
—
Adjusted income before income tax 51,240
62,663
Adjusted income tax expense ^(e)
(7,594 ) (14,851 )
Adjusted net income $ 43,646
$ 47,812

Weighted average common shares outstanding — diluted 58,878,784
58,752,384
Diluted adjusted earnings per common share $ 0.74
$ 0.81
(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 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, and the timing and volume of the tax benefits associated with such future equity activity will affect these estimates and the estimated effective tax rate for the year.


~~(a)~~	Represents amortization of intangible assets, including $5.0 million and $4.7 million for the three months ended March 31, 2020 and 2019, respectively, associated with intangible assets recorded in connection with our going private transaction in May 2008.


~~(b)~~	~~Represents the excess of lease expense over cash lease expense (for periods prior to 2020).~~


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

~~(d)~~

Other costs in the three months ended March 31, 2020 relate to occupancy costs incurred for our new corporate headquarters during the construction period, which represent duplicative corporate office costs in 2020 while we also continue to carry the costs for our existing corporate headquarters. Other costs in the three months ended March 31, 2019 relate to transaction costs incurred in connection with completed acquisitions.

~~(e)~~

Represents income tax expense calculated on adjusted income before income tax at an effective tax rate of approximately 15% and 24% for the three months ended March 31, 2020 and 2019, respectively. The tax rate for 2020 represents a tax rate of approximately 27% 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, and the timing and volume of the tax benefits associated with such future equity activity will affect these estimates and the estimated effective tax rate for the year.


~~(f)~~	~~Represents impairment costs for long-lived assets incurred as a result of the impact of COVID-19 on our operations.~~

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 lease expense over cash lease expense (prior to fiscal 2020),~~ stock-based compensation expense, impairment costs, ~~and transaction~~other costs ~~and other nonrecurring~~incurred due to the impact of COVID-19 including center closing costs, ~~such as~~and 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. 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 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, 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

The COVID-19 pandemic has substantially disrupted our global operations and we are in a fluid and continuously changing environment. The broad effects of COVID-19, its duration and full impact to our operations are difficult to predict, due in large part to the interdependence of our operations with the operating decisions and requirements of our client partners, as well as social distancing guidelines and government mandates for continued school and business closures that impact the timing and cadence of center re-openings. As a result, we have taken a number of actions described below to increase our liquidity and strengthen our financial position as we navigate these uncertain times.

Our primary cash requirements are for the ongoing operations of our existing child care centers, back-up care, ~~and~~ educational advisory and other services, and debt financing obligations. Our primary sources of liquidity are our existing cash, cash flows from operations and borrowings available under our revolving credit facility. Our revolving credit facility is part of our $1.3 billion senior secured credit facilities, which consist of a $1.1 billion secured term loan facility and a $225 million revolving credit facility. There were no borrowings outstanding on our revolving credit facility at March 31, 2020 and December 31, 2019. In April and May 2020, we amended our existing senior credit facilities to, among other changes, increase the borrowing capacity of our revolving credit facility by $175 million, to a total of $400 million, modify the interest rates applicable to borrowings outstanding on the revolving credit facility, and modify the terms of the applicable covenants. Refer to Note 12, ~~Subsequent Events, in our condensed consolidated financial statements for additional information on the amendments to our credit agreement.~~

We had ~~$49.2~~$442.1 million in cash ($~~55.4~~447.8 million including restricted cash) at March 31, ~~2020,~~2021, of which ~~$27.1~~$44.5 million was held in foreign jurisdictions, compared to ~~$27.9~~$384.3 million in cash ($~~31.2~~388.5 million including restricted cash) at December 31, ~~2019,~~2020, of which ~~$14.2~~$43.6 million was held in foreign jurisdictions. Operations outside of North America accounted for 26% and 23% of our consolidated revenue ~~for both~~in the three months ended March 31, 2021 and 2020, ~~and 2019.~~respectively. The net impact on our liquidity from changes in foreign currency exchange rates was not material for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, and we do not currently expect that the effects of changes in foreign currency exchange rates will have a material net impact on our liquidity, capital resources or results from operations for the remainder of ~~2020.~~2021.

