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The global COVID-19 pandemic has significantly disrupted our business and our financial condition and operating results and will continue to adversely impact our business.
−Removed: The COVID-19 pandemic has substantially disrupted our global operations.
−Removed: We expect to continue to be impacted as the situation remains dynamic and subject to rapid and potentially material changes.
−Removed: As of December 31, 2020, we operated 1,014 child care and early education centers with the capacity to serve approximately 114,000 children and their families, of which 910 child care centers with the capacity to serve approximately 105,000 children were open.
−Removed: While we are focused on the re-enrollment and ramping of our centers and continuing the phased re-opening of our centers that remain temporarily closed, the continued or additional disruptions to our business and potential adverse impacts to our financial condition and results of operations resulting from the COVID-19 pandemic include, but are not limited to:
−Removed: • significant changes in the conditions of the markets we operate in, including required school and business closures, stay-at-home mandates or new lockdown orders, limiting our ability to provide our services, especially center-based child care and center-based back-up child care, and potentially resulting in continued center closures or permanent center closures;
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−Removed: • reduced enrollment upon the re-opening of centers and difficulty re-ramping enrollment as families may limit their participation in various public activities and gatherings, including group child care, or as social distancing protocols and other licensing regulations may reduce group sizes or otherwise affect the overall capacity of children we can serve;
−Removed: • inability to hire and maintain an adequate level of center staff requiring us to reduce enrollment in order to comply with mandated ratios, inability to retain teachers after long periods of furlough, and the impact to our operations if a significant percentage of our workforce is unable to return to work because of illness, quarantine, worker absenteeism, limitations on travel, or government or social distancing restrictions, or difficulty maintaining or retaining staff, which may have a disproportionate impact on our business compared to other companies that depend less on the in-person provision of services;
−Removed: • periodic classroom closures or temporary center closures due to potential exposure to COVID-19, which may impact our reputation or impact parent/client confidence resulting in reduced demand or the adoption of alternative child care options;
−Removed: • the length of time before COVID-19 vaccines are available to the general public or children or the lack of widespread adoption and acceptance of the vaccine by the general public, which may have a disproportionate impact on our business compared to other companies that depend less on the in-person provision of services;
−Removed: • reduced or shifting demand for our services due to adverse and uncertain economic and demographic conditions, including as a result of clients that have been adversely impacted, and/or increased unemployment, continued school and business closures, new lockdown orders, long-term shift to an at-home workforce, and general effects of a broad-based economic recession;
−Removed: • incremental costs associated with mitigating the effects of the pandemic, additional procedures and protocols required to maintain health and safety at our centers, and costs and reputational harm associated with a potential COVID-19 outbreak at our centers, or the failure of compliance with our COVID-19 health and safety protocols;
−Removed: • a decrease in revenues due to clients requesting refunds or renegotiating contracts for reduced or changing services;
−Removed: • the potential deterioration in the collectability of our existing accounts receivable and a decrease in the generation of new revenue due to the potential diminished financial health of our clients;
−Removed: • inability to implement our growth strategies due to prolonged business contraction and reduced capital expenditures and cost-saving initiatives;
−Removed: • delayed re-opening or permanent closure of centers outside of our control due in large part to the interdependence of our operations with our client partners’ operating decisions and requirements as well as decisions by governmental authorities regarding school and business closures and requirements for re-opening;
+Added: The COVID-19 pandemic has substantially disrupted our global operations, and we expect to continue to be impacted as the conditions persist.
+Added: The situation remains dynamic and subject to rapid and potentially material changes.
+Added: As of December 31, 2021, we operated 1,014 early education and child care centers with the capacity to serve approximately 114,000 children and their families, of which 977 child care centers were open.
