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 June 30, 2021

OR

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

For the transition period from                      to                     

Commission File Number: 001-35780

__________________________________________________

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

(Exact name of registrant as specified in its charter)

__________________________________________________

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

2 Wells Avenue
Newton, Massachusetts	02459
(Address of principal executive offices)	(Zip code)

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

Not Applicable

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

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	BFAM	New York Stock Exchange

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

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

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

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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

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

As of July 29, 2021, there were 60,560,617 shares of common stock outstanding.

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

FORM 10-Q

For the quarterly period ended June 30, 2021

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		Page
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
Signatures		40

2

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2021		December 31, 2020
	(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	418,638	$	384,344
Accounts receivable — net of allowance for credit losses of $2,402 and $2,357 at June 30, 2021 and December 31, 2020, respectively	141,253		176,617
Prepaid expenses and other current assets	74,743		62,902
Prepaid income taxes	19,830		322
Total current assets	654,464		624,185
Fixed assets — net	617,248		628,757
Goodwill	1,451,041		1,431,967
Other intangible assets — net	261,013		274,620
Operating lease right-of-use assets	703,107		717,821
Other assets	54,010		49,298
Total assets	$	3,740,883	$	3,726,648
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	10,750	$	10,750
Accounts payable and accrued expenses	190,554		194,551
Current portion of operating lease liabilities	87,934		87,181
Deferred revenue	225,683		197,939
Other current liabilities	49,599		40,393
Total current liabilities	564,520		530,814
Long-term debt — net	1,015,433		1,020,137
Operating lease liabilities	712,399		729,754
Other long-term liabilities	117,822		105,980
Deferred revenue	10,421		10,215
Deferred income taxes	49,144		45,951
Total liabilities	2,469,739		2,442,851
Stockholders’ equity:
Preferred stock, $0.001 par value; 25,000,000 shares authorized; no shares issued or outstanding at June 30, 2021 and December 31, 2020	—		—
Common stock, $0.001 par value; 475,000,000 shares authorized; 60,278,756 and 60,466,168 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	60		60
Additional paid-in capital	868,289		910,304
Accumulated other comprehensive loss	(23,654)		(27,069)
Retained earnings	426,449		400,502
Total stockholders’ equity	1,271,144		1,283,797
Total liabilities and stockholders’ equity	$	3,740,883	$	3,726,648

See accompanying notes to condensed consolidated financial statements.

3

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
	(In thousands, except share data)
Revenue	$	441,478	$	293,772	$	832,318	$	800,095
Cost of services	335,496		228,536		644,978		626,000
Gross profit	105,982		65,236		187,340		174,095
Selling, general and administrative expenses	64,458		49,247		124,568		106,616
Amortization of intangible assets	7,512		7,875		15,052		16,084
Income from operations	34,012		8,114		47,720		51,395
Interest expense — net	(9,580)		(9,129)		(18,596)		(19,335)
Income (loss) before income tax	24,432		(1,015)		29,124		32,060
Income tax benefit (expense)	(5,617)		1,374		(3,177)		(969)
Net income	$	18,815	$	359	$	25,947	$	31,091
Earnings per common share:
Common stock — basic	$	0.31	$	0.01	$	0.43	$	0.53
Common stock — diluted	$	0.31	$	0.01	$	0.42	$	0.52
Weighted average common shares outstanding:
Common stock — basic	60,551,528		59,631,428		60,573,237		58,781,169
Common stock — diluted	61,106,792		60,266,102		61,216,383		59,572,444

See accompanying notes to condensed consolidated financial statements.

4

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
	(In thousands)
Net income	$	18,815	$	359	$	25,947	$	31,091
Other comprehensive income (loss):
Foreign currency translation adjustments	1,213		1,557		699		(37,951)
Unrealized gain (loss) on cash flow hedges and investments, net of tax	964		793		2,716		(3,477)
Total other comprehensive income (loss)	2,177		2,350		3,415		(41,428)
Comprehensive income (loss)	$	20,992	$	2,709	$	29,362	$	(10,337)

See accompanying notes to condensed consolidated financial statements.