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On April 21, 2020, we ~~issued~~completed the issuance and ~~sold~~sale of 2,138,580 shares of ~~unregistered~~ common stock to Durable Capital Master Fund LP at a price of $116.90 per share. We ~~received gross~~raised net proceeds from the offering of ~~$250~~$249.8 million, which further ~~strengthens~~strengthened our liquidity and financial ~~position.~~position and increased our cash and cash equivalents.

Our revolving credit facility is part of our senior secured credit facilities, which consist of a secured term loan facility and a $400 million revolving credit facility. There were no borrowings outstanding on our revolving credit facility at March 31, 2021 and December 31, 2020.

We had a working capital ~~deficit~~ of ~~$213.0~~$123.4 million and ~~$254.4~~$93.4 million at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. ~~Our working capital deficit has primarily arisen from using cash generated from operations to make long-term investments in fixed assets and acquisitions, and from share repurchases.~~ We anticipate that our cash flows from operating activities will continue to be ~~adversely~~ impacted ~~at least during the closure of~~while our re-opened centers ~~which~~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 cash, ~~cash proceeds from the April 2020 sale of common stock,~~ as well as borrowings available under our revolving credit facility, ~~to fund operations.~~as needed. As we ~~prepare to re-open~~focus on the re-enrollment and ramping of re-opened centers, as well as re-opening our remaining temporarily closed centers, ~~in the coming months,~~ we will continue to ~~reduce~~manage our discretionary operating and capital spending and prioritize investments that support current operations and strategic opportunities, as well as ~~our~~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 government support programs. 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 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 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, 2021 and December 31, 2020, we had $3.5 million and $7.7 million, respectively, in lease payment deferrals of which the majority are payable over the next year.

The board of directors authorized a share repurchase program of up to $300 million of our outstanding common stock, effective June 12, 2018. During the three months ended March 31, ~~2020, we repurchased 231,313 shares for $32.2 million,~~2021 there were no share repurchases and ~~at March 31, 2020,~~ $194.9 million remained available 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. ~~At this time, we have temporarily suspended share repurchases as we prioritize investments to the most critical operating areas.~~

We believe that funds provided by operations, our existing cash balances, ~~the proceeds from the April 2020 common stock issuance,~~ and borrowings available under our revolving credit facility will be adequate to fund all obligations and liquidity requirements for at least the next twelve months. However, prolonged disruptions to our operations, including as a result of ~~continued~~periodically reinstated lockdowns, required school, child care and business closures and ~~shelter-in-place~~ 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.~~terms, if at all.


Cash Flows	Three Months Ended March 31,						Cash Flows	Three Months Ended March 31,
	2020			2019				2021		2020
	(In thousands)
								(In thousands)
Net cash provided by operating activities	$	64,083		$	107,013		Net cash provided by operating activities	$	68,295	$	64,083
Net cash used in investing activities	$	(12,964	)	$	(60,562	)	Net cash used in investing activities	$	(22,284)	$	(12,964)
Net cash used in financing activities	$	(25,703	)	$	(62,263	)
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	$	31,192		$	38,478		Cash, cash equivalents and restricted cash — beginning of period	$	388,465	$	31,192
Cash, cash equivalents and restricted cash — end of period	$	55,405		$	23,214		Cash, cash equivalents and restricted cash — end of period	$	447,836	$	55,405

Cash Provided by Operating Activities

Cash provided by operating activities was ~~$64.1~~$68.3 million for the three months ended March 31, ~~2020,~~2021, compared to ~~$107.0~~$64.1 million for the same period in ~~2019.~~2020. The ~~decrease~~increase in cash provided by operating activities primarily resulted ~~from the $11.3 million decrease in net income from the prior year, and~~ 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 from the prior year.