+Added: While we are focused on the enrollment of our centers, the continued or additional disruptions to our business and potential adverse impacts to our financial condition and results of operations resulting from the COVID-19 pandemic include, but are not limited to:
+Added: • significant changes in the conditions of the markets we operate in limiting our ability to provide our services, especially center-based child care and center-based back-up child care, and potentially resulting in continued center closures or permanent center closures;
+Added: • reduced enrollment upon the re-opening of centers as families may limit their participation in various public activities and gatherings, including group child care;
+Added: • inability to hire and maintain an adequate level of center staff requiring us to reduce enrollment, close classrooms or centers in order to comply with mandated ratios, inability to retain teachers, and the impact to our operations if a significant percentage of our workforce is unable to return to work because of illness, quarantine, worker absenteeism, limitations on travel, or government or social distancing restrictions, or difficulty maintaining or retaining staff, which may have a disproportionate impact on our business compared to other companies that depend less on the in-person provision of services and do not directly provide care and education to young children;
+Added: • new or persistent COVID-19 variants could result in temporary classroom or center closures or permanent closure of centers outside of our control due in large part to the interdependence of our operations with our client partners’ operating decisions and requirements, which may result in reduced demand or the adoption of alternative child care options;
+Added: • the adoption and efficacy of vaccines may have a disproportionate impact on our business compared to other companies that depend less on the in-person provision of services;
+Added: • reduced or shifting demand for our services due to adverse and uncertain economic and demographic conditions, including as a result of clients that have been adversely impacted, and/or increased unemployment, school and business closures, lockdown orders, long-term shift to a remote workforce, and general effects of a broad-based economic recession;
+Added: • incremental costs and general disruption associated with additional procedures and protocols required to maintain health and safety at our centers, and costs and reputational harm associated with a potential COVID-19 outbreak at our centers, or the failure of compliance with COVID-19 health and safety protocols;
+Added: • a reduction or limit on governmental grant funding for COVID-19 relief at the federal, state and local level could adversely impact our results of operations;
• legal actions or proceedings related to COVID-19;
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Additional impacts may arise of which we are currently not aware, the nature and extent of which will depend on future developments which are highly uncertain and cannot be predicted.
−Removed: Changes in the demand for child and adult/elder dependent care, and workplace solutions, which may be negatively affected by demographic trends and economic conditions, may affect our operating results.
−Removed: Our business strategy depends on employers recognizing the value in providing employees with child care, dependent care, workforce education, and other workplace solutions as an employee benefit.
+Added: Vaccine and workplace safety mandates or guidance proposed or implemented by federal, state or local governments, or by clients, could disrupt the Company’s operations, increase costs and adversely affect its business, financial condition, or results of operations.
+Added: Notwithstanding the withdrawal of the federal Occupational Safety and Health Administration emergency rule on vaccine mandates, many state, county, and local jurisdictions have proposed or implemented some form of COVID-19 workplace safety guidance and requirements including vaccinations, masking and physical distancing or weekly testing requirements.
+Added: Further vaccine mandates or other requirements may be announced in jurisdictions in which our businesses operate, by state or local governments or by the clients we serve.
+Added: Complying with vaccine mandates may be costly and operationally complex.
+Added: Additionally, competing and potentially conflicting laws and regulations regarding vaccine mandates and testing requirements could further complicate compliance.
+Added: Such vaccination requirements may result in incremental employee turnover, recruiting challenges or additional costs, which could have a material adverse effect on our business, financial condition, and results of operations.
+Added: Our business depends largely on our ability to hire and retain qualified teachers and maintain strong employee relations.
+Added: The provision of child care services is personnel intensive.
+Added: Our business depends on our ability to attract, train, and retain the appropriate mix of qualified employees and on effectively implementing and maintaining strong employee relations, cultivating an atmosphere of trust, and effectively communicating the value proposition of working at Bright Horizons.
+Added: The early education and child care industry traditionally has experienced high turnover rates.
+Added: In addition, state laws require our teachers and other staff members to meet certain educational and other minimum requirements, and we often require that teachers and staff at our centers have additional qualifications.
+Added: We are also required by government regulation to maintain certain prescribed minimum teacher-to-child ratios.
+Added: If we are unable to hire and retain qualified teachers at a center, we could be required to reduce enrollment, close classrooms or centers or be prevented from accepting additional enrollment in order to comply with such mandated ratios.
