Acquisitions | 9 Months Ended |
Sep. 30, 2013 |
Business Combinations [Abstract] | ' |
Acquisitions | ' |
3 | ACQUISITIONS | | | | | | | |
2013 Acquisitions |
Children’s Choice Learning Centers, Inc. |
On July 22, 2013, the Company acquired the outstanding shares of Children’s Choice Learning Centers, Inc., an operator of 49 employer-sponsored child care centers throughout the United States, for cash consideration of $54.2 million, inclusive of certain adjustments. The purchase price was financed with available cash on hand and funds available under the Company’s revolving credit facility. The Company has incurred acquisition costs of approximately $1.7 million through September 30, 2013, which are included in selling, general and administrative expenses. |
The purchase price for this acquisition has been allocated based on preliminary estimates of the fair values of the acquired assets and assumed liabilities at the date of acquisition as follows (in thousands): |
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Accounts receivable | | $ | 981 | | | | | |
Prepaids and other assets | | | 334 | | | | | |
Fixed assets | | | 5,637 | | | | | |
Intangible assets, primarily customer relationships | | | 12,800 | | | | | |
Goodwill | | | 38,818 | | | | | |
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Total assets acquired | | | 58,570 | | | | | |
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Accounts payable and accrued expenses | | | (3,441 | ) | | | | |
Deferred revenue and parent deposits | | | (885 | ) | | | | |
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Total liabilities assumed | | | (4,326 | ) | | | | |
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Purchase price | | $ | 54,244 | | | | | |
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The allocation of the purchase price consideration was 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 the Company gathers additional information regarding the assets acquired and the liabilities assumed. |
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The Company recorded goodwill of $38.8 million, which will be deductible for tax purposes as permitted under federal tax rules. Goodwill related to this acquisition is reported within the full service center-based care segment. |
Intangible assets of $12.8 million consist of customer relationships and trade names that will be amortized over approximately ten years. |
Kidsunlimited Group Limited |
On April 10, 2013, the Company entered into a share purchase agreement with Lloyds Development Capital (Holdings) Limited and Kidsunlimited Group Limited pursuant to which it acquired 100% of Kidsunlimited, an operator of 64 nurseries throughout the United Kingdom for cash consideration of $69.0 million, subject to certain adjustments. The purchase price was financed with available cash on hand. The Company has incurred acquisition costs of approximately $1.8 million through September 30, 2013, which are included in selling, general and administrative expenses. |
The purchase price for this acquisition has been allocated based on preliminary estimates of the fair values of the acquired assets and assumed liabilities at the date of acquisition as follows (in thousands): |
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| | | | | | | | |
Cash | | $ | 4,888 | | | | | |
Accounts receivable | | | 1,809 | | | | | |
Prepaids and other assets | | | 2,509 | | | | | |
Fixed assets | | | 13,901 | | | | | |
Intangible assets, primarily customer relationships | | | 17,901 | | | | | |
Goodwill | | | 53,604 | | | | | |
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Total assets acquired | | | 94,612 | | | | | |
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Accounts payable and accrued expenses | | | (8,173 | ) | | | | |
Unfavorable leasehold interests | | | (1,759 | ) | | | | |
Deferred revenue | | | (4,475 | ) | | | | |
Other current liabilities | | | (8,378 | ) | | | | |
Deferred taxes | | | (2,840 | ) | | | | |
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Total liabilities assumed | | | (25,625 | ) | | | | |
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Purchase price | | $ | 68,987 | | | | | |
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The allocation of the purchase price consideration was 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 the Company gathers additional information regarding the assets acquired and the liabilities assumed. |
The Company recorded goodwill of $53.6 million, which will not be deductible for tax purposes. Goodwill related to this acquisition is reported within the full service center-based care segment. |
Intangible assets of $17.9 million consist of customer relationships and trade names that will be amortized over approximately eight years. A deferred tax liability of $4.1 million was recorded related to the intangible assets for which the amortization is not deductible for tax purposes. |
Other Acquisitions |
During the three months ended September 30, 2013, the Company also acquired two businesses for aggregate cash consideration of $7.0 million, net of cash acquired of $2.6 million. The Company recorded goodwill of $5.2 million, intangible assets of $2.9 million consisting of customer relationships, and working capital of $1.5 million in relation to these acquisitions. |
2012 Acquisition |
Huntyard Limited |
In May 2012, the Company acquired the outstanding shares of Huntyard Limited (“Huntyard”), a company that operated 27 child care and early education centers in the United Kingdom under the name Casterbridge Early Care and Education, for cash consideration of $110.8 million. The Company also incurred acquisition costs of $0.5 million during the second and third quarters of 2012. |
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The purchase price for this acquisition has been allocated based on the estimated fair values of the acquired assets and assumed liabilities at the date of acquisition as follows (in thousands): |
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Cash | | $ | 2,872 | | | | | |
Accounts receivable | | | 341 | | | | | |
Prepaids and other current assets | | | 2,880 | | | | | |
Fixed assets | | | 65,843 | | | | | |
Intangible assets, primarily customer relationships | | | 6,004 | | | | | |
Goodwill | | | 49,573 | | | | | |
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Total assets acquired | | | 127,513 | | | | | |
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Accounts payable and accrued expenses | | | (7,520 | ) | | | | |
Taxes payable | | | (656 | ) | | | | |
Deferred revenue and parent deposits | | | (3,006 | ) | | | | |
Deferred taxes | | | (5,570 | ) | | | | |
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Total liabilities assumed | | | (16,752 | ) | | | | |
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Purchase price | | $ | 110,761 | | | | | |
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The Company recorded goodwill of $49.6 million, which will not be deductible for tax purposes. Goodwill related to this acquisition is reported within the full service center-based care segment. |
Intangible assets of $6.0 million consist of customer relationships and trade names that will be amortized over five and seven years, respectively. A deferred tax liability of $1.5 million was recorded related to the intangible assets for which the amortization is not deductible for tax purposes. |
During the second quarter of 2013, the Company obtained additional information to determine the fair values of certain assets acquired and liabilities assumed as of the acquisition date. Based on such information, the Company retrospectively adjusted the fiscal year 2012 comparative information resulting in an increase in goodwill of $3.9 million with a corresponding increase in deferred income taxes. There were no changes to the previously reported condensed consolidated statements of operations or condensed consolidated statements of cash flows. |
Pro Forma Information |
The operating results for each of the acquisitions are included in the consolidated results of operations from the date of acquisition. The following table presents consolidated pro forma information as if the acquisitions of Children’s Choice Learning Centers, Inc. and Kidsunlimited had occurred on January 1, 2012, and as if the acquisition of Huntyard had occurred on January 1, 2011 (in thousands): |
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| | Pro forma (Unaudited) | |
| | Nine Months Ended | | | Nine Months Ended | |
September 30, 2013 | September 30, 2012 |
Revenue | | $ | 943,745 | | | $ | 896,609 | |
Net (loss) income attributable to Bright Horizons Family Solutions Inc. | | $ | (9,221 | ) | | $ | 8,888 | |
These acquired businesses contributed total revenues of $74.7 million in the nine months ended September 30, 2013. The Company has also determined that the presentation of net income for each of those acquisitions, from the date of acquisition, is impracticable due to the integration of the operations upon acquisition. The goodwill resulting from the 2012 and 2013 acquisitions arises largely from the synergies expected from combining the operations of the acquisitions with our existing operations. |