QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
(State or other jurisdiction of incorporation) | (I.R.S. Employer Identification Number) |
(Address of principal executive offices) | (Zip code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
☒ | Accelerated filer | ☐ | |||||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||||||||
Emerging growth company |
Page | ||||||||
June 30, 2020 | December 31, 2019 | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable — net of allowance for credit losses of $ | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
Fixed assets — net | |||||||||||
Goodwill | |||||||||||
Other intangible assets — net | |||||||||||
Operating lease right-of-use assets | |||||||||||
Other assets | |||||||||||
Total assets | $ | $ | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Current portion of long-term debt | $ | $ | |||||||||
Accounts payable and accrued expenses | |||||||||||
Current portion of operating lease liabilities | |||||||||||
Deferred revenue | |||||||||||
Other current liabilities | |||||||||||
Total current liabilities | |||||||||||
Long-term debt — net | |||||||||||
Operating lease liabilities | |||||||||||
Other long-term liabilities | |||||||||||
Deferred revenue | |||||||||||
Deferred income taxes | |||||||||||
Total liabilities | |||||||||||
Stockholders’ equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Retained earnings | |||||||||||
Total stockholders’ equity | |||||||||||
Total liabilities and stockholders’ equity | $ | $ |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||||||||||
Cost of services | |||||||||||||||||||||||
Gross profit | |||||||||||||||||||||||
Selling, general and administrative expenses | |||||||||||||||||||||||
Amortization of intangible assets | |||||||||||||||||||||||
Income from operations | |||||||||||||||||||||||
Interest expense — net | ( | ( | ( | ( | |||||||||||||||||||
Income (loss) before income tax | ( | ||||||||||||||||||||||
Income tax benefit (expense) | ( | ( | ( | ||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Earnings per common share: | |||||||||||||||||||||||
Common stock — basic | $ | $ | $ | $ | |||||||||||||||||||
Common stock — diluted | $ | $ | $ | $ | |||||||||||||||||||
Weighted average common shares outstanding: | |||||||||||||||||||||||
Common stock — basic | |||||||||||||||||||||||
Common stock — diluted |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||
Foreign currency translation adjustments | ( | ( | ( | ||||||||||||||||||||
Unrealized gain (loss) on cash flow hedges and investments, net of tax | ( | ( | ( | ||||||||||||||||||||
Total other comprehensive income (loss) | ( | ( | ( | ||||||||||||||||||||
Comprehensive income (loss) | $ | $ | $ | ( | $ |
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 | ||||||||||||||||||||||||||||||||||||||||
Balance at April 1, 2020 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||
Issuance of common stock | |||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | |||||||||||||||||||||||||||||||||||||||||
Issuance of common stock under the Equity Incentive Plan | |||||||||||||||||||||||||||||||||||||||||
Shares received in net share settlement of stock option exercises and vesting of restricted stock | ( | — | ( | ( | |||||||||||||||||||||||||||||||||||||
Other comprehensive income | |||||||||||||||||||||||||||||||||||||||||
Net income | |||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2020 | $ | $ | $ | $ | ( | $ | $ |
Three months ended June 30, 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 April 1, 2019 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||
Stock-based compensation expense | |||||||||||||||||||||||||||||||||||||||||
Issuance of common stock under the Equity Incentive Plan | |||||||||||||||||||||||||||||||||||||||||
Shares received in net share settlement of stock option exercises and vesting of restricted stock | ( | — | ( | ( | |||||||||||||||||||||||||||||||||||||
Purchase of treasury stock | ( | ( | |||||||||||||||||||||||||||||||||||||||
Retirement of treasury stock | ( | ( | |||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | ( | ( | |||||||||||||||||||||||||||||||||||||||
Net income | |||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2019 | $ | $ | $ | $ | ( | $ | $ |
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 | ||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2020 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||
Issuance of common stock | |||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | |||||||||||||||||||||||||||||||||||||||||
Issuance of common stock under the Equity Incentive Plan | |||||||||||||||||||||||||||||||||||||||||
Shares received in net share settlement of stock option exercises and vesting of restricted stock | ( | — | ( | ( | |||||||||||||||||||||||||||||||||||||
Purchase of treasury stock | ( | ( | |||||||||||||||||||||||||||||||||||||||
Retirement of treasury stock | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | ( | ( | |||||||||||||||||||||||||||||||||||||||
Net income | |||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2020 | $ | $ | $ | $ | ( | $ | $ |
Six months ended June 30, 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 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||
Stock-based compensation expense | |||||||||||||||||||||||||||||||||||||||||
Issuance of common stock under the Equity Incentive Plan | |||||||||||||||||||||||||||||||||||||||||
Shares received in net share settlement of stock option exercises and vesting of restricted stock | ( | — | ( | ( | |||||||||||||||||||||||||||||||||||||
Purchase of treasury stock | ( | ( | |||||||||||||||||||||||||||||||||||||||
Retirement of treasury stock | ( | ( | |||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | ( | ( | |||||||||||||||||||||||||||||||||||||||
Net income | |||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2019 | $ | $ | $ | $ | ( | $ | $ |
Six months ended June 30, | |||||||||||
2020 | 2019 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
Net income | $ | $ | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Impairment losses on long-lived assets | |||||||||||
Impairment losses on equity investment | |||||||||||
Stock-based compensation expense | |||||||||||
Deferred income taxes | ( | ||||||||||
Other non-cash adjustments — net | ( | ( | |||||||||
Changes in assets and liabilities: | |||||||||||
Accounts receivable | ( | ||||||||||
Prepaid expenses and other current assets | ( | ( | |||||||||
Accounts payable and accrued expenses | ( | ||||||||||
Income taxes | ( | ||||||||||
Deferred revenue | |||||||||||
Leases | |||||||||||
Other assets | ( | ||||||||||
Other current and long-term liabilities | |||||||||||
Net cash provided by operating activities | |||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
Purchases of fixed assets | ( | ( | |||||||||
Proceeds from the disposal of fixed assets | |||||||||||
Proceeds from the maturity of debt securities and sale of other investments | |||||||||||
Purchases of debt securities and other investments | ( | ( | |||||||||
Payments and settlements for acquisitions — net of cash acquired | ( | ( | |||||||||
Net cash used in investing activities | ( | ( | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
Proceeds from stock issuance — net of issuance costs | |||||||||||
Borrowings under revolving credit facility | |||||||||||
Payments under revolving credit facility | ( | ( | |||||||||
Principal payments of long-term debt | ( | ( | |||||||||
Payments for debt issuance costs | ( | ||||||||||
Purchase of treasury stock | ( | ( | |||||||||
Taxes paid related to the net share settlement of stock options and restricted stock | ( | ( | |||||||||
Proceeds from issuance of common stock upon exercise of options and restricted stock upon purchase | |||||||||||
Payments of contingent consideration for acquisitions | ( | ||||||||||
Net cash provided by (used in) financing activities | ( | ||||||||||
Effect of exchange rates on cash, cash equivalents and restricted cash | ( | ||||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | ( | ||||||||||
Cash, cash equivalents and restricted cash — beginning of period | |||||||||||
Cash, cash equivalents and restricted cash — end of period | $ | $ |
Six months ended June 30, | |||||||||||
2020 | 2019 | ||||||||||
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash and cash equivalents, included in prepaid expenses and other current assets | |||||||||||
Total cash, cash equivalents and restricted cash — end of period | $ | $ | |||||||||
SUPPLEMENTAL CASH FLOW INFORMATION: | |||||||||||
Cash payments of interest | $ | $ | |||||||||
Cash payments of income taxes | $ | $ | |||||||||