+Added: We may continue to experience difficulty in attracting, hiring and retaining qualified teachers due to tight labor pools.
+Added: We may experience difficulty in attracting and retaining teachers due to health concerns and changes in the work environment as a result of COVID-19.
+Added: Such market pressures have required us to offer increased salaries, enhanced benefits and institute additional initiatives to maintain strong employee relations, which increase costs, and may further increase costs in the future.
+Added: Difficulties in hiring and retaining qualified personnel may also affect our ability to meet growth objectives in certain geographies and to take advantage of additional enrollment opportunities at our early education and child care centers in these markets, which could negatively impact our business.
+Added: From time to time we may be subject to employee organizing efforts.
+Added: Labor union representation of a material number of our employees could impact our business, financial condition or operating results as a result of additional labor costs, payroll and benefit expenses, new rules and practices, or work stoppages.
+Added: Changes in the demand for child dependent care, and workplace solutions, which may be negatively affected by demographic trends and economic conditions, may affect our operating results.
+Added: Our business strategy largely depends on employers recognizing the value of providing employees with child care, dependent care, workforce education, and other workplace solutions as an employee benefit.
The number of employers that view such services as cost-effective or beneficial to their workforces may not continue to grow at the levels we anticipate or may diminish.
−Removed: In addition, changes in demographic trends, including the number of two working parent or working single parent families in the workforce, may impact the demand for our services.
+Added: In addition, changes in demographic trends, including the number of dual working parent or working single parent families in the workforce, may impact the demand for our services.
Such changes could materially and adversely affect our business and operating results.
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Even as employers recognize the value of our services, demand may be adversely affected by general economic conditions or changes in workforce demographics and work-place environments as a result of COVID-19.
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If demand for our services were to decrease, it could disrupt our operations and have a material adverse effect on our business and operating results.
−Removed: Our business depends largely on our ability to hire and retain qualified teachers and maintain strong employee relations.
−Removed: The provision of child care services is personnel intensive.
−Removed: Our business depends on our ability to attract, train, and retain the appropriate mix of qualified employees and on effectively implementing and maintaining strong employee relations, cultivating an atmosphere of trust, and effectively communicating the value proposition of working at Bright Horizons.
−Removed: The child care industry traditionally has experienced high turnover rates.
−Removed: In addition, state laws require our teachers and other staff members to meet certain educational and other minimum requirements, and we often require that teachers and staff at our centers have additional qualifications.
−Removed: We are also required by state laws to maintain certain prescribed minimum adult-to-child ratios.
−Removed: If we are unable to hire and retain qualified teachers at a center, we could be required to reduce enrollment or be prevented from accepting additional enrollment in order to comply with such mandated ratios.
−Removed: In certain markets, we may experience difficulty in attracting, hiring and retaining qualified teachers due to tight labor pools, or we may experience difficulty in attracting and retaining teachers due to health concerns and changes in the work environment as a result of COVID-19, which may require us to offer increased salaries, enhanced benefits and institute initiatives to maintain strong employee relations, which could result in increased costs.
−Removed: Difficulties in hiring and retaining qualified personnel may also affect our ability to meet growth objectives in certain geographies and to take advantage of additional enrollment opportunities at our child care and early education centers in these markets, which could negatively impact our business.
−Removed: From time to time we may be subject to employee organizing efforts.
−Removed: Labor union representation of a material number of our employees could impact our business, financial condition or operating results as a result of additional labor costs, payroll and benefit expenses, new rules and practices, or work stoppages.
−Removed: Because our success depends substantially on the value of our brands and reputation as a provider of choice, adverse publicity could impact the demand for our services.
+Added: Because our success depends substantially on the value of our brands and reputation as a provider of choice, adverse publicity or negative perceptions about our business could impact the demand for our services.
Our reputation and brand are critical to our business.
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Any reputational damage could have a material adverse effect on our brand value and our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.
−Removed: Breaches in data security and other information technology interruptions could adversely affect our financial condition and operating results.