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Cash Used in Investing Activities

Cash used in investing activities was ~~$13.0~~$22.3 million for the three months ended March 31, ~~2020~~2021, compared to ~~$60.6~~$13.0 million for the same period in ~~2019~~2020, and was related to fixed asset additions, acquisitions, and other investments. The ~~decrease~~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 ~~lower volume~~camp and back-up care provider, and to a lesser extent, settlements of ~~fixed asset additions and~~prior year acquisitions in ~~2020 as we prioritize investments~~the three months ended March 31, 2021, compared to $3.5 million used to acquire one center in the most critical operating areas as we navigate the impact and response to the COVID-19 pandemic, and a nonrecurring investment of $19.8 million in debt securities in 2019, which were purchased by our wholly-owned captive insurance company using restricted cash.prior year. During the three months ended March 31, ~~2020,~~2021, we invested ~~$12.6~~$17.9 million ~~net of proceeds from the sale of fixed assets,~~ in fixed asset purchases for new child care centers, and maintenance and refurbishments in our existing centers, ~~compared to a net investment of $21.1 million in~~which was consistent with the prior year. ~~We used $3.5~~Proceeds from the sale of fixed assets of $3.9 million ~~to acquire one center~~were lower in the three months ended March 31, ~~2020,~~2021 compared to ~~$19.5~~$4.5 million ~~used to acquire a provider of back-up care and one center~~ in the ~~three months ended March 31, 2019. These uses of cash during the three months ended March 31, 2020 were partially offset by $3.2 million in restricted cash~~prior year. In addition, proceeds generated from the maturity of debt securities held by our wholly-owned captive insurance ~~company.~~

~~Cash Used in Financing Activities~~

~~We used $25.7~~company and sales of investments were $0.7 million ~~in financing activities in the three months ended March 31, 2020 compared to $62.3~~and $3.2 million ~~for the same period in 2019. Cash used in financing activities~~ for the three months ended March 31, 2021 and 2020, respectively, net of purchases.

Cash Provided by (Used in) Financing Activities

Cash provided by financing activities was $13.9 million for the three months ended March 31, 2021 compared to cash used of $25.7 million for the same period in 2020. The increase in cash provided by financing activities was primarily ~~for share repurchases of $32.7 million, taxes paid~~ related to an increase in the ~~net share settlement of stock awards totaling $5.2 million and payments of debt principal of $2.7 million. These uses of cash were partially offset by~~ proceeds from the exercise of stock options and the issuance and sale of restricted stock, ~~of $16.0 million. Cash used~~which were $22.4 million in ~~financing activities for~~ the three months ended March 31, ~~2019 consisted primarily of repayments of $68.2~~2021 compared to $16.0 million ~~net of borrowings, on~~in the ~~revolving credit facility, taxes paid related to the net~~prior year, and having no share ~~settlement of stock awards totaling $2.8 million,~~repurchases and payments of ~~debt principal of $2.7 million. These uses of cash were partially offset by proceeds from~~contingent consideration in the ~~exercise of stock options~~three months ended March 31, 2021 compared to $32.7 million and $1.1 million, respectively, in the ~~issuance and sale of restricted stock of $11.4 million.~~prior year.

Debt

~~As of March 31, 2020, our $1.3 billion~~Our senior secured credit facilities ~~consisted~~consist of a ~~$1.1 billion~~ secured term loan facility and a ~~$225~~$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 (in thousands):~~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

March 31, 2020 December 31, 2019
Term loans $ 1,042,750
$ 1,045,438
Deferred financing costs and original issue discount (6,156 ) (6,639 )
Total debt 1,036,594
1,038,799
Less current maturities 10,750
10,750
Long-term debt $ 1,025,844
$ 1,028,049

There were no borrowings outstanding on the revolving credit facility at March 31, 2020 and December 31, 2019, with the full line available for borrowings. The revolving credit facility matures on July 31, 2022. In April and May 2020, we amended our existing senior credit facilities to, among other ~~changes,~~things, increase the borrowing capacity of our revolving credit facility ~~by $175~~from $225 million to ~~a total borrowing capacity of~~ $400 million, modify the interest rates applicable to borrowings outstanding on the revolving credit facility, and modify the terms of the applicable covenants. ~~Refer to Note 12,~~ ~~Subsequent Events, in our condensed consolidated financial statements for additional information~~The revolving credit facility matures on July 31, 2022. There were no borrowings outstanding on the ~~amendments to our~~revolving credit ~~agreement.~~facility at March 31, 2021 and December 31, 2020, with the full line available for borrowings.