5

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)

	Three months ended June 30, 2021
	Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
	(In thousands, except share data)
Balance at April 1, 2021	60,726,701	$	61	$	928,761	$	—	$	(25,831)	$	407,634	$	1,310,625
Stock-based compensation expense				5,829								5,829
Issuance of common stock under the Equity Incentive Plan	75,169	—		5,341								5,341
Shares received in net share settlement of stock option exercises and vesting of restricted stock	(8,114)	—		(1,297)								(1,297)
Purchase of treasury stock						(70,346)						(70,346)
Retirement of treasury stock	(515,000)	(1)		(70,345)		70,346						—
Other comprehensive income								2,177				2,177
Net income										18,815		18,815
Balance at June 30, 2021	60,278,756	$	60	$	868,289	$	—	$	(23,654)	$	426,449	$	1,271,144

	Three months ended June 30, 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 April 1, 2020	57,920,154	$	58	$	627,337	$	—	$	(94,109)	$	404,242	$	937,528
Issuance of common stock	2,138,580	2		249,788								249,790
Stock-based compensation expense				5,155								5,155
Issuance of common stock under the Equity Incentive Plan	117,276	—		5,577								5,577
Shares received in net share settlement of stock option exercises and vesting of restricted stock	(23,823)	—		(2,484)								(2,484)
Other comprehensive income								2,350				2,350
Net income										359		359
Balance at June 30, 2020	60,152,187	$	60	$	885,373	$	—	$	(91,759)	$	404,601	$	1,198,275

See accompanying notes to condensed consolidated financial statements.

6

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)

	Six months ended June 30, 2021
	Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
	(In thousands, except share data)
Balance at January 1, 2021	60,466,168	$	60	$	910,304	$	—	$	(27,069)	$	400,502	$	1,283,797
Stock-based compensation expense				11,135								11,135
Issuance of common stock under the Equity Incentive Plan	371,561	1		24,337								24,338
Shares received in net share settlement of stock option exercises and vesting of restricted stock	(43,973)	—		(7,142)								(7,142)
Purchase of treasury stock						(70,346)						(70,346)
Retirement of treasury stock	(515,000)	(1)		(70,345)		70,346						—
Other comprehensive income								3,415				3,415
Net income										25,947		25,947
Balance at June 30, 2021	60,278,756	$	60	$	868,289	$	—	$	(23,654)	$	426,449	$	1,271,144

	Six months ended June 30, 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	$	—	$	(50,331)	$	373,510	$	971,268
Issuance of common stock	2,138,580	2		249,788								249,790
Stock-based compensation expense				9,438								9,438
Issuance of common stock under the Equity Incentive Plan	416,152	1		18,038								18,039
Shares received in net share settlement of stock option exercises and vesting of restricted stock	(55,252)	—		(7,715)								(7,715)
Purchase of treasury stock						(32,208)						(32,208)
Retirement of treasury stock	(231,313)	(1)		(32,207)		32,208						—
Other comprehensive loss								(41,428)				(41,428)
Net income										31,091		31,091
Balance at June 30, 2020	60,152,187	$	60	$	885,373	$	—	$	(91,759)	$	404,601	$	1,198,275

See accompanying notes to condensed consolidated financial statements.

7

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months ended June 30,
	2021		2020
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	25,947	$	31,091
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	55,392		55,880
Impairment losses on long-lived assets	—		16,857
Impairment losses on equity investment	—		2,128
Stock-based compensation expense	11,135		9,438
Deferred income taxes	2,238		(2,783)
Other non-cash adjustments — net	513		(1,187)
Changes in assets and liabilities:
Accounts receivable	35,338		(73,449)
Prepaid expenses and other current assets	(10,612)		(33,156)
Accounts payable and accrued expenses	(1,818)		(19,824)
Income taxes	(19,908)		327
Deferred revenue	28,117		3,399
Leases	(2,143)		30,003
Other assets	3,101		3,404
Other current and long-term liabilities	8,425		29,132
Net cash provided by operating activities	135,725		51,260
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets	(33,953)		(32,374)
Proceeds from the disposal of fixed assets	5,490		7,352
Proceeds from the maturity of debt securities and sale of other investments	10,500		7,247
Purchases of debt securities and other investments	(10,611)		(6,106)
Payments and settlements for acquisitions — net of cash acquired	(9,082)		(4,394)
Net cash used in investing activities	(37,656)		(28,275)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock issuance — net of issuance costs	—		249,937
Borrowings under revolving credit facility	—		43,200
Payments under revolving credit facility	—		(43,200)
Principal payments of long-term debt	(5,375)		(5,375)
Payments of debt issuance costs	(2,057)		(2,818)
Purchase of treasury stock	(70,346)		(32,658)
Proceeds from issuance of common stock upon exercise of options and restricted stock upon purchase	28,180		21,187
Taxes paid related to the net share settlement of stock options and restricted stock	(7,142)		(7,715)
Payments of contingent consideration for acquisitions	—		(1,088)
Net cash provided by (used in) financing activities	(56,740)		221,470
Effect of exchange rates on cash, cash equivalents and restricted cash	(675)		(908)
Net increase in cash, cash equivalents and restricted cash	40,654		243,547
Cash, cash equivalents and restricted cash — beginning of period	388,465		31,192
Cash, cash equivalents and restricted cash — end of period	$	429,119	$	274,739