+Added: Breaches in data security and other information technology interruptions or system failures could adversely affect our financial condition and operating results.
As part of our business, we collect and store sensitive data and certain personal information from our clients, the families and children we serve and our employees.
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Like many businesses, we have in the past and will in the future continue to be subject to cybersecurity threats and attempts to compromise and penetrate our data security and systems.
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−Removed: We also face the potential for business disruptions from information technology interruptions associated with natural disasters and other events including power outages, catastrophic events, computer and network failures, inadequate or ineffective redundancy, and flaws in third-party software or services.
+Added: We also face the potential for business disruptions from information technology interruptions associated with natural disasters and other events including power outages, catastrophic events, computer and network failures, inadequate or ineffective redundancy plans, system failures, and flaws in third-party software or services.
Our back-up care and educational advisory services are highly dependent on information technology for the coordination and delivery of services, which could be significantly impacted by a breach in our security and systems or other system interruptions.
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Additionally, any related negative publicity could significantly harm our reputation and could materially and adversely affect our business and operating results.
−Removed: In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and changing requirements applicable to our business, including the European Union’s General Data Protection Regulation and the California Consumer Privacy Act, compliance with those requirements could result in additional costs and failure to comply with such regulations could result in significant penalties and damages which could materially and adversely affect our business and financial condition.
+Added: Our collection, use, storage, disclosure, transfer and other processing of personal information could give rise to significant costs and liabilities, including as a result of governmental regulations, uncertain or inconsistent interpretation and enforcement of legal requirements or differing views of personal privacy rights, which may have a material adverse effect on our reputation, business, financial condition and results of operation.
+Added: A variety of laws, regulations, industry self-regulatory principles, industry standards or codes of conduct and regulatory guidance relating to privacy, data protection, marketing and advertising, and consumer protection apply to the collection, use, retention, protection, disclosure, transfer and other processing of certain types of data.
+Added: As the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and changing requirements applicable to our business, including the European Union’s General Data Protection Regulation and the California Consumer Privacy Act, among others, compliance with such requirements could impose significant limitations, require changes to our business, or restrict our use or storage of personal information, which may increase our compliance expenses and make our business more costly or less efficient to conduct.
+Added: Failure to comply with such regulations could result in significant penalties and damages which could materially and adversely affect our business and financial condition.
Our continued profitability depends on our ability to pass on our increased costs, such as labor and related costs, to our customers.
Hiring and retaining key employees and qualified personnel, including teachers, is critical to our business and labor costs are our largest expense.
−Removed: Because we are primarily a service business, inflationary factors and regulatory changes that contribute to wage and benefits cost increases result in significant increases in the costs of running our business.
+Added: Because we are primarily a service business, inflationary factors and regulatory changes that contribute to wage and benefits cost increases result in significant increases in the cost of running our business.
We expect to pay employees at rates above the minimum wage, and increases in the statutory minimum wage rates could result in a corresponding increase in the wages and benefits we pay to our employees.
−Removed: Additionally, competition for teachers in certain markets, and costs associated with rehiring and retaining previously furloughed employees, and costs of retraining teachers could result in significant increases in the cost of running our business.
+Added: Additionally, competition for teachers and staff, and costs associated with hiring, compensating and retaining employees, and costs of retraining teachers could result in significant increases in the cost of running our business, including costs to enhance employee compensation and benefit programs as an incentive and retentive tool.
Our success depends on our ability to continue to pass along these costs to our customers and to meet our changing labor needs while controlling costs.
In the event that we cannot increase the price for our services to cover these higher wage and benefit costs without reducing customer demand for our services, our margins could be adversely affected, which could have a material adverse effect on our financial condition and results of operations as well as our growth.
−Removed: Changes in our relationships with employer sponsors or failure to anticipate and respond to changing client and customer (parents or client employees) preferences and expectations may affect our operating results.
−Removed: We derive a significant portion of our business from child care and early education centers, back-up care, and other workplace solutions associated with employer sponsors for whom we provide these services at single or multiple sites pursuant to contractual arrangements.