Borrowings under the credit agreement are subject to variable interest. We mitigate our interest rate exposure with variable-to-fixed interest rate swap agreements with an underlying fixed notional ~~amount~~value of $500 ~~million. These swap agreements,~~million, designated and accounted for as cash flow hedges from inception, that are scheduled to mature on October 31, 2021. The weighted average interest rate for the term ~~loans~~loan was ~~3.53%~~3.06% and ~~3.97%~~3.53% for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively, including the impact of the interest rate swap agreements.

~~All obligations under~~ 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 ~~senior secured credit facilities are secured by substantially all~~event the ~~assets~~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 our ~~U.S. subsidiaries. The senior secured credit facilities contain a number of covenants that, among other things~~existing interest rate swap agreements, 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 dividendsexpire on capital stock or redeem, repurchase or retire capital stock or subordinated indebtedness; engage in transactions with affiliates; sell assets, including capital stock of our subsidiaries; alter the business conducted; enter into agreements restricting our subsidiaries’ ability to pay dividends; and consolidate or merge.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 revolving credit facility requires Bright Horizons Family Solutions LLC, the borrower, and its restricted subsidiaries, to comply with a ~~maximum consolidated first lien net leverage ratio that is a~~ quarterly maintenance based financial 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 covenant at March 31, ~~2020 and, in connection with the April 2020 amendment to our credit agreement, have obtained amendments related to our future covenant requirements.~~2021. Refer to Note 6, Credit Arrangements and Debt Obligations,~~, and Note 12,~~ ~~Subsequent Events~~, in our condensed consolidated financial statements for additional information on our debt and credit arrangements, and ~~amendments to our credit agreement and financial covenant.~~covenant requirements.

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Off-Balance Sheet Arrangements

As of March 31, ~~2020,~~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~~“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, ~~2019.~~2020. There have been no material changes to our critical accounting policies since December 31, ~~2019.~~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 exchange rates. Other than the broad effects of the COVID-19 pandemic ~~as a result of~~and its negative impact on the global economy and major financial markets, there have been no material changes in our exposure to interest rate or foreign currency exchange rate fluctuations since December 31, ~~2019.~~2020. See Part II, Item 7A, ~~“Quantitative~~“Quantitative and Qualitative Disclosures about Market Risk,” in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 for further information regarding market risk. ~~Refer to Note 12,~~ ~~Subsequent Events, in our condensed consolidated financial statements for additional information on recent amendments to our credit agreement.~~

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of March 31, ~~2020,~~2021, we conducted an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), regarding the effectiveness of the design and operation of 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 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 March 31, ~~2020.~~2021.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended March 31, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal control over financial reporting due to the COVID-19 pandemic. We are continually monitoring and assessing its impact on the design, implementation and operating effectiveness

Table of ~~our internal control over financial reporting.~~Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are, from time to time, subject to claims, suits, and 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~~“Risk Factors,” inof our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019, which could adversely affect our business, financial condition and operating results.~~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 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, ~~2019, with the exception of the addition of the following risk factor:~~2020.

~~The global COVID-19 pandemic has significantly disrupted our business and our financial condition and operating results and will continue to adversely impact our business.~~