See accompanying notes to condensed consolidated financial statements.

8

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)

	Six months ended June 30,
	2021		2020
	(In thousands)
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS:
Cash and cash equivalents	$	418,638	$	270,442
Restricted cash and cash equivalents, included in prepaid expenses and other current assets	10,481		4,297
Total cash, cash equivalents and restricted cash — end of period	$	429,119	$	274,739
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments of interest	$	16,815	$	18,117
Cash payments of income taxes	$	21,200	$	6,709
Cash paid for amounts included in the measurement of lease liabilities	$	72,496	$	51,397
NON-CASH TRANSACTIONS:
Fixed asset purchases recorded in accounts payable and accrued expenses	$	2,849	$	3,311
Contingent consideration issued for acquisitions	$	7,337	$	—
Operating right-of-use assets obtained in exchange for operating lease liabilities — net	$	28,147	$	71,677
Restricted stock reclassified from other current liabilities to equity upon vesting	$	4,178	$	4,424

See accompanying notes to condensed consolidated financial statements.

9

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

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

Basis of Presentation — The accompanying unaudited condensed consolidated balance sheet as of June 30, 2021 and the condensed consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the interim periods ended June 30, 2021 and 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required in accordance with U.S. GAAP for complete financial statements and should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior period amounts within the condensed consolidated balance sheet and supplemental statement of cash flows information to conform to the current period presentation.

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

Stockholders’ Equity — The board of directors of the Company authorized a share repurchase program of up to $300 million of the Company’s outstanding common stock, effective June 12, 2018. The share repurchase program has no expiration date. The shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions, under Rule 10b5-1 plans, or by other means in accordance with federal securities laws. During the three months ended June 30, 2021, 0.5 million shares were repurchased for $70.3 million under this authorization, and at June 30, 2021, $124.5 million remained available under the repurchase program.

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

COVID-19 Pandemic — Since March 2020, the Company's global operations have been significantly impacted by the COVID-19 pandemic. As of June 30, 2021, the Company operated 1,006 early education and child care centers, of which approximately 920 early education and child care centers were open. The Company remains focused on the re-enrollment of its centers and the phased re-opening of the limited number of centers that remain temporarily closed, which the Company expects will continue throughout 2021. The broad and long-term effects of COVID-19, its duration and the scope of ongoing and related disruptions, cannot be predicted. Given these factors, the Company currently expects the effects of COVID-19 to continue to adversely impact the results of its operations for the remainder of 2021.

10

Government Support — The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and the Consolidated Appropriations Act, 2021 (“CAA”) were enacted in the United States on March 27, 2020 and January 1, 2021, respectively; both are economic aid packages to help mitigate the impact of the pandemic. Additionally, other foreign governmental legislation that provided relief provisions was enacted in response to the economic impact of COVID-19. The Company has participated in certain government support programs, including availing itself of certain tax deferrals 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 CAA to wages paid through the first two quarters of 2021, among other changes. Governmental support received is recorded on the consolidated statement of income as a reduction to the related expenses that the assistance is intended to defray. During the six months ended June 30, 2021 and 2020, $17.0 million and $39.6 million, respectively, was recorded as a reduction to cost of services in relation to these benefits. As of June 30, 2021 and December 31, 2020, $10.9 million and $8.4 million, respectively, was recorded in prepaid expenses and other current assets on the consolidated balance sheet for amounts due from government support programs. Additionally, the Company had payroll tax deferrals totaling $20.4 million as of June 30, 2021 and December 31, 2020, of which $10.2 million was recorded in accounts payable and accrued expenses and $10.2 million was included in other long-term liabilities.