+Added: Changes in our relationships with employer sponsors or failure to anticipate and respond to changing client and customer (parents or client employees) preferences and expectations or develop new customer-oriented services may affect our operating results.
+Added: We derive a significant portion of our business from early education and child care, back-up care, and other workplace solutions associated with employer sponsors for whom we provide these services at single or multiple sites pursuant to contractual arrangements.
Our contracts with employers for full service center-based child care typically have terms of three to ten years, and our contracts related to back-up care and educational advisory services typically have terms of one to three years, with varying terms and renewal and termination options.
We have a history of consistent contract renewals, but we may not experience similar renewal rates in the future.
−Removed: The termination or non-renewal of a significant number of contracts or the termination of a multiple-site or multiple-service client relationship could have a material adverse effect on our business, results of operations, financial condition or cash flows.
−Removed: Additionally, our continued success depends on our ability to convert and retain new and existing clients and our ability to develop new consumer-oriented strategies or services to accommodate changing client, learner, or parent expectations and preferences around service delivery.
+Added: Failure to comply with or monitor contract terms or the termination or non-renewal of a significant number of contracts or the termination of a multiple-site or multiple-service client relationship could have a material adverse effect on our business, results of operations, financial condition or cash flows.
+Added: Additionally, our continued success depends on our ability to convert and retain new and existing clients and our ability to develop new consumer-oriented strategies or services to accommodate changing client, learner, or parent expectations and preferences around our services or service delivery.
Our future success depends on our ability to continue to meet the evolving needs and expectations of our customers, including enhancing our existing services.
+Added: Obsolete processes and/or skill gaps could impede our ability to meet new or changing customer demand.
Failure to meet these needs may result in client loss and reduced demand and could have a material impact on our financial results.
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Our success depends on the efforts, abilities and continued services of our executive officers and other key employees.
−Removed: We believe future success will depend upon our ability to continue to attract, motivate and retain highly-skilled managerial, sales and marketing, divisional, regional and child care and early education center director personnel as well as key personnel in the back-up care and educational advisory markets.
+Added: We believe future success will depend on our ability to continue to attract, motivate and retain highly-skilled managerial, sales and marketing, operational, and early education and child care center director personnel as well as key personnel in the back-up care and educational advisory markets.
+Added: We may experience difficulty in attracting, hiring and retaining corporate staff and key employees due to the current labor market.
+Added: Difficulties in hiring and retaining key personnel may affect our ability to meet growth objectives and such market pressures may require us to enhance compensation and benefits, which may increase costs.
Failure to retain our leadership team and attract and retain other important personnel could lead to disruptions in management and operations, which could affect our business and operating results.
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Our operating results are subject to seasonal fluctuations.
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We may be unable to adjust our expenses on a short-term basis to minimize the effect of these fluctuations in revenue.
−Removed: Our quarterly results of operations may also fluctuate based upon the number and timing of child care center openings and/or closings, the timing of new client service launches, acquisitions, the performance of new and existing child care and early education centers, the contractual arrangements under which child care centers are operated, the change in the mix of such contractual arrangements, competitive factors and general economic conditions.
+Added: Our quarterly results of operations may also fluctuate based on the number and timing of child care center openings and/or closings, the timing of new client service launches, acquisitions, the performance of new and existing early education and child care centers, the contractual arrangements under which child care centers are operated, the change in the mix of such contractual arrangements, competitive factors and general economic conditions.
The inability of existing child care centers to maintain their current enrollment levels and profitability, the failure of newly opened child care centers to contribute to profitability, and the failure to maintain and grow our other services could result in additional fluctuations in our future operating results on a quarterly or annual basis.
Health pandemics, natural disaster, sociopolitical or other catastrophic event could severely disrupt our business.
−Removed: A regional or global health pandemic, not unlike COVID-19, depending upon its duration and severity, could severely affect our business.
+Added: A regional or global health pandemic, not unlike COVID-19, depending on its duration and severity, could severely affect our business.