The COVID-19 pandemic has disrupted our global operations as a result of required school and business closures and shelter-in-place mandates in response to the COVID-19 pandemic. We expect to continue to be impacted as the situation remains dynamic and subject to rapid and potentially material changes. As of March 31, 2020, we operated 1,094 child care and early education centers with the capacity to serve approximately 120,000 children and their families, of which approximately 250 child care centers with the capacity to serve approximately 32,000 children remained open after the temporary center closures in response to the COVID-19 pandemic. The continued or additional disruptions to our business and potential adverse impacts to our financial condition and results of operations resulting from the COVID-19 pandemic include, but are not limited to:

significant changes in the conditions of the markets we operate in, including required school and business closures and shelter-in-place mandates, limiting our ability to provide our services, especially center-based child care and center-based back-up child care;

reduced enrollment upon the re-opening of centers as families may limit their participation in various public activities and gatherings, including group child care, or as social distancing protocols and other licensing regulations may reduce group sizes or otherwise affect the overall capacity of children we can serve;

inability to hire and maintain an adequate level of center staff requiring us to reduce enrollment in order to comply with mandated ratios, inability to retain teachers after long periods of furlough, and the impact to our operations if a significant percentage of our workforce is unable to return to work because of illness, quarantine, worker absenteeism, limitations on travel, government or social distancing restrictions, which may have a disproportionate impact on our business compared to other companies that depend less on the in-person provision of services;

reduced or shifting demand for our services due to adverse and uncertain economic conditions, including as a result of clients that have been adversely impacted, and/or increased unemployment, continued school and business closures, long-term shift to an at-home workforce, and general effects of a broad-based economic recession;

~~potential incremental costs associated with mitigating the effects of the pandemic and/or additional procedures and protocols required to maintain health and safety at our centers;~~

~~a decrease in revenues due to clients requesting refunds or renegotiating contracts for reduced or changing services, including in our cost-plus and employer sponsor model centers;~~

the potential deterioration in the collectability of our existing accounts receivable and a decrease in the generation of new accounts receivable due to the potential diminished financial health of our clients;

~~inability to implement our growth strategies due to prolonged business contraction and reduced capital expenditures and cost-saving initiatives;~~

delayed re-opening of centers outside of our control due in large part to the interdependence of our operations with our client partners’ operating decisions and requirements as well as decisions by governmental authorities regarding school and business closures;

~~legal actions or proceedings related to COVID-19;~~

~~reduction in our liquidity position limiting our ability to service our indebtedness and our future ability to incur additional indebtedness or financing; and~~

~~further downgrades to our credit rating by ratings agencies which could reduce our ability to access capital markets.~~

These factors could place limitations on our ability to operate effectively and could have a material adverse effect on our operations, financial condition and operating results. As the situation continues to evolve and more information and guidance becomes available, we may adjust our current plans, policies and procedures to address the rapidly changing variables related to the pandemic. Additional impacts may arise of which we are currently not aware, the nature and extent of which will depend on future developments which are highly uncertain and cannot be predicted.

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 ~~quarter~~three months ended March 31, ~~2020:~~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
(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, 2020 to January 31, 2020 ⁽²⁾
34,083
$ 161.14
31,500
$ 221,982
February 1, 2020 to February 29, 2020 ^{(2) (3)}
65,994
$ 157.60
36,000
$ 215,957
March 1, 2020 to March 31, 2020 ⁽³⁾
167,563
$ 127.72
163,813
$ 194,850
267,640
231,313


~~(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 months of January and February 2020, we retired a total of 26,757 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.

~~(3)~~

During February and March 2020, we repurchased 9,570 shares of unvested restricted stock awards that were subject to forfeiture resulting from the grantees’ termination of service with us for an aggregate $0.6 million pursuant to the certain restricted stock award agreements. The purchase price was equal to the purchase price paid by the grantees on the date of grant as provided in the restricted stock award agreements.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~On May 7, 2020, Bright Horizons Family Solutions LLC (the “Borrower”), a wholly-owned indirect subsidiary~~Not applicable.