Recently Adopted Pronouncement — In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The standard removes certain exceptions to the general principles in Topic 740 and improves the consistent application of U.S. GAAP by clarifying and amending certain areas of the existing guidance. The Company adopted the new guidance on January 1, 2021. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.

2. REVENUE RECOGNITION

Disaggregation of Revenue

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

	Full service center-based child care		Back-up care		Educational advisory and other services		Total
	(In thousands)
Three months ended June 30, 2021
North America	$	216,327	$	76,660	$	25,567	$	318,554
Europe	118,100		4,824		—		122,924
	$	334,427	$	81,484	$	25,567	$	441,478
Three months ended June 30, 2020
North America	$	92,572	$	133,106	$	20,562	$	246,240
Europe	44,734		2,798		—		47,532
	$	137,306	$	135,904	$	20,562	$	293,772

	Full service center-based child care		Back-up care		Educational advisory and other services		Total
	(In thousands)
Six months ended June 30, 2021
North America	$	408,781	$	147,842	$	49,733	$	606,356
Europe	215,965		9,997		—		225,962
	$	624,746	$	157,839	$	49,733	$	832,318
Six months ended June 30, 2020
North America	$	390,639	$	203,663	$	41,327	$	635,629
Europe	158,058		6,408		—		164,466
	$	548,697	$	210,071	$	41,327	$	800,095

11

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

Deferred Revenue

The Company records deferred revenue when payments are received in advance of the Company’s performance under the contract, which is recognized as revenue as the performance obligation is satisfied. During the six months ended June 30, 2021, $146.7 million was recognized as revenue related to the deferred revenue balance recorded at December 31, 2020. During the six months ended June 30, 2020, $151.4 million was recognized as revenue related to the deferred revenue balance recorded at December 31, 2019.

Remaining Performance Obligations

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

3. LEASES

The Company has operating leases for certain of its full service and back-up early education and child care centers, corporate offices, call centers, and to a lesser extent, various office equipment, in the United States, the United Kingdom, and the Netherlands. Most of the leases expire within 10 to 15 years and many contain renewal options and/or termination provisions. The Company does not have any finance leases as of June 30, 2021.

Lease Expense

The components of lease expense were as follows:

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
	(In thousands)
Operating lease expense (1)	$	33,652	$	38,667	$	67,277	$	72,528
Variable lease expense (1)	6,735		6,120		13,677		15,353
Total lease expense	$	40,387	$	44,787	$	80,954	$	87,881

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

Operating lease expense for the three and six months ended June 30, 2020 includes an impairment loss on operating lease right-of-use assets of $5.2 million. Refer to Note 9, Fair Value Measurements, for additional information.

Other Information

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

	June 30, 2021	December 31, 2020
Weighted average remaining lease term (in years)	10	10
Weighted average discount rate	5.9%	6.0%

12

Maturity of Lease Liabilities

The following table summarizes the maturity of lease liabilities as of June 30, 2021:

	Operating Leases
	(In thousands)
Remainder of 2021	$	55,582
2022	133,656
2023	125,251
2024	114,428
2025	99,967
Thereafter	540,141
Total lease payments	1,069,025
Less imputed interest	(268,692)
Present value of lease liabilities	800,333
Less current portion of operating lease liabilities	(87,934)
Long-term operating lease liabilities	$	712,399

As of June 30, 2021, the Company had entered into additional operating leases that have not yet commenced with total fixed payment obligations of $21.8 million. The leases are expected to commence between the third quarter of fiscal 2021 and the fourth quarter of fiscal 2022 and have initial lease terms of approximately 10 to 15 years.

Lease Modifications

As of June 30, 2021, the Company had deferred lease payments of $2.0 million. The majority of these lease payments are payable over the next year. As of December 31, 2020, the Company had deferred lease payments of $7.7 million.