Enrollment in our child care centers could experience sharp declines as families might avoid taking their children out in public in the event of a health pandemic, and local, regional or national governments might limit or ban public interactions to halt or delay the spread of diseases causing business disruptions and the temporary closure of our centers.
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Enrollment in our child care centers could experience sharp declines as families might avoid taking their children out in public as a result of one or more of these events.
+Added: Further, climate change may increase both the frequency and severity of extreme weather conditions and natural disasters, which may affect our business operations and our clients, either in a particular region or globally.
+Added: In addition, changes in regulations brought about by climate change could impact our business, operating results, and financial condition.
Additionally, our information systems are essential to our back-up and educational advisory and other services segments as well as to the corporate departments that support our lines of business.
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• limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate needs, and increasing our cost of borrowing;
−Removed: • requiring a substantial portion of our cash flow to be dedicated to debt service payments instead of other corporate purposes, thereby reducing the amount of cash flow available for operations, capital expenditures, and acquisitions among other requirements;
+Added: • requiring a substantial portion of our cash flow to be dedicated to debt service payments instead of other corporate purposes, thereby reducing the amount of cash flow available for operations, capital expenditures, and acquisitions among other purposes;
• limiting our flexibility in planning for, and reacting to, changes in the industry in which we compete and placing us at a disadvantage compared to other, less leveraged competitors or competitors with comparable debt at more favorable interest rates.
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If market interest rates increase, variable rate debt will create higher interest service requirements, which could adversely affect our cash flows and impact future earnings.
−Removed: While we have entered into variable-to-fixed interest rate swap agreements and interest rate caps to limit our exposure to higher interest rates on a portion of our debt, and may enter into additional agreements in the future, any such agreements may not offer complete protection from this risk and may carry additional risks.
+Added: While we have entered into interest rate caps to limit our exposure to higher interest rates on a portion of our debt, and may enter into additional agreements in the future, any such agreements may not offer complete protection from this risk and may carry additional risks.
For information regarding our sensitivity to changes in interest rates, refer to “ Quantitative and Qualitative Disclosures About Market Risk ” in Item 7A of this Annual Report on Form 10-K.
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Our senior secured credit facilities are subject to variable interest rates that are indexed to LIBOR.
−Removed: The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, previously announced in July 2017 that it intends to phase out LIBOR by the end of 2021;
−Removed: however, this has been extended until 2023.
−Removed: Our credit agreement provides for application of the current LIBOR rate and it is not currently possible to predict the effect of alternative reference rates or any other reforms to LIBOR that may be enacted.
−Removed: The expected discontinuation, reform, or replacement of LIBOR may result in fluctuating interest rates, or higher interest rates, which could have an adverse effect on the Company’s interest expense and results of operations.
+Added: The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, previously announced on March 5, 2021 the future cessation or loss of representativeness of all remaining interest periods of U.S.
+Added: dollar LIBOR as of June 30, 2023.
+Added: Our credit agreement provides for application of the current LIBOR rate and it is not currently possible to predict the effect of the replacement of LIBOR with alternative reference rates.
+Added: The expected discontinuation and replacement of LIBOR may result in fluctuating interest rates, or higher interest rates, which could have an adverse effect on the Company’s interest expense and results of operations.
The terms of our indebtedness restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.
−Removed: The credit agreement governing our senior secured credit facilities contains a number of restrictive covenants that impose operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to incur certain liens, make investments and acquisitions, incur or guarantee additional indebtedness, pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock, or enter into certain other types of contractual arrangements affecting our subsidiaries or indebtedness.
−Removed: In addition, the restrictive covenants in the credit agreement governing our senior secured credit facilities require us to maintain specified financial ratios and satisfy other financial condition tests, and we expect that the agreements governing any new senior secured credit facilities will contain similar requirements to satisfy financial condition tests and, with respect to any new revolving credit facility, maintain specified financial ratios, subject to certain conditions.