Cash paid for amounts included in the measurement of lease liabilities | $ | $ | |||||||||
NON-CASH TRANSACTIONS: | |||||||||||
Fixed asset purchases recorded in accounts payable and accrued expenses | $ | $ | |||||||||
Contingent consideration issued for acquisitions | $ | $ | |||||||||
Operating right-of-use assets obtained in exchange for operating lease liabilities — net | $ | $ |
Six months ended June 30, 2020 | |||||
Beginning balance at January 1, 2020 | $ | ||||
Provision | |||||
Write-offs and recoveries | ( | ||||
Ending balance at June 30, 2020 | $ |
Full service center-based child care | Back-up care | Educational advisory services | Total | ||||||||||||||||||||
Three months ended June 30, 2020 | |||||||||||||||||||||||
North America | $ | $ | $ | $ | |||||||||||||||||||
Europe | |||||||||||||||||||||||
$ | $ | $ | $ | ||||||||||||||||||||
Three months ended June 30, 2019 | |||||||||||||||||||||||
North America | $ | $ | $ | $ | |||||||||||||||||||
Europe | |||||||||||||||||||||||
$ | $ | $ | $ |
Full service center-based child care | Back-up care | Educational advisory services | Total | ||||||||||||||||||||
Six months ended June 30, 2020 | |||||||||||||||||||||||
North America | $ | $ | $ | $ | |||||||||||||||||||
Europe | |||||||||||||||||||||||
$ | $ | $ | $ | ||||||||||||||||||||
Six months ended June 30, 2019 | |||||||||||||||||||||||
North America | $ | $ | $ | $ | |||||||||||||||||||
Europe | |||||||||||||||||||||||
$ | $ | $ | $ |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Operating lease expense (1) | $ | $ | $ | $ | |||||||||||||||||||
Variable lease expense (1) | |||||||||||||||||||||||
Total lease expense | $ | $ | $ | $ |
June 30, 2020 | December 31, 2019 | ||||||||||
Weighted average remaining lease term (in years) | |||||||||||
Weighted average discount rate |
Operating Leases | |||||
Remainder of 2020 | $ | ||||
2021 | |||||
2022 | |||||
2023 | |||||
2024 | |||||
Thereafter | |||||
Total lease payments | |||||
Less imputed interest | ( | ||||
Present value of lease liabilities | |||||
Less current portion of operating lease liabilities | ( | ||||
Long-term operating lease liabilities | $ |
Full service center-based child care | Back-up care | Educational advisory services | Total | ||||||||||||||||||||
Balance at January 1, 2019 | $ | $ | $ | $ | |||||||||||||||||||
Additions from acquisitions | |||||||||||||||||||||||
Adjustments to prior year acquisitions | ( | ( | |||||||||||||||||||||
Effect of foreign currency translation | |||||||||||||||||||||||
Balance at December 31, 2019 | |||||||||||||||||||||||
Additions from acquisitions | |||||||||||||||||||||||
Adjustments to prior year acquisitions | ( | ( | ( | ||||||||||||||||||||
Effect of foreign currency translation | ( | ( | ( | ||||||||||||||||||||
Balance at June 30, 2020 | $ | $ | $ | $ |
June 30, 2020 | Weighted average amortization period | Cost | Accumulated amortization | Net carrying amount | |||||||||||||||||||
Definite-lived intangible assets: | |||||||||||||||||||||||
Customer relationships | $ | $ | ( | $ | |||||||||||||||||||
Trade names | ( | ||||||||||||||||||||||
( | |||||||||||||||||||||||
Indefinite-lived intangible assets: | |||||||||||||||||||||||
Trade names | N/A | — | |||||||||||||||||||||
$ | $ | ( | $ |
December 31, 2019 | Weighted average amortization period | Cost | Accumulated amortization | Net carrying amount | |||||||||||||||||||
Definite-lived intangible assets: | |||||||||||||||||||||||
Customer relationships | $ | $ | ( | $ | |||||||||||||||||||
Trade names | ( | ||||||||||||||||||||||
( | |||||||||||||||||||||||
Indefinite-lived intangible assets: | |||||||||||||||||||||||
Trade names | N/A | — | |||||||||||||||||||||
$ | $ | ( | $ |
Estimated amortization expense | |||||
Remainder of 2020 | $ | ||||
2021 | $ | ||||
2022 | $ | ||||
2023 | $ | ||||
2024 | $ |
June 30, 2020 | December 31, 2019 | ||||||||||
Term loans | $ | $ | |||||||||
Deferred financing costs and original issue discount | ( | ( | |||||||||
Total debt | |||||||||||
Less current maturities | |||||||||||
Long-term debt | $ | $ |
Term Loans | |||||
Remainder of 2020 | $ | ||||
2021 | |||||
2022 | |||||
2023 | |||||
Total future principal payments | $ |
Derivative financial instruments | Consolidated balance sheet classification | June 30, 2020 | December 31, 2019 | |||||||||||||||||
Interest rate swaps - liability | Other long-term liabilities | $ | ( | $ | ( | |||||||||||||||
Interest rate caps - asset | Other assets | $ | $ |
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 | $ | ( | Interest expense — net | $ | ( | $ | ||||||||||||||||||||
Interest rate caps | ( | Interest expense — net | ( | |||||||||||||||||||||||
Income tax effect | Income tax expense | ( | ||||||||||||||||||||||||
Net of income taxes | $ | ( | $ | ( | $ |
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 | $ | ( | Interest expense — net | $ | $ | ( | ||||||||||||||||||||
Income tax effect | Income tax expense | ( | ||||||||||||||||||||||||
Net of income taxes | $ | ( | $ | $ | ( |
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 | $ | ( | Interest expense — net | $ | ( | $ | ( | |||||||||||||||||||
Interest rate caps | ( | Interest expense — net | ( | |||||||||||||||||||||||
Income tax effect | Income tax expense | |||||||||||||||||||||||||
Net of income taxes | $ | ( | $ | ( | $ | ( |
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 | $ | ( | Interest expense — net | $ | $ | ( | ||||||||||||||||||||
Income tax effect | Income tax expense | ( | ||||||||||||||||||||||||
Net of income taxes | $ | ( | $ | $ | ( |
Basic earnings per share: | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Allocation of net income to common stockholders: | |||||||||||||||||||||||
Common stock | $ | $ | $ | $ | |||||||||||||||||||
Unvested participating shares | |||||||||||||||||||||||
$ | $ | $ | $ | ||||||||||||||||||||
Weighted average common shares outstanding: | |||||||||||||||||||||||
Common stock | |||||||||||||||||||||||
Unvested participating shares | |||||||||||||||||||||||
Earnings per common share: | |||||||||||||||||||||||
Common stock | $ | $ | $ | $ |
Diluted earnings per share: | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Earnings allocated to common stock | $ | $ | $ | $ | |||||||||||||||||||
Earnings allocated to unvested participating shares | |||||||||||||||||||||||
Adjusted earnings allocated to unvested participating shares | ( | ( | ( | ( | |||||||||||||||||||
Earnings allocated to common stock | $ | $ | $ | $ | |||||||||||||||||||
Weighted average common shares outstanding: | |||||||||||||||||||||||
Common stock | |||||||||||||||||||||||
Effect of dilutive securities | |||||||||||||||||||||||
Earnings per common share: | |||||||||||||||||||||||
Common stock | $ | $ | $ | $ |
Six months ended June 30, 2020 | |||||
Balance at January 1, 2020 | $ | ||||
Settlement of contingent consideration liabilities | ( | ||||
Changes in fair value | |||||
Foreign currency translation | ( | ||||
Balance at June 30, 2020 | $ |
Six months ended June 30, 2020 | |||||||||||||||||||||||||||||
Foreign currency translation adjustments | Unrealized gain (loss) on interest rate swaps | Unrealized gain (loss) on interest rate caps | Unrealized gain (loss) on investments | Total | |||||||||||||||||||||||||
Balance at January 1, 2020 | $ | ( | $ | ( | $ | $ | $ | ( | |||||||||||||||||||||
Other comprehensive income (loss) before reclassifications, net of tax | ( | ( | ( | ( | |||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss), net of tax | — | — | |||||||||||||||||||||||||||
Net other comprehensive income (loss) | ( | ( | ( | ( | |||||||||||||||||||||||||
Balance at June 30, 2020 | $ | ( | $ | ( | $ | ( | $ | $ | ( |
Six months ended June 30, 2019 | |||||||||||||||||||||||
Foreign currency translation adjustments | Unrealized gain (loss) on interest rate swaps | Unrealized gain (loss) on investments | Total | ||||||||||||||||||||
Balance at January 1, 2019 | $ | ( | $ | $ | $ | ( | |||||||||||||||||
Other comprehensive income (loss) before reclassifications, net of tax | ( | ( | ( | ||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss), net of tax | — | ( | — | ( | |||||||||||||||||||
Net other comprehensive income (loss) | ( | ( | ( | ||||||||||||||||||||
Balance at June 30, 2019 | $ | ( | $ | ( | $ | $ | ( |
Full service center-based child care | Back-up care | Educational advisory services | Total | ||||||||||||||||||||
Three months ended June 30, 2020 | |||||||||||||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||||||||||
Income (loss) from operations (1) | ( | ||||||||||||||||||||||
Three months ended June 30, 2019 | |||||||||||||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||||||||||