Table of the Company, entered into a Fifth Amendment to Credit Agreement (the “Amendment”), by and among the Borrower, Bright Horizons Capital Corp., the Fifth Amendment Incremental Revolving Credit Lender, and JPMorgan Chase Bank, N.A., as Administrative Agent and L/C Issuer (each term as defined in the Amendment). The Amendment amends the Borrower’s Credit Agreement, dated as of January 30, 2013, by and among the Borrower, Bright Horizons Capital Corp., JPMorgan Chase Bank, N.A., as Administrative Agent and L/C Issuer, the Lenders and other parties party thereto from time to time (as amended and restated by the Incremental and Amendment and Restatement Agreement, dated as of November 7, 2016 and as further amended by the Amendment Agreement, dated as of May 8, 2017, the Amendment to Credit Agreement, dated as of November 30, 2017, the Third Amendment to Credit Agreement, dated as of May 31, 2018, and the Fourth Amendment to Credit Agreement, dated as of April 24, 2020, the “Credit Agreement”).Contents

The Amendment amends the Credit Agreement to increase the revolving credit commitments under the Credit Agreement from $385,000,000 to $400,000,000. The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment, which is filed as Exhibit 10.5 to this Quarterly Report on Form 10-Q and is incorporated by reference into this Item 5.

Item 6. Exhibits

(a) Exhibits:



Exhibit Number		Exhibit Title
10.131.1		~~Stock Purchase Agreement, dated as of April 19, 2020, by and between Bright Horizons Family Solutions Inc. and Durable Capital Master Fund LP.~~
~~10.2~~	Fourth Amendment to Credit Agreement, dated as of April 24, 2020, by and among Bright Horizons Family Solutions LLC, Bright Horizons Capital Corp., the Loan parties, the Lenders party thereto, the Fourth Amendment Incremental Revolving Credit Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and L/C Issuer ~~(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed April 27, 2020).~~
~~10.3~~†	~~Amended and Restated Severance Agreement between Bright Horizons Family Solutions LLC and John Casagrande~~ ~~(incorporated by reference to Exhibit 10.36 to the Company’s Annual Report on Form 10-K, filed February 27, 2020).~~
~~10.4~~†	~~Severance Agreement between Bright Horizons Family Solutions LLC and Maribeth Bearfield~~ ~~(incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K, filed February 27, 2020).~~
10.5*	Fifth Amendment to Credit Agreement, dated as of May 7, 2020, by and among Bright Horizons Family Solutions LLC, Bright Horizons Capital Corp., the Loan Parties, the Fifth Amendment Incremental Revolving Credit Lender party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and L/C Issuer.
31.1*	Principal Executive Officer Certification Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as Adopted Pursuant to 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 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.
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).



*		Exhibits filed herewith.
**		Exhibits furnished herewith.
†	~~Management contract or compensatory plan.~~

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:	May ~~11, 2020~~10, 2021	By:	/s/ Elizabeth Boland
			Elizabeth Boland
			Chief Financial Officer
			(Duly Authorized Officer)

3432



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	2120
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3029
Item 4.	Controls and Procedures	3029
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	3130
Item 1A.	Risk Factors	3130
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3230
Item 3.	Defaults Upon Senior Securities	3230
Item 4.	Mine Safety Disclosures	3230
Item 5.	Other Information	3230
Item 6.	Exhibits	3331
Signatures		3432

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

	March 31, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	49,230		$	27,872
Accounts receivable — net of allowance for credit losses of $1,836 and $1,226 at March 31, 2020 and December 31, 2019, respectively	171,566			148,855
Prepaid expenses and other current assets	63,369			52,161
Total current assets	284,165			228,888
Fixed assets — net	609,459			636,153
Goodwill	1,389,649			1,412,873
Other intangible assets — net	295,337			304,673
Operating lease right-of-use assets	724,053			700,956
Other assets	48,331			46,877
Total assets	$	3,350,994		$	3,330,420
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	10,750		$	10,750
Accounts payable and accrued expenses	188,423			167,059
Current portion of operating lease liabilities	86,252			83,123
Deferred revenue	184,400			191,117
Other current liabilities	27,356			31,241
Total current liabilities	497,181			483,290
Long-term debt — net	1,025,844			1,028,049
Operating lease liabilities	722,602			685,910
Other long-term liabilities	101,352			92,865
Deferred revenue	10,484			10,098
Deferred income taxes	56,003			58,940
Total liabilities	2,413,466			2,359,152
Stockholders’ equity:
Preferred stock, $0.001 par value; 25,000,000 shares authorized and no shares issued or outstanding at March 31, 2020 and December 31, 2019	—			—
Common stock, $0.001 par value; 475,000,000 shares authorized; 57,920,154 and 57,884,020 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively	58			58
Additional paid-in capital	627,337			648,031
Accumulated other comprehensive loss	(94,109		)	(50,331		)
Retained earnings	404,242			373,510
Total stockholders’ equity	937,528			971,268
Total liabilities and stockholders’ equity	$	3,350,994		$	3,330,420