4. ACQUISITIONS

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

2021 Acquisitions

During the six months ended June 30, 2021, the Company acquired two centers as well as a camp and back-up care provider in the United States, in two separate business acquisitions, which were each accounted for as a business combination. These businesses were acquired for aggregate cash consideration of $8.6 million, net of cash acquired of $0.3 million, and consideration payable of $0.4 million. Additionally, the Company is subject to contingent consideration payments for these two acquisitions, and recorded a preliminary fair value estimate of $7.3 million in relation to these contingent consideration arrangements at acquisition. Contingent consideration of up to $1.2 million may be payable within one year if certain performance targets are met for one of the acquisitions, and contingent consideration is payable in 2026 based on certain financial metrics for the other acquisition. The Company recorded goodwill of $14.5 million related to the back-up care segment and of $3.4 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 $1.3 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 June 30, 2021, the purchase price allocations for these acquisitions remain open as the Company gathers additional information regarding the assets acquired and the liabilities assumed, and finalizes its determination of the estimated fair value of the contingent consideration at the date of acquisition. The operating results for the acquired businesses are included in the consolidated results of operations from the date of acquisition, and were not material to the Company’s financial results.

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2020 Acquisitions

During the year ended December 31, 2020, the Company acquired two child care centers and the Sittercity business, an online marketplace for families and caregivers, in the United States, in three separate business acquisitions, which were each accounted for as a business combination. These businesses were acquired for cash consideration of $8.1 million, net of cash acquired of $1.3 million, and consideration payable of $0.1 million, and included fixed assets and technology of $4.1 million, as well as a trade name of $0.7 million that will be amortized over five years. The Company recorded goodwill of $2.0 million related to the educational advisory and other services segment and $2.1 million related to the full-service center-based child care segment, all of which will be deductible for tax purposes.

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 June 30, 2021, the purchase price allocation for one of the 2020 acquisitions remains open as the Company gathers additional information regarding the assets acquired and the liabilities assumed.

During the year ended December 31, 2020, the Company paid $1.2 million for contingent consideration related to acquisitions completed in 2018 and 2019, which had been recorded as a liability at the date of acquisition.

5. GOODWILL AND INTANGIBLE ASSETS

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

	Full service center-based child care		Back-up 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	3,435		14,537		—		17,972
Adjustments to prior year acquisitions	—		—		150		150
Effect of foreign currency translation	758		194		—		952
Balance at June 30, 2021	$	1,201,851	$	209,347	$	39,843	$	1,451,041

The Company also has intangible assets, which consisted of the following at June 30, 2021 and December 31, 2020:

June 30, 2021	Weighted average amortization period	Cost		Accumulated amortization		Net carrying amount
		(In thousands)
Definite-lived intangible assets:
Customer relationships	14 years	$	402,965	$	(325,348)	$	77,617
Trade names	6 years	12,282		(10,039)		2,243
		415,247		(335,387)		79,860
Indefinite-lived intangible assets:
Trade names	N/A	181,153		—		181,153
		$	596,400	$	(335,387)	$	261,013

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December 31, 2020	Weighted average amortization period	Cost		Accumulated amortization		Net carrying amount
		(In thousands)
Definite-lived intangible assets:
Customer relationships	14 years	$	402,319	$	(310,587)	$	91,732
Trade names	6 years	11,219		(9,633)		1,586
		413,538		(320,220)		93,318
Indefinite-lived intangible assets:
Trade names	N/A	181,302		—		181,302
		$	594,840	$	(320,220)	$	274,620

6. CREDIT ARRANGEMENTS AND DEBT OBLIGATIONS

Senior Secured Credit Facilities

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

Outstanding term loan borrowings were as follows:

	June 30, 2021		December 31, 2020
	(In thousands)
Term loan	$	1,029,313	$	1,034,688
Deferred financing costs and original issue discount	(3,130)		(3,801)
Total debt	1,026,183		1,030,887
Less current maturities	(10,750)		(10,750)
Long-term debt	$	1,015,433	$	1,020,137

On May 26, 2021, the Company amended its existing senior credit facilities to, among other changes, extend the revolving credit facility maturity date from July 31, 2022 to May 26, 2026 (subject to a springing maturity to August 8, 2023 if more than $25 million of the term loans have not been repaid, refinanced or extended), and reduce the interest rates applicable to borrowings outstanding on the revolving credit facility. In conjunction with this credit amendment, the Company incurred $2.1 million in fees that have been capitalized in other assets on the consolidated balance sheet and are amortized over the contractual life of the revolving credit facility. There were no borrowings outstanding on the revolving credit facility at June 30, 2021 and December 31, 2020.