Income from operations |
Full service center-based child care | Back-up care | Educational advisory services | Total | ||||||||||||||||||||
Six months ended June 30, 2020 | |||||||||||||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||||||||||
Income (loss) from operations (1) | ( | ||||||||||||||||||||||
Six months ended June 30, 2019 | |||||||||||||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||||||||||
Income from operations (2) |
Three Months Ended June 30, | |||||||||||||||||||||||
2020 | % | 2019 | % | ||||||||||||||||||||
Revenue | $ | 293,772 | 100.0 | % | $ | 528,060 | 100.0 | % | |||||||||||||||
Cost of services | 228,536 | 77.8 | % | 388,439 | 73.6 | % | |||||||||||||||||
Gross profit | 65,236 | 22.2 | % | 139,621 | 26.4 | % | |||||||||||||||||
Selling, general and administrative expenses | 49,247 | 16.8 | % | 56,491 | 10.7 | % | |||||||||||||||||
Amortization of intangible assets | 7,875 | 2.6 | % | 8,297 | 1.6 | % | |||||||||||||||||
Income from operations | 8,114 | 2.8 | % | 74,833 | 14.1 | % | |||||||||||||||||
Interest expense — net | (9,129) | (3.1) | % | (11,723) | (2.2) | % | |||||||||||||||||
Income (loss) before income tax | (1,015) | (0.3) | % | 63,110 | 11.9 | % | |||||||||||||||||
Income tax benefit (expense) | 1,374 | 0.4 | % | (13,783) | (2.6) | % | |||||||||||||||||
Net income | $ | 359 | 0.1 | % | $ | 49,327 | 9.3 | % | |||||||||||||||
Adjusted EBITDA (1) | $ | 60,025 | 20.4 | % | $ | 105,885 | 20.1 | % | |||||||||||||||
Adjusted income from operations (1) | $ | 27,211 | 9.3 | % | $ | 74,833 | 14.1 | % | |||||||||||||||
Adjusted net income (1) | $ | 26,445 | 9.0 | % | $ | 58,458 | 11.1 | % |
Six Months Ended June 30, | |||||||||||||||||||||||
2020 | % | 2019 | % | ||||||||||||||||||||
Revenue | $ | 800,095 | 100.0 | % | $ | 1,029,818 | 100.0 | % | |||||||||||||||
Cost of services | 626,000 | 78.2 | % | 763,250 | 74.1 | % | |||||||||||||||||
Gross profit | 174,095 | 21.8 | % | 266,568 | 25.9 | % | |||||||||||||||||
Selling, general and administrative expenses | 106,616 | 13.3 | % | 112,366 | 10.9 | % | |||||||||||||||||
Amortization of intangible assets | 16,084 | 2.1 | % | 16,459 | 1.6 | % | |||||||||||||||||
Income from operations | 51,395 | 6.4 | % | 137,743 | 13.4 | % | |||||||||||||||||
Interest expense — net | (19,335) | (2.4) | % | (23,671) | (2.3) | % | |||||||||||||||||
Income before income tax | 32,060 | 4.0 | % | 114,072 | 11.1 | % | |||||||||||||||||
Income tax expense | (969) | (0.1) | % | (22,703) | (2.2) | % | |||||||||||||||||
Net income | $ | 31,091 | 3.9 | % | $ | 91,369 | 8.9 | % | |||||||||||||||
Adjusted EBITDA (1) | $ | 141,483 | 17.7 | % | $ | 199,723 | 19.4 | % | |||||||||||||||
Adjusted income from operations (1) | $ | 76,165 | 9.5 | % | $ | 138,176 | 13.4 | % | |||||||||||||||
Adjusted net income (1) | $ | 70,091 | 8.8 | % | $ | 106,270 | 10.3 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Net income | $ | 359 | $ | 49,327 | $ | 31,091 | $ | 91,369 | |||||||||||||||
Interest expense — net | 9,129 | 11,723 | 19,335 | 23,671 | |||||||||||||||||||
Income tax expense (benefit) | (1,374) | 13,783 | 969 | 22,703 | |||||||||||||||||||
Depreciation | 19,784 | 18,588 | 39,796 | 36,888 | |||||||||||||||||||
Amortization of intangible assets (a) | 7,875 | 8,297 | 16,084 | 16,459 | |||||||||||||||||||
EBITDA | 35,773 | 101,718 | 107,275 | 191,090 | |||||||||||||||||||
Additional Adjustments: | |||||||||||||||||||||||
COVID-19 related costs (b) | 18,436 | — | 23,406 | — | |||||||||||||||||||
Stock-based compensation expense (c) | 5,155 | 4,512 | 9,438 | 7,618 | |||||||||||||||||||
Other costs (d) | 661 | — | 1,364 | 433 | |||||||||||||||||||
Non-cash operating lease expense (e) | — | (345) | — | 582 | |||||||||||||||||||
Total adjustments | 24,252 | 4,167 | 34,208 | 8,633 | |||||||||||||||||||
Adjusted EBITDA | $ | 60,025 | $ | 105,885 | $ | 141,483 | $ | 199,723 | |||||||||||||||
Income from operations | $ | 8,114 | $ | 74,833 | $ | 51,395 | $ | 137,743 | |||||||||||||||
COVID-19 related costs (b) | 18,436 | — | 23,406 | — | |||||||||||||||||||
Other costs (d) | 661 | — | 1,364 | 433 | |||||||||||||||||||
Adjusted income from operations | $ | 27,211 | $ | 74,833 | $ | 76,165 | $ | 138,176 | |||||||||||||||
Net income | $ | 359 | $ | 49,327 | $ | 31,091 | $ | 91,369 | |||||||||||||||
Income tax expense (benefit) | (1,374) | 13,783 | 969 | 22,703 | |||||||||||||||||||
Income (loss) before income tax | (1,015) | 63,110 | 32,060 | 114,072 | |||||||||||||||||||
Amortization of intangible assets (a) | 7,875 | 8,297 | 16,084 | 16,459 | |||||||||||||||||||
COVID-19 related costs (b) | 18,436 | — | 23,406 | — | |||||||||||||||||||
Stock-based compensation expense (c) | 5,155 | 4,512 | 9,438 | 7,618 | |||||||||||||||||||
Other costs (d) | 661 | — | 1,364 | 433 | |||||||||||||||||||
Adjusted income before income tax | 31,112 | 75,919 | 82,352 | 138,582 | |||||||||||||||||||
Adjusted income tax expense (f) | (4,667) | (17,461) | (12,261) | (32,312) | |||||||||||||||||||
Adjusted net income | $ | 26,445 | $ | 58,458 | $ | 70,091 | $ | 106,270 | |||||||||||||||
Weighted average common shares outstanding — diluted | 60,266,102 | 58,939,763 | 59,572,444 | 58,846,073 | |||||||||||||||||||
Diluted adjusted earnings per common share | $ | 0.44 | $ | 0.99 | $ | 1.18 | $ | 1.81 |
Cash Flows | Six Months Ended June 30, | ||||||||||
2020 | 2019 | ||||||||||
(In thousands) | |||||||||||
Net cash provided by operating activities | $ | 51,260 | $ | 190,611 | |||||||
Net cash used in investing activities | $ | (28,275) | $ | (90,899) | |||||||
Net cash provided by (used in) financing activities | $ | 221,470 | $ | (112,378) | |||||||
Cash, cash equivalents and restricted cash — beginning of period | $ | 31,192 | $ | 38,478 | |||||||
Cash, cash equivalents and restricted cash — end of period | $ | 274,739 | $ | 26,226 |
June 30, 2020 | December 31, 2019 | ||||||||||
Term loans | $ | 1,040,063 | $ | 1,045,438 | |||||||
Deferred financing costs and original issue discount | (4,512) | (6,639) | |||||||||
Total debt | 1,035,551 | 1,038,799 | |||||||||
Less current maturities | 10,750 | 10,750 | |||||||||
Long-term debt | $ | 1,024,801 | $ | 1,028,049 |
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) | ||||||||||||||||||||||
April 1, 2020 to April 30, 2020 (2) | 467 | $ | 107.65 | — | $ | 194,850 | ||||||||||||||||||||
May 1, 2020 to May 31, 2020 | — | $ | — | — | $ | 194,850 | ||||||||||||||||||||
June 1, 2020 to June 30, 2020 | — | $ | — | — | $ | 194,850 | ||||||||||||||||||||
467 | — |
Exhibit Number | Exhibit Title | |||||||
10.1 | Stock Purchase Agreement, dated as of April 19, 2020, by and between Bright Horizons Family Solutions Inc. and Durable Capital Master Fund LP. (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed May 11, 2020). | |||||||
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 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 | 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 (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q, filed May 11, 2020). | |||||||
31.1* | ||||||||
31.2* | ||||||||
32.1** | ||||||||
32.2** | ||||||||
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. | ||||
BRIGHT HORIZONS FAMILY SOLUTIONS INC. | |||||||||||
Date: | August 10, 2020 | By: | /s/ Elizabeth Boland | ||||||||
Elizabeth Boland | |||||||||||
Chief Financial Officer | |||||||||||
(Duly Authorized Officer) |
Date: | August 10, 2020 | /s/ Stephen Kramer | |||||||||
Stephen Kramer | |||||||||||
Chief Executive Officer |
Date: | August 10, 2020 | /s/ Elizabeth Boland | |||||||||
Elizabeth Boland | |||||||||||
Chief Financial Officer |
Date: | August 10, 2020 | /s/ Stephen Kramer | |||||||||
Stephen Kramer | |||||||||||
Chief Executive Officer |
Date: | August 10, 2020 | /s/ Elizabeth Boland | |||||||||
Elizabeth Boland | |||||||||||
Chief Financial Officer |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts Receivable, Allowance for Credit Loss, Current | $ 8,351 | $ 1,226 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 25,000,000 | 25,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in usd per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 475,000,000 | 475,000,000 |
Common stock, shares issued (in shares) | 60,152,187 | 57,884,020 |
Common stock, shares outstanding (in shares) | 60,152,187 | 57,884,020 |
Condensed Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Revenue | $ 293,772 | $ 528,060 | $ 800,095 | $ 1,029,818 |
Cost of services | 228,536 | 388,439 | 626,000 | 763,250 |
Gross profit | 65,236 | 139,621 | 174,095 | 266,568 |
Selling, general and administrative expenses | 49,247 | 56,491 | 106,616 | 112,366 |