	Three months ended March 31, 2019
	Common Stock				Additional Paid-in Capital			Treasury Stock, at Cost		Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total Stockholders’ Equity
	Shares		Amount		Additional Paid-in Capital			Treasury Stock, at Cost		Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total Stockholders’ Equity
Balance at January 1, 2019	57,494,468		$	57	$	648,651		$	—	$	(62,355	)	$	193,124	$	779,477
Stock-based compensation expense					3,106										3,106
Issuance of common stock under the Equity Incentive Plan	303,929		1		11,054										11,055
Shares received in net share settlement of stock option exercises and vesting of restricted stock	(24,718	)	—		(2,779		)								(2,779		)
Other comprehensive income										4,111					4,111
Net income													42,042		42,042
Balance at March 31, 2019	57,773,679		$	58	$	660,032		$	—	$	(58,244	)	$	235,166	$	837,012



	Three months ended March 31, 2020
Beginning balance at January 1, 2020	$	1,226
Provision	910
Write offs and recoveries	(300		)
Ending balance at March 31, 2020	$	1,836



	Full service center-based child care		Back-up care		Educational advisory services		Total
Three months ended March 31, 2020
North America	$	298,067	$	70,557	$	20,765	$	389,389
Europe	113,324		3,610		—		116,934
	$	411,391	$	74,167	$	20,765	$	506,323
Three months ended March 31, 2019
North America	$	304,312	$	62,007	$	18,744	$	385,063
Europe	114,008		2,687		—		116,695
	$	418,320	$	64,694	$	18,744	$	501,758



	Operating Leases
Remainder of 2020	$	90,468
2021	124,795
2022	120,283
2023	111,985
2024	101,015
Thereafter	555,120
Total lease payments	1,103,666
Less imputed interest	(294,812		)
Present value of lease liabilities	808,854
Less current portion of operating lease liabilities	(86,252		)
Long-term operating lease liabilities	$	722,602



	Estimated amortization expense
Remainder of 2020	$	23,200
2021	$	28,077
2022	$	25,774
2023	$	24,905
2024	$	11,051



	March 31, 2020			December 31, 2019
Term loans	$	1,042,750		$	1,045,438
Deferred financing costs and original issue discount	(6,156		)	(6,639		)
Total debt	1,036,594			1,038,799
Less current maturities	10,750			10,750
Long-term debt	$	1,025,844		$	1,028,049



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)
Interest rate swaps	$	(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	)



	Three months ended March 31, 2020
Balance at January 1, 2020	$	15,987
Settlement of contingent consideration liabilities	(1,088		)
Changes in fair value	422
Foreign currency translation	(1,044		)
Balance at March 31, 2020	$	14,277



	Three months ended March 31, 2020
	Foreign currency translation adjustments			Unrealized gain (loss) on interest rate swaps			Unrealized gain (loss) on investments		Total
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		)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax	—			208			—		208
Net current period other comprehensive income (loss)	(39,508		)	(4,399		)	129		(43,778		)
Balance at March 31, 2020	$	(87,343	)	$	(6,965	)	$	199	$	(94,109	)



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, 2020 to January 31, 2020 ⁽²⁾	34,083	$	161.14	31,500	$	221,982
February 1, 2020 to February 29, 2020 ^{(2) (3)}	65,994	$	157.60	36,000	$	215,957
March 1, 2020 to March 31, 2020 ⁽³⁾	167,563	$	127.72	163,813	$	194,850
	267,640			231,313