+Added: The credit agreement governing our senior secured credit facilities contains a number of restrictive covenants that impose operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to, or requirements that certain financial condition tests must be satisfied in order to, incur liens, make investments and acquisitions, incur or guarantee additional indebtedness, pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock, or enter into certain other types of contractual arrangements affecting our subsidiaries or indebtedness.
+Added: In addition, the restrictive covenants in the credit agreement governing our senior secured credit facilities require us to maintain specified financial ratios, and we expect that the agreements governing any new senior secured credit facilities will contain similar requirements to satisfy financial condition tests and maintain specified financial ratios, subject to certain conditions.
Our ability to meet those financial ratios and tests can be affected by events beyond our control.
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Industry, Competition and Growth Risks
−Removed: A permanent shift in workforce demographics and office environments may result in decreased demand for center-based child care and have an adverse effect our results of operations.
+Added: A permanent shift in workforce demographics and office environments may result in decreased demand for center-based child care and have an adverse effect on our results of operations.
During the ongoing COVID-19 pandemic, a substantial portion of the workforce, including parents of children we serve at our centers, transitioned from working in traditional office environments to working in “virtual” or “home” offices, including in our primary markets of the United States, United Kingdom, and the Netherlands.
−Removed: While we expect that many employees will return to traditional office environments once the likelihood of exposure to COVID-19 is significantly reduced, some employers may continue to encourage their employees to maintain a remote or work-from-home presence or may permanently move all or a portion of their workforce to work remotely.
+Added: While we expect that many employees will return to traditional office environments once the COVID-19 pandemic subsides, some employers may continue to encourage their employees to maintain a remote or work-from-home presence or may permanently move all or a portion of their workforce to remote or to a hybrid model.
While working parents continue to need child care regardless of their work location, there are no assurances that parents who work from home will continue to use our centers or will not require other part-time child care arrangements that accommodate different working arrangements.
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We have expanded and are continuing to expand our operations, suite of services and client relationships, which has placed, and will continue to place, significant demands on our management and our operational, IT and financial infrastructure.
−Removed: Additionally, our ability to grow in the future will depend upon a number of factors, including the ability to develop and expand new and existing client relationships, to continue to provide and expand the high-quality services we offer, to hire and train qualified personnel, to expand and grow in existing and future markets, to develop and operationalize new service offerings, and to sustain operational excellence and efficiencies across all business lines.
+Added: Additionally, our ability to grow in the future will depend on a number of factors, including the ability to develop and expand new and existing client relationships, to continue to provide and expand the high-quality services we offer, to hire and train qualified personnel, to expand and grow in existing and future markets, to develop and operationalize new service offerings, and to sustain operational excellence and efficiencies across all business lines.
Achieving and sustaining growth requires the successful execution of our growth strategies, which may require the implementation of enhancements to customer-facing, operational and financial systems, expanded sales and marketing capacity, continuous updates to technology and improvements to processes and systems, and additional or new organizational resources.
Given these challenges, we may be unable to manage our expanding operations effectively, or to maintain our growth, which could have a material adverse effect on our business or results of operations.
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Acquisitions present many risks and may disrupt our operations.
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Significant competition in our industry could adversely affect our results of operations.
−Removed: We compete for enrollment and sponsorship of our child care and early education centers in a highly-fragmented market.
+Added: We compete for enrollment and sponsorship of our early education and child care centers in a highly-fragmented market.
For enrollment, we compete with center-based child care (such as residential and worksite child care centers, full- and part-time nursery schools, private and public elementary schools and church-affiliated and other not-for-profit providers) as well as family child care (operated out of the caregiver’s home).
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National, state or local child care benefit programs comprised primarily of subsidies in the form of tax credits or other direct government financial aid to parents provide us opportunities for expansion in additional markets.
−Removed: However, a universal benefit with governmentally mandated or provided child care could reduce the demand for early care services at our existing child care and early education centers due to the availability of lower cost care alternatives or could place downward pressure on the tuition and fees we charge, which could adversely affect our revenues and results of operations.