Amortization of intangible assets | 7,875 | 8,297 | 16,084 | 16,459 |
Income from operations | 8,114 | 74,833 | 51,395 | 137,743 |
Interest expense — net | (9,129) | (11,723) | (19,335) | (23,671) |
Income (loss) before income tax | (1,015) | 63,110 | 32,060 | 114,072 |
Income tax benefit (expense) | 1,374 | (13,783) | (969) | (22,703) |
Net income | $ 359 | $ 49,327 | $ 31,091 | $ 91,369 |
Weighted average common shares outstanding: | ||||
Common stock — diluted (in shares) | 60,266,102 | 58,939,763 | 59,572,444 | 58,846,073 |
Cost of services, extensible list | us-gaap:ServiceMember | |||
Common Stock | ||||
Earnings per common share: | ||||
Common stock — basic (in dollars per share) | $ 0.01 | $ 0.85 | $ 0.53 | $ 1.57 |
Common stock — diluted (in dollars per share) | $ 0.01 | $ 0.83 | $ 0.52 | $ 1.55 |
Weighted average common shares outstanding: | ||||
Common stock — basic (in shares) | 59,631,428 | 57,847,630 | 58,781,169 | 57,763,335 |
Common stock — diluted (in shares) | 60,266,102 | 58,939,763 | 59,572,444 | 58,846,073 |
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 359 | $ 49,327 | $ 31,091 | $ 91,369 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustments | 1,557 | (10,796) | (37,951) | (3,818) |
Unrealized gain (loss) on cash flow hedges and investments, net of tax | 793 | (4,303) | (3,477) | (7,170) |
Total other comprehensive income (loss) | 2,350 | (15,099) | (41,428) | (10,988) |
Comprehensive income (loss) | $ 2,709 | $ 34,228 | $ (10,337) | $ 80,381 |
Organization and Basis of Presentation |
6 Months Ended | ||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||
Organization and Basis of Presentation | 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 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 June 30, 2020 and the condensed consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the interim periods ended June 30, 2020 and 2019 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, 2019. Certain reclassifications have been made to prior period amounts within the operating section of the condensed consolidated statement of cash flows 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, 2020 and the condensed consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the interim periods ended June 30, 2020 and 2019, 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. At June 30, 2020, $194.9 million remained available under the repurchase program. The Company has temporarily suspended share repurchases due to the impact of COVID-19 as the Company prioritizes investments to the most critical operating areas. 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 — In March 2020, the Company began to experience the impact of the COVID-19 pandemic on its global operations, as required business and school closures and shelter-in-place government mandates resulted in the temporary closure of a significant portion of the Company’s child care centers. The Company has continued 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. As countries and local jurisdictions have begun to lift certain restrictions and re-open, the Company commenced a phased re-opening of its temporarily closed centers. As of June 30, 2020, the Company managed the operations of 1,076 child care and early education centers with the capacity to serve approximately 120,000 children and their families. As of June 30, 2020, over 400 of its child care centers were operating, including approximately 210 centers in the United States, 135 centers in the United Kingdom, and 61 centers in the Netherlands, with a total capacity to serve approximately 50,000 children. The Company plans to continue this phased re-opening through the third and fourth quarters of 2020, and potentially in subsequent periods, as conditions permit. Open centers are operating with specific COVID-19 protocols in place in order to protect the health and safety of children, families 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 group sizes, and enhanced hygiene and cleaning practices. The Company’s back-up care and educational advisory services have remained fully operational and available to clients. Due to the acute need for child care support, the Company expanded back-up care services and the availability of self-sourced reimbursed care. As a result of the economic effects of the COVID-19 pandemic, including the Company’s temporary closure of a significant portion of its centers and the related negative financial impact to its results of operations, the Company considered whether these conditions indicated it was more likely than not that the Company’s $1.4 billion in goodwill and $180.6 million in indefinite-lived intangible assets were impaired. Based on the facts and circumstances as of June 30, 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 operating lease right-of-use assets and amortizable intangible assets, to determine whether these conditions indicated that the carrying amount of such assets may not be recoverable. During the six months ended June 30, 2020, the Company recognized a $16.9 million impairment loss on long-lived assets for certain centers that are unlikely to recover the carrying amount of their long-lived assets due to the operational disruption caused by the pandemic, including certain locations that the Company has decided to not re-open or expects not to continue operating on a long-term basis. Given the current risks and uncertainties associated with the COVID-19 pandemic, additional impairment losses may occur. The broad effects of COVID-19, its duration and scope of the ongoing disruption, including the pace of re-opening the Company’s remaining temporarily closed centers and re-ramping of enrollment at centers that have re-opened, cannot be predicted and is affected by many interdependent variables and decisions by government authorities as well as the Company’s client partners. The timing and cadence of re-opening the remaining temporarily closed centers will vary by jurisdiction and will be guided by factors such as government requirements, parent and client demand, as well as guidance and directives from medical experts and the Centers for Disease Control and Prevention (“CDC”). Therefore, although the Company currently anticipates that a significant majority of its centers will re-open by September 30, 2020, the timing and cadence of re-opening the remaining temporarily closed centers may change as we continue to evaluate local conditions and factors governing opening decisions, including federal and state guidelines. The Company cannot anticipate how long it will take for re-opened centers to reach typical enrollment levels and there is no assurance that centers currently open will continue to operate. Additionally, as the Company continues to analyze the current environment, it may decide to not re-open certain centers in locations where demand and economic trends have shifted. While the Company has experienced increased demand for back-up care services, such as in-home care and self-sourced reimbursed care, and minimal disruption to providing educational advisory services, these conditions and trends may not continue in subsequent periods. As businesses and families adapt to new conditions in the coming months, the Company expects its back-up care services to return to primarily in-center and in-home service delivery at more normalized levels going forward. Given these factors, the Company expects the effects of COVID-19 to continue to adversely impact the results of its operations for the remainder of 2020, and potentially in subsequent periods. In response to these developments, the Company has implemented measures in an effort to manage costs and improve liquidity and access to financial resources, and thereby mitigate the impact on the Company’s financial position and operations. These measures include, but are not limited to, the following: •furloughing a significant portion of the Company’s employees in proportion to the number of center closures, including center personnel for temporarily closed centers and related support functions in the Company’s 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; •participating in government assistance programs, including tax deferrals, tax credits and employee wage support; •renegotiating payment terms with vendors and landlords; •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 $249.8 million in net proceeds from the issuance and sale of common stock in April 2020. In light of these actions and based on the Company’s assumptions about the continued impact of COVID-19 on its operations, the Company believes it has sufficient liquidity to satisfy its obligations for at least the next twelve months. Refer to Note 6, Credit Arrangements and Debt Obligations, for additional information on the amendments to the Company’s credit agreement. Government Assistance — The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 in the United States, which is an economic aid package to help mitigate the impact of the pandemic and includes several relief provisions related to payroll and income taxes. 