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 were being amortized over the contractual life of the revolving credit facility prior to the May 26, 2021 amendment.

All borrowings under the credit agreement are subject to variable interest. The effective interest rate for the term loan was 2.50% at June 30, 2021 and December 31, 2020, and the weighted average interest rate was 2.50% and 3.00% for the six months ended June 30, 2021 and 2020, respectively, prior to the effects of any interest rate hedge arrangements. Effective as of May 26, 2021, borrowings under the revolving credit facility bear interest at a rate per annum ranging from 0.50% to 0.75% over the base rate, or 1.50% to 1.75% over the eurocurrency rate. The weighted average interest rate for the revolving credit facility was 4.00% and 4.49% for the six months ended June 30, 2021 and 2020, respectively.

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

In addition, the credit agreement governing the senior secured credit facilities requires Bright Horizons Capital Corp., the Company’s direct subsidiary, to be a passive holding company, subject to certain exceptions. The revolving credit facility requires Bright Horizons Family Solutions LLC, the borrower, and its restricted subsidiaries, to comply with a maximum first lien net leverage ratio of 4.25 to 1.00 beginning June 30, 2021. A breach of the applicable covenant is subject to certain equity cure rights.

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

	Term Loan
	(In thousands)
Remainder of 2021	$	5,375
2022	10,750
2023	1,013,188
Total future principal payments	$	1,029,313

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. 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 and losses resulting from changes in the fair value of the interest rate swaps and interest rate caps to accumulated other comprehensive income or loss. These gains and losses are subsequently reclassified into earnings and recognized to interest expense in the Company’s consolidated statement of income in the period that the hedged interest expense on the term loan facility is recognized. The premium paid for the interest rate cap was recorded as an asset and will be allocated to each of the individual hedged interest payments on the basis of their relative fair values. The change in each respective allocated fair value amount will be reclassified out of accumulated other comprehensive income when each of the hedged forecasted transactions impacts earnings and recognized to interest expense in the Company's consolidated statement of income.

The fair value of the derivative financial instruments was as follows for the periods presented:

Derivative financial instruments	Consolidated balance sheet classification	June 30, 2021		December 31, 2020
		(In thousands)
Interest rate swaps - liability	Other current liabilities	$	1,911	$	4,775
Interest rate caps - asset	Other assets	$	1,141	$	277

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

Derivatives designated as cash flow hedging instruments	Amount of gain (loss) recognized in other comprehensive income (loss)		Consolidated statement of income classification	Amount of net gain (loss) reclassified into earnings		Total effect on other comprehensive income (loss)
	(In thousands)			(In thousands)
Three months ended June 30, 2021
Cash flow hedges	$	(138)	Interest expense — net	$	(1,471)	$	1,333
Income tax effect	37		Income tax expense	393		(356)
Net of income taxes	$	(101)		$	(1,078)	$	977
Three months ended June 30, 2020
Cash flow hedges	$	(219)	Interest expense — net	$	(1,356)	$	1,137
Income tax effect	59		Income tax expense	365		(306)
Net of income taxes	$	(160)		$	(991)	$	831

Derivatives designated as cash flow hedging instruments	Amount of gain (loss) recognized in other comprehensive income (loss)		Consolidated statement of income classification	Amount of net gain (loss) reclassified into earnings		Total effect on other comprehensive income (loss)
	(In thousands)			(In thousands)
Six months ended June 30, 2021
Cash flow hedges	$	840	Interest expense — net	$	(2,921)	$	3,761
Income tax effect	(224)		Income tax expense	780		(1,004)
Net of income taxes	$	616		$	(2,141)	$	2,757
Six months ended June 30, 2020
Cash flow hedges	$	(6,521)	Interest expense — net	$	(1,641)	$	(4,880)
Income tax effect	1,754		Income tax expense	442		1,312
Net of income taxes	$	(4,767)		$	(1,199)	$	(3,568)

During the next twelve months, the Company estimates that a net loss of $2.2 million, pre-tax, will be reclassified from accumulated other comprehensive income (loss) and recorded to interest expense related to these derivative financial instruments.

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