+Added: However, a broad-based benefit with governmentally mandated or funded child care, such as universal pre-school, could reduce the demand for early care services at our existing early education and child care centers due to the availability of lower cost care alternatives, or could place downward pressure on the tuition and fees we charge, which could adversely affect our revenues and results of operations.
Additionally, changes in government support programs in our international jurisdictions, such as the reduction of government-funded tuition subsidies, could reduce the demand for our services in these markets, adversely impacting our results of operations.
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Litigation, Insurance, Tax and Regulatory Risks
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workers’ compensation, commercial general liability (including coverage for sexual and physical abuse, and student accident coverage), professional liability, automobile liability, excess and “umbrella” liability, commercial property coverage, employment practices liability, commercial crime coverage, fiduciary liability, privacy breach/cyber liability and directors’ and officers’ liability.
−Removed: These policies are subject to various limitations, exclusions and deductibles.
A portion of our general liability coverage is provided by our wholly-owned captive insurance company.
+Added: These policies are subject to various limitations, exclusions and deductibles and certain claims may not be covered by such policies and/or exceed policy limits.
There is no assurance that our insurance, particularly coverage for sexual and physical abuse, will adequately cover our claims, or continue to be readily available to us in the form or amounts we have been able to obtain in the past, and our insurance premiums could materially increase in the future as a consequence of conditions in the insurance business or in the child care industry.
Changes in laws and regulations could impact the way we conduct business.
−Removed: Our child care and early education centers, back-up care, and educational advisory services are subject to numerous national, state and local regulations and licensing requirements.
−Removed: Although these regulations vary greatly from jurisdiction to jurisdiction, government agencies generally review, among other areas, the adequacy of buildings and equipment, licensed capacity, adult-to-child ratios, educational qualifications and training of staff, record keeping, dietary program, daily curriculum, hiring practices, and compliance with changes in federal and local labor laws and regulations, health and safety standards and requirements, including COVID-19 protocols, and data privacy statutes.
−Removed: In addition to costs associated with compliance of changing laws and regulations, failure to comply with applicable regulations and requirements could subject us to governmental sanctions, which can include fines, corrective orders, probation or, in more serious cases, suspension or revocation of one or more of our child care centers’ licenses to operate, and require significant expenditures to bring those centers into compliance.
+Added: Our early education and child care centers, back-up care, and educational advisory services are subject to numerous national, state and local regulations and licensing requirements.
+Added: Although these regulations vary greatly from jurisdiction to jurisdiction, government agencies generally review, among other areas, the adequacy of buildings and equipment, licensed capacity, teacher-to-child ratios, educational qualifications and training of staff, record keeping, dietary program, daily curriculum, hiring practices, and compliance with changes in federal and local labor laws and regulations, health and safety standards and requirements, including COVID-19 protocols, and data privacy statutes.
+Added: In addition to costs associated with compliance of licensing requirements and changing laws and regulations, failure to comply with applicable regulations and requirements could subject us to governmental sanctions, which can include fines, corrective orders, probation or, in more serious cases, suspension or revocation of one or more of our child care centers’ licenses to operate, and require significant expenditures to bring those centers into compliance.
Our tax rate is dependent on a number of factors, a change in any of which could impact our future tax rates and net income.
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and foreign jurisdictions, and our future tax rates and operations may be adversely affected by a number of factors, including:
−Removed: changes in tax laws or the interpretation of such tax laws in the various jurisdictions in which we operate;
+Added: changes in tax rates, tax laws or the interpretation of such tax laws in the various jurisdictions in which we operate;
changes in the estimated realization of our deferred tax assets and settlement of our deferred tax liabilities;
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Any significant change in our jurisdictional earnings mix or in the tax laws in those jurisdictions could impact our future tax rates and net income in those periods and any increases in income tax rates or changes in income tax laws could have a material adverse impact on our financial results.
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International Risks
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As of December 31, 2021, we had 364 centers located in three foreign countries - United Kingdom, Netherlands and India.
−Removed: If the international markets in which we compete are affected