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 of these government assistance programs, including availing itself to certain tax deferrals and tax credits allowed pursuant to the CARES Act in the United States and certain tax deferrals, tax credits, and employee wage support in the United Kingdom, and may continue to do so in the future. Governmental assistance in connection to certain tax credits and employee wage support is recorded on the consolidated statement of income as a reduction to the related expense that the assistance is intended to defray. During the six months ended June 30, 2020, $39.6 million was recorded as a reduction to labor costs, primarily in cost of services, which consists of $10.3 million of payroll tax credits in the United States and $29.3 million of employee wage support in the United Kingdom. As of June 30, 2020, $19.2 million was recorded in prepaid expenses and other current assets on the consolidated balance sheet for amounts due from government assistance programs in relation to these benefits. Additionally, approximately $6.6 million and $6.7 million was recorded in accounts payable and accrued expenses and other long-term liabilities, respectively, related to payroll tax deferrals. 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 upon 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. During the three months ended June 30, 2020, the Company experienced a significant increase in the demand for its back-up care services, which resulted in a corresponding increase in accounts receivable and the allowance for credit losses. Additionally, the Company changed its estimate of credit losses as the economic environment deteriorated. Activity in the allowance for credit losses is as follows (in thousands):
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 June 30, 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 — 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 is in the process of evaluating the impact of adoption of this standard, but does not expect it will have a material impact on the Company’s consolidated financial statements and related disclosures.
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Revenue Recognition |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition | 2. REVENUE RECOGNITION The Company's services are comprised of full service center-based child care, back-up care, and educational advisory services. The Company's back-up care offerings include self-sourced reimbursed care, a reimbursement program for clients to utilize in emergency-type situations. Revenue growth in the back-up care segment for the three months ended June 30, 2020 was primarily attributable to the increased utilization for self-sourced reimbursed care as a result of the acute need for child care during the temporary closure of schools and child care centers. Revenue for self-sourced care is comprised of variable transaction fees paid by employer sponsors and is recognized on a net basis over time as services are provided. 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):
The classification “North America” is comprised of the Company’s United States, Canada, and Puerto Rico operations and the classification “Europe” includes the United Kingdom, Netherlands, and India operations. 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, 2020, $151.4 million was recognized as revenue related to the deferred revenue balance recorded at December 31, 2019. During the six months ended June 30, 2019, $138.7 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 Company’s remaining performance obligations not subject to the practical expedients were not material.
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Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | 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, the Netherlands, and Canada. 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, 2020. Lease Expense The components of lease expense were as follows (in thousands):
(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:
Maturity of Lease Liabilities The following table summarizes the maturity of lease liabilities as of June 30, 2020 (in thousands):
As of June 30, 2020, the Company had entered into additional operating leases that have not yet commenced with total fixed payment obligations of $42.4 million. The leases are expected to commence between the third quarter of fiscal 2020 and the fourth quarter of fiscal 2021 and have initial lease terms of approximately 15 years. Lease Modifications In response to the broad effects of COVID-19, the Company re-negotiated certain payment terms with lessors to mitigate the impact on the Company’s financial position and operations. As of June 30, 2020, the Company had deferred lease payments of $11.7 million. The majority of these lease payments are payable over the next 1.5 years. On April 10, 2020, the FASB issued guidance for lease concessions provided to lessees in response to the effects of COVID-19. Such guidance allows lessees to make an election not to evaluate whether a lease concession provided by a lessor should be accounted for as a lease modification, in the event the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee. Such concessions would be recorded as negative lease expense in the period of relief. The Company elected this practical expedient in accounting for lease concessions provided for our center lease agreements and the impact was immaterial.
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Acquisitions |
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Jun. 30, 2020 | |
Business Combinations [Abstract] | |
Acquisitions | 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 our existing operations, as well as from benefits derived from gaining the related assembled workforce. 2020 Acquisitions During the six months ended June 30, 2020, the Company acquired two centers in the United States, which were accounted for as two separate business combinations. The centers were acquired for cash consideration of $4.3 million and consideration payable of $0.1 million, and includes fixed assets of $2.3 million in relation to the real estate acquired. The Company recorded goodwill of $2.1 million to the full service center-based child care segment, all of which will be deductible for tax purposes. The allocation of purchase price consideration is based on preliminary estimates of fair value; such estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). As of June 30, 2020, the purchase price allocations for these acquisitions remain open as the Company gathers additional information regarding the assets acquired and the liabilities assumed. The operating results for the acquired businesses are included in the consolidated results of operations from the date of acquisition, and were not material to the Company’s financial results. During the six months ended June 30, 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, the Company acquired three centers and the tuition program management division of another company in the United States, four centers in the Netherlands, and one back-up care provider in the United Kingdom, in eight separate business acquisitions, which were each accounted for as business combinations. These businesses were acquired for cash consideration of $53.3 million, net of cash acquired of $1.2 million, and consideration payable of $0.7 million. Additionally, contingent consideration of up to $20.0 million may be payable 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. 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 million related to the educational advisory services segment, 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. The allocation of purchase price consideration is based on preliminary estimates of fair value; such estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). As of June 30, 2020, the purchase price allocations for four of the 2019 acquisitions remain open as the Company gathers additional information regarding the assets acquired and the liabilities assumed. During the year ended December 31, 2019, the Company paid $4.2 million for deferred and contingent consideration, which were accrued 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.
