Acquisitions | 6 Months Ended |
Jun. 30, 2014 |
Business Combinations [Abstract] | ' |
Acquisitions | ' |
3. ACQUISITIONS |
As part of the Company’s growth strategy to expand through strategic and synergistic acquisitions, the Company has made the following acquisitions in the six months ended June 30, 2014 and year ended December 31, 2013. 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 the assembled workforce acquired. |
2014 Acquisitions |
During the six months ended June 30, 2014, the Company acquired three centers in the United States for cash consideration of $6.5 million. The Company recorded goodwill of $5.4 million related to the full service center-based care segment, which will be deductible for tax purposes. Intangible assets of $1.2 million, consisting primarily of customer relationships, fixed assets of $0.3 million, and a working capital deficit of $0.4 million were also recorded 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 the Company gathers additional information regarding the assets acquired and the liabilities assumed. |
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 $50.8 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, which were repaid in the fourth quarter of 2013. |
The purchase price for this acquisition, which was finalized in the first quarter of 2014, has been allocated based on estimates of the fair values of the acquired assets and assumed liabilities at the date of acquisition as follows (in thousands): |
|
| | | | | | | | | | | |
| At acquisition date as reported September 30, 2013 | | Measurement period adjustments | | At acquisition date as reported June 30, 2014 |
Accounts receivable | $ | 981 | | | $ | (126 | ) | | $ | 855 | |
|
Prepaid expenses and other assets | 334 | | | 411 | | | 745 | |
|
Fixed assets | 5,637 | | | 535 | | | 6,172 | |
|
Intangible assets | 12,800 | | | (1,190 | ) | | 11,610 | |
|
Goodwill | 38,818 | | | (2,303 | ) | | 36,515 | |
|
Total assets acquired | 58,570 | | | (2,673 | ) | | 55,897 | |
|
Accounts payable and accrued expenses | (3,441 | ) | | (801 | ) | | (4,242 | ) |
Deferred revenue and parent deposits | (885 | ) | | 18 | | | (867 | ) |
|
Total liabilities assumed | (4,326 | ) | | (783 | ) | | (5,109 | ) |
Purchase price | $ | 54,244 | | | $ | (3,456 | ) | | $ | 50,788 | |
|
The Company recorded goodwill of $36.5 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 consist primarily of $11.3 million of customer relationships that will be amortized over approximately eleven 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 $68.9 million, subject to certain adjustments. The purchase price was financed with available cash on hand. |
The purchase price for this acquisition, which was finalized in the first quarter of 2014, has been allocated based on estimates of the fair values of the acquired assets and assumed liabilities at the date of acquisition as follows (in thousands): |
|
| | | | | | | | | | | |
| At acquisition date as reported June 30, 2013 | | Measurement period adjustments | | At acquisition date as reported June 30, 2014 |
Cash | $ | 4,888 | | | $ | — | | | $ | 4,888 | |
|
Accounts receivable | 1,809 | | | — | | | 1,809 | |
|
Prepaid expenses and other assets | 2,509 | | | — | | | 2,509 | |
|
Fixed assets | 13,901 | | | (192 | ) | | 13,709 | |
|
Favorable leases | — | | | 2,892 | | | 2,892 | |
|
Intangible assets | 17,442 | | | 765 | | | 18,207 | |
|
Goodwill | 55,349 | | | (2,372 | ) | | 52,977 | |
|
Total assets acquired | 95,898 | | | 1,093 | | | 96,991 | |
|
Accounts payable and accrued expenses | (9,450 | ) | | 3,798 | | | (5,652 | ) |
|
Unfavorable leasehold interests | (1,759 | ) | | (5,325 | ) | | (7,084 | ) |
Deferred revenue | (12,853 | ) | | 8,378 | | | (4,475 | ) |
|
Other current liabilities | — | | | (8,378 | ) | | (8,378 | ) |
|
Deferred taxes | (2,735 | ) | | 245 | | | (2,490 | ) |
|
Total liabilities assumed | (26,797 | ) | | (1,282 | ) | | (28,079 | ) |
Purchase price | $ | 69,101 | | | $ | (189 | ) | | $ | 68,912 | |
|
The Company recorded goodwill of $53.0 million, which will not be deductible for tax purposes. Goodwill related to this acquisition is reported within the full service center-based care segment. |
Intangible assets consist primarily of $15.9 million of customer relationships that will be amortized over approximately eight years. A deferred tax liability of $4.0 million was recorded related to the intangible assets for which the amortization is not deductible for tax purposes. |
Pro Forma Information |
The operating results for each of the acquisitions are included in the consolidated results of operations from the respective dates 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 (in thousands): |
| | | | | | | | |
| | | | | | | | | | | |
| Pro forma (Unaudited) | | | | | | | | |
| Six Months Ended | | | | | | | | |
June 30, 2013 | | | | | | | | |
Revenue | $ | 633,196 | | | | | | | | | |
| | | | | | | |
Net loss attributable to Bright Horizons Family Solutions Inc. | $ | (24,715 | ) | | | | | | | | |
The unaudited pro forma results reflect certain adjustments related to the acquisitions, such as increased amortization expense related to the acquired intangible assets. |
These acquired businesses contributed total revenues of $62.2 million in the six months ended June 30, 2014. 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. |