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Goodwill and Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | 5. GOODWILL AND INTANGIBLE ASSETS The changes in the carrying amount of goodwill were as follows (in thousands):
The Company also has intangible assets, which consisted of the following at June 30, 2020 and December 31, 2019 (in thousands):
The Company estimates that it will record amortization expense related to intangible assets existing as of June 30, 2020 as follows (in thousands):
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Credit Arrangements and Debt Obligations |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Arrangements and Debt Obligations | 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 multi-currency revolving credit facility (“revolving credit facility”). The term loans mature on November 7, 2023 and require 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):
On April 24, 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 $385 million. On May 7, 2020, the Company further increased the borrowing capacity of its revolving credit facility from $385 million to $400 million. The revolving credit facility matures on July 31, 2022. There were no borrowings outstanding on the revolving credit facility at June 30, 2020 and December 31, 2019. 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%. Effective as of April 24, 2020, borrowings under the revolving credit facility bear interest at a rate per annum ranging from 0.50% to 1.25% over the base rate, or 1.50% to 2.25% over the eurocurrency rate and the unused commitment fee applicable to the revolving credit commitments ranges from 30 to 50 basis points. Prior to the April 2020 credit amendment, borrowings under the revolving credit facility bore 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 effective interest rate for the term loans was 2.50% and 3.55% at June 30, 2020 and December 31, 2019, respectively, and the weighted average interest rate was 3.00% and 4.24% for the six months ended June 30, 2020 and 2019, respectively, prior to the effects of any interest rate hedge arrangements. The weighted average interest rate for the revolving credit facility was 4.49% and 3.75% for the six months ended June 30, 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. In conjunction with the April and May 2020 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. Amortization expense of deferred financing costs was $0.6 million and $0.4 million for the three months ended June 30, 2020 and 2019, respectively, and was $1.0 million and $0.8 million for the six months ended June 30, 2020 and 2019, respectively. Amortization expense of original issue discount costs was $0.1 million for both the three months ended June 30, 2020 and 2019, and was $0.2 million for both the six months ended June 30, 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 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. 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 first lien gross leverage ratio for four fiscal quarters, followed by a maximum first lien net leverage ratio in the quarters thereafter. The maximum first lien gross leverage ratio was 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. A breach of the applicable covenant is subject to certain equity cure rights. Prior to the April 2020 credit amendment, the Company was required to 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):
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 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 or 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 or 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. As of June 30, 2020 and December 31, 2019, the fair value of the derivative financial instruments was as follows (in thousands):
For the three months ended June 30, 2020, the effect of the derivative financial instruments on other comprehensive income (loss) was as follows (in thousands):
For the three months ended June 30, 2019, the effect of the interest rate swap agreements on other comprehensive income (loss) was as follows (in thousands):
For the six months ended June 30, 2020, the effect of the derivative financial instruments on other comprehensive income (loss) was as follows (in thousands):
For the six months ended June 30, 2019, the effect of the interest rate swap agreements on other comprehensive income (loss) was as follows (in thousands):
During the next twelve months, the Company estimates that a net loss of $5.8 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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Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | 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):
Options outstanding to purchase 1.2 million and 0.8 million shares of common stock were excluded from diluted earnings per share for the three months ended June 30, 2020 and 2019, respectively, and 0.8 million shares of common stock were excluded for both the six months ended June 30, 2020 and 2019, since their effect was anti-dilutive. These options may become dilutive in the future.
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Income Taxes |
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Jun. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 8. INCOME TAXES The Company’s effective income tax rates were (135.4)% and 21.8% for the three months ended June 30, 2020 and 2019, respectively, and 3.0% and 19.9% for the six months ended June 30, 2020 and 2019, respectively. For the three and six months ended June 30, 2020, the Company’s annual effective tax rate was highly sensitive to changes in estimates of total ordinary income (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 effective income tax rate may fluctuate from quarter to quarter for various reasons, including changes to income (loss) before income tax, jurisdictional mix of income (loss) before income tax, valuation allowances, jurisdictional income tax rate changes, as well as discrete items such as the settlement of foreign, federal 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 and six months ended June 30, 2020, the excess tax benefit from stock-based compensation expense decreased tax expense by $1.7 million and $8.6 million, respectively. During the three and six months ended June 30, 2019, the excess tax benefit from stock-based compensation expense decreased tax expense by $2.8 million and $7.4 million, respectively. For the three and six months ended June 30, 2020, prior to the inclusion of the excess tax benefit, the effective income tax rate approximated 29%. For the three and six months ended June 30, 2019, prior to the inclusion of the excess tax benefit, the effective income tax rate approximated 26%. The Company’s unrecognized tax benefits were $3.7 million at June 30, 2020 and $4.3 million at December 31, 2019, 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 zero to $0.3 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 through 2019 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 the tax years from 2015 to 2019 are subject to audit and, as of June 30, 2020, there was one state audit in process. 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.
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Fair Value Measurements |
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | 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 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 approximates their fair value because of their short-term nature. Financial instruments that potentially expose the Company to concentrations of credit risk consist mainly of cash and cash equivalents and accounts receivable. During the six months ended June 30, 2020, the Company experienced a significant increase in cash and cash equivalents resulting from the $249.8 million net proceeds received from the capital raised. Additionally, the Company experienced a significant increase in accounts receivable and the related allowance for credit losses, resulting from the increase in demand for its back-up care services, as further described in Note 1, Organization and Basis of Presentation. The Company mitigates its exposure by maintaining its cash and cash equivalents in financial institutions of high credit standing. The Company’s accounts receivable is derived primarily from the services it provides, and the related credit risk is dispersed across many clients in various industries with no single client accounting for more than 10% of the Company's net revenue or accounts receivable. Even though these significant increases result in increased exposure to credit risk, no significant credit concentration risk existed at June 30, 2020. 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 June 30, 2020, the carrying value and estimated fair value of long-term debt was $1.04 billion and $1.01 billion, respectively. As of December 31, 2019, the carrying value and estimated fair value of long-term debt was $1.05 billion. 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 and interest rate caps are classified as Level 2, as defined under U.S. GAAP. As of June 30, 2020 and December 31, 2019, the fair value of the interest rate swap agreements was a liability of $7.6 million and $2.9 million, respectively, which were recorded in other long-term liabilities on the consolidated balance sheets. As of June 30, 2020, the fair value of the interest rate cap agreements was $1.2 million, which was recorded in other assets on the consolidated balance sheet. Debt Securities — The Company’s investments in debt securities, which are classified as available-for-sale, consist of U.S. Treasury and U.S. government agency securities and certificate of deposits. These securities are held in escrow by the Company’s wholly-owned captive insurance company and were purchased with restricted cash. As such, these securities are not available to fund the Company’s operations. These securities are recorded at fair value using quoted prices available in active markets. As such, the Company’s debt securities are classified as Level 1, as defined under U.S. GAAP. As of June 30, 2020, the fair value of the available-for-sale debt securities was $24.1 million and was classified based on the instruments’ maturity dates, with $21.2 million included in prepaid expenses and other current assets and $2.9 million in other assets on the consolidated balance sheet. As of December 31, 2019, the fair value of the available-for-sale debt securities was $24.9 million, with $17.0 million included in prepaid expenses and other current assets and $7.9 million in other assets on the consolidated balance sheet. At June 30, 2020 and December 31, 2019, the amortized cost was $23.9 million and $24.9 million, respectively. The debt securities held at June 30, 2020 had remaining maturities ranging from less than one year to approximately 1.5 years. Unrealized gains and losses, net of tax, on available-for-sale debt securities are included in accumulated other comprehensive income (loss), and were immaterial for the three and six months ended June 30, 2020 and 2019. The Company did not realize any gains or losses on its debt securities during the three and six months ended June 30, 2020 and 2019. Liabilities for Contingent Consideration — The Company is subject to contingent consideration arrangements in connection with certain business combinations as disclosed in Note 4, Acquisitions. 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 in the Company’s consolidated statement of income. The fair value of the contingent consideration was calculated using a real options model based on probability-weighted outcomes of meeting certain future performance targets. The key inputs to the valuation are the projections of future financial results in relation to the business. The Company classified the contingent consideration liability as a Level 3 fair value measurement due to the lack of observable inputs used in the model. The following table provides a roll forward of the fair value of recurring Level 3 fair value measurements (in thousands):
Nonrecurring fair value estimates — During the three and six months ended June 30, 2020, the Company recognized impairment losses of $11.9 million and $16.9 million, respectively, on fixed assets and operating lease right-of-use assets for certain centers. The impairment losses were included in cost of services on the consolidated statement of income, which have been allocated to the full service center-based child care segment. The estimated fair value of the applicable center long-lived assets was based on the fair value of the asset groups, calculated using a discounted cash flow model, with unobservable inputs. The fair value of the fixed assets was insignificant given the current and expected cash flows of these centers and the valuation of the lease right-of-use-assets considered the amount a market participant would pay for use of the asset. 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. During the three and six months ended June 30, 2020, the Company recognized a $2.1 million impairment loss on an equity investment. The impairment loss was included in cost of services on the consolidated statement of income, which has been allocated to the back-up care segment. The estimated fair value of the equity investment was based on a qualitative assessment, that considered the current economic environment, business prospects and transaction information, among other factors considered. The Company classified the equity investment as a Level 3 fair value measurement due to the lack of observable inputs.
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Accumulated Other Comprehensive Income (Loss) |
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Accumulated Other Comprehensive Income (Loss) | 10. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Accumulated other comprehensive income (loss), which is included as a component of stockholders’ equity, is comprised of foreign currency translation adjustments and unrealized gains (losses) on cash flow hedges and investments, net of tax. The changes in accumulated other comprehensive income (loss) by component were as follows (in thousands):
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Segment Information |
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | 11. SEGMENT INFORMATION The Company’s services are comprised of full service center-based child care, back-up care, and educational advisory services, which also represent the Company’s three operating and reportable segments. 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, in-home child and adult/elder care, and self-sourced reimbursed care. The Company’s educational advisory services segment consists of tuition assistance and student loan repayment program administration, educational consulting services, and college admissions advisory services. The Company and its chief operating decision maker evaluate performance based on revenues and income (loss) from operations. The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements; therefore, no segment asset information is produced or included herein. Revenue and income (loss) from operations by reportable segment were as follows (in thousands):
(1) For the three months ended June 30, 2020, income (loss) from operations included impairment costs of $14.0 million due to the impact of the COVID-19 pandemic, of which $6.7 million related to fixed assets and $5.2 million related to operating lease right-of-use assets in the full service center-based child care segment, and $2.1 million related to an equity investment in the back-up care segment. Additionally, loss from operations in the full service center-based child care segment included $4.4 million in costs associated with the closure of centers, including related severance and facilities costs.
(1) For the six months ended June 30, 2020, income (loss) from operations included impairment costs of $19.0 million due to the impact of the COVID-19 pandemic, of which $11.7 million related to fixed assets and $5.2 million related to operating lease right-of-use assets in the full service center-based child care segment, and $2.1 million related to an equity investment in the back-up care segment. Additionally, loss from operations in the full service center-based child care segment included $4.4 million in costs associated with the closure of centers, including related severance and facilities costs. (2) For the six months ended June 30, 2019, income from operations included expenses incurred in connection with completed acquisitions of $0.4 million, which have been allocated to the back-up care segment.
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Organization and Basis of Presentation (Policies) |
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||
Organization | 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 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 | Basis of Presentation — The accompanying unaudited condensed consolidated balance sheet as of June 30, 2020 and the condensed consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the interim periods ended June 30, 2020 and 2019 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, 2019. Certain reclassifications have been made to prior period amounts within the operating section of the condensed consolidated statement of cash flows 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, 2020 and the condensed consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the interim periods ended June 30, 2020 and 2019, 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.
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Recently Adopted Pronouncements and Recently Issued Pronouncements | 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 upon 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. During the three months ended June 30, 2020, the Company experienced a significant increase in the demand for its back-up care services, which resulted in a corresponding increase in accounts receivable and the allowance for credit losses. Additionally, the Company changed its estimate of credit losses as the economic environment deteriorated. Activity in the allowance for credit losses is as follows (in thousands):
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 June 30, 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 — 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 is in the process of evaluating the impact of adoption of this standard, but does not expect it will have a material impact on the Company’s consolidated financial statements and related disclosures.
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Fair Value Of Financial Instruments | 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 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.
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Organization and Basis of Presentation (Tables) |
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||
Schedule of Allowance for Credit Loss | During the three months ended June 30, 2020, the Company experienced a significant increase in the demand for its back-up care services, which resulted in a corresponding increase in accounts receivable and the allowance for credit losses. Additionally, the Company changed its estimate of credit losses as the economic environment deteriorated. Activity in the allowance for credit losses is as follows (in thousands):
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Revenue Recognition (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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):
The classification “North America” is comprised of the Company’s United States, Canada, and Puerto Rico operations and the classification “Europe” includes the United Kingdom, Netherlands, and India operations.
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Leases (Tables) |
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of lease expense | The components of lease expense were as follows (in thousands):
(1) Excludes short-term lease expense and sublease income, which were immaterial for the periods presented.
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Schedule of weighted average remaining lease term and discount rate | The weighted average remaining lease term and the weighted average discount rate were as follows:
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Maturities of lease liabilities | The following table summarizes the maturity of lease liabilities as of June 30, 2020 (in thousands):
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Goodwill and Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Carrying Amount of Goodwill | The changes in the carrying amount of goodwill were as follows (in thousands):
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Schedule of Finite-Lived Intangible Assets | The Company also has intangible assets, which consisted of the following at June 30, 2020 and December 31, 2019 (in thousands):
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Estimated Amortization Expense Related to Intangible Assets | The Company estimates that it will record amortization expense related to intangible assets existing as of June 30, 2020 as follows (in thousands):
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Credit Arrangements and Debt Obligations (Tables) |
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Borrowings | Outstanding term loan borrowings were as follows (in thousands):
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Schedule of Maturities of Long-term Debt | Future principal payments of long-term debt are as follows for the years ending December 31 (in thousands):
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Schedule of Interest Rate Derivatives by Balance Sheet | As of June 30, 2020 and December 31, 2019, the fair value of the derivative financial instruments was as follows (in thousands):
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Schedule of the Effect of Interest Rate Derivatives on Other Comprehensive Income | For the three months ended June 30, 2020, the effect of the derivative financial instruments on other comprehensive income (loss) was as follows (in thousands):
For the three months ended June 30, 2019, the effect of the interest rate swap agreements on other comprehensive income (loss) was as follows (in thousands):
For the six months ended June 30, 2020, the effect of the derivative financial instruments on other comprehensive income (loss) was as follows (in thousands):
For the six months ended June 30, 2019, the effect of the interest rate swap agreements on other comprehensive income (loss) was as follows (in thousands):
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Earnings Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings (Loss) Per Share, Basic | 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):
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Schedule of Earnings (Loss) Per Share, Diluted |
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Fair Value Measurements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
Schedule of Roll Forward of Contingent Consideration | The following table provides a roll forward of the fair value of recurring Level 3 fair value measurements (in thousands):
|
Accumulated Other Comprehensive Income (Loss) (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in Accumulated Other Comprehensive Income (Loss) | The changes in accumulated other comprehensive income (loss) by component were as follows (in thousands):
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Segment Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income from Operations by Segment | Revenue and income (loss) from operations by reportable segment were as follows (in thousands):
(1) For the three months ended June 30, 2020, income (loss) from operations included impairment costs of $14.0 million due to the impact of the COVID-19 pandemic, of which $6.7 million related to fixed assets and $5.2 million related to operating lease right-of-use assets in the full service center-based child care segment, and $2.1 million related to an equity investment in the back-up care segment. Additionally, loss from operations in the full service center-based child care segment included $4.4 million in costs associated with the closure of centers, including related severance and facilities costs.
(1) For the six months ended June 30, 2020, income (loss) from operations included impairment costs of $19.0 million due to the impact of the COVID-19 pandemic, of which $11.7 million related to fixed assets and $5.2 million related to operating lease right-of-use assets in the full service center-based child care segment, and $2.1 million related to an equity investment in the back-up care segment. Additionally, loss from operations in the full service center-based child care segment included $4.4 million in costs associated with the closure of centers, including related severance and facilities costs. (2) For the six months ended June 30, 2019, income from operations included expenses incurred in connection with completed acquisitions of $0.4 million, which have been allocated to the back-up care segment.
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Organization and Basis of Presentation - Schedule of Allowance For Credit Loss (Details) $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2020
USD ($)
| |
Accounts Receivable, Allowance for Credit Loss [Roll Forward] | |
Beginning balance | $ 1,226 |
Provision | 7,641 |
Write-offs and recoveries | (516) |
Ending balance | $ 8,351 |
Revenue Recognition - Additional Information (Details) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Revenue from Contract with Customer [Abstract] | ||
Deferred revenue, revenue recognized | $ 151.4 | $ 138.7 |
Leases - Additional Information (Details) $ in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2020
USD ($)
|
Jun. 30, 2020
USD ($)
|
|
Lessee, Lease, Description [Line Items] | ||
Impairment loss on operating lease right-of-use assets | $ 5.2 | $ 5.2 |
Total fixed payment obligations for operating lease not yet commenced | 42.4 | 42.4 |
Deferred current lease payments | $ 11.7 | $ 11.7 |
Deferred current lease payments, deferral term | 1 year 6 months | |
Minimum | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease term | 10 years | 10 years |
Maximum | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease term | 15 years | 15 years |
Operating lease not yet commenced term | 15 years | 15 years |
Leases - Lease Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Leases [Abstract] | ||||
Operating lease expense | $ 38,667 | $ 30,429 | $ 72,528 | $ 61,389 |
Variable lease expense | 6,120 | 8,653 | 15,353 | 16,986 |
Total lease expense | $ 44,787 | $ 39,082 | $ 87,881 | $ 78,375 |
Leases - Weighted Average Remaining Lease Term and Discount Rate (Details) |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Leases [Abstract] | ||
Weighted average remaining lease term (in years) | 10 years | 10 years |
Weighted average discount rate (percent) | 6.10% | 6.20% |
Leases - Maturities of Lease Liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Leases [Abstract] | ||
Remainder of 2020 | $ 63,157 | |
2021 | 131,457 | |
2022 | 122,511 | |
2023 | 114,224 | |
2024 | 103,860 | |
Thereafter | 573,179 | |
Total lease payments | 1,108,388 | |
Less imputed interest | (291,556) | |
Present value of lease liabilities | 816,832 | |
Less current portion of operating lease liabilities | (92,457) | $ (83,123) |
Long-term operating lease liabilities | $ 724,375 | $ 685,910 |
Goodwill and Intangible Assets - Intangible Assets Subject to Amortization (Detail) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2020 |
Dec. 31, 2019 |
|
Definite-lived intangible assets: | ||
Cost | $ 412,397 | $ 415,323 |
Accumulated amortization | (305,526) | (291,741) |
Net carrying amount | 106,871 | 123,582 |
Indefinite-lived intangible assets: | ||
Trade names | 180,618 | 181,091 |
Cost | 593,015 | 596,414 |
Net carrying amount | $ 287,489 | $ 304,673 |
Customer relationships | ||
Definite-lived intangible assets: | ||
Weighted average amortization period | 14 years | 14 years |
Cost | $ 402,243 | $ 404,667 |
Accumulated amortization | (297,036) | (283,597) |
Net carrying amount | $ 105,207 | $ 121,070 |
Trade names | ||
Definite-lived intangible assets: | ||
Weighted average amortization period | 6 years | 6 years |
Cost | $ 10,154 | $ 10,656 |
Accumulated amortization | (8,490) | (8,144) |
Net carrying amount | $ 1,664 | $ 2,512 |
Goodwill and Intangible Assets - Estimated Amortization Expense Related to Intangible Assets (Detail) $ in Thousands |
Jun. 30, 2020
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
Remainder of 2020 | $ 15,332 |
2021 | 28,083 |
2022 | 25,774 |
2023 | 24,905 |
2024 | $ 11,051 |
Credit Arrangements and Debt Obligations - Outstanding Borrowing (Detail) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Schedule Of Borrowings [Line Items] | ||
Less current maturities | $ 10,750 | $ 10,750 |
Long-term debt | 1,024,801 | 1,028,049 |
Term Loan | ||
Schedule Of Borrowings [Line Items] | ||
Term loans | 1,040,063 | 1,045,438 |
Deferred financing costs and original issue discount | (4,512) | (6,639) |
Total debt | 1,035,551 | 1,038,799 |
Less current maturities | 10,750 | 10,750 |
Long-term debt | $ 1,024,801 | $ 1,028,049 |
Credit Arrangements and Debt Obligations - Future Principal Payments Under New Term Loan (Detail) - Term Loan $ in Thousands |
Jun. 30, 2020
USD ($)
|
---|---|
Debt Instrument [Line Items] | |
Remainder of 2020 | $ 5,375 |
2021 | 10,750 |
2022 | 10,750 |
2023 | 1,013,188 |
Total debt | $ 1,040,063 |
Credit Arrangements and Debt Obligations - Schedule of Derivatives by Balance Sheet Location (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Interest rate swaps | Other long-term liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Interest rate swaps - liability | $ (7,580) | $ (2,850) |
Interest rate caps | Other assets | ||
Derivatives, Fair Value [Line Items] | ||
Interest rate caps - asset | $ 1,231 | $ 0 |
Earnings Per Share - Additional Information (Detail) - shares shares in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Share-based Payment Arrangement, Option | Common Stock | ||||
Earnings Per Share [Line Items] | ||||
Options outstanding to purchase (in shares) | 1.2 | 0.8 | 0.8 | 0.8 |
Earnings Per Share - Computation of Basic Earnings Per Common Share (Detail) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Calculation Of Numerator And Denominator In Earnings Per Share [Line Items] | ||||
Net income | $ 359 | $ 49,327 | $ 31,091 | $ 91,369 |
Allocation of net income to common stockholders: | ||||
Common stock | 358 | 49,088 | 30,945 | 90,933 |
Unvested participating shares | 1 | 239 | 146 | 436 |
Net income (loss) available to common shareholders | $ 359 | $ 49,327 | $ 31,091 | $ 91,369 |
Common Stock | ||||
Weighted average common shares outstanding: | ||||
Weighted average number of common shares (in shares) | 59,631,428 | 57,847,630 | 58,781,169 | 57,763,335 |
Earnings per common share: | ||||
Common stock (in dollars per share) | $ 0.01 | $ 0.85 | $ 0.53 | $ 1.57 |
Restricted Stock | Common Stock | ||||
Weighted average common shares outstanding: | ||||
Weighted average number of common shares (in shares) | 250,427 | 281,387 | 262,614 | 276,270 |
Earnings Per Share - Computation of Diluted Earnings per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Diluted earnings per share: | ||||
Earnings allocated to common stock | $ 358 | $ 49,088 | $ 30,945 | $ 90,933 |
Earnings allocated to unvested participating shares | 1 | 239 | 146 | 436 |
Adjusted earnings allocated to unvested participating shares | (1) | (234) | (144) | (427) |
Earnings allocated to common stock | $ 358 | $ 49,093 | $ 30,947 | $ 90,942 |
Weighted average common shares outstanding: | ||||
Common stock-diluted (in shares) | 60,266,102 | 58,939,763 | 59,572,444 | 58,846,073 |
Common Stock | ||||
Weighted average common shares outstanding: | ||||
Weighted average number of common shares (in shares) | 59,631,428 | 57,847,630 | 58,781,169 | 57,763,335 |
Effect of dilutive securities (in shares) | 634,674 | 1,092,133 | 791,275 | 1,082,738 |
Common stock-diluted (in shares) | 60,266,102 | 58,939,763 | 59,572,444 | 58,846,073 |
Earnings per common share: | ||||
Common stock (in dollars per share) | $ 0.01 | $ 0.83 | $ 0.52 | $ 1.55 |
Income Taxes - Additional Information (Detail) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2020
USD ($)
|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2020
USD ($)
tax_audit
|
Jun. 30, 2019
USD ($)
|
Dec. 31, 2019
USD ($)
|
|
Income Tax Disclosure [Line Items] | |||||
Effective income tax rates (percent) | (135.40%) | 21.80% | 3.00% | 19.90% | |
Excess tax benefit amount | $ 1,700,000 | $ 2,800,000 | $ 8,600,000 | $ 7,400,000 | |
Effective income tax rate, percent prior to adoption of accounting standards update (percent) | 29.00% | 26.00% | 29.00% | 26.00% | |
Unrecognized income tax benefit | $ 3,700,000 | $ 3,700,000 | $ 4,300,000 | ||
Minimum | |||||
Income Tax Disclosure [Line Items] | |||||
Change in uncertain tax positions | 0 | 0 | |||
Maximum | |||||
Income Tax Disclosure [Line Items] | |||||
Change in uncertain tax positions | $ 300,000 | $ 300,000 | |||
State | |||||
Income Tax Disclosure [Line Items] | |||||
Number of income tax audits in process | tax_audit | 1 |
Fair Value Measurements - Contingent Consideration (Details) $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2020
USD ($)
| |
Business Combination, Contingent Consideration, Liability [Roll Forward] | |
Ending balance | $ 0 |
Fair Value, Inputs, Level 3 | |
Business Combination, Contingent Consideration, Liability [Roll Forward] | |
Beginning balance | 15,987 |
Settlement of contingent consideration liabilities | (1,088) |
Changes in fair value | 422 |
Ending balance | 14,277 |
Foreign Currency Gain (Loss) | Fair Value, Inputs, Level 3 | |
Business Combination, Contingent Consideration, Liability [Roll Forward] | |
Foreign currency translation | $ (1,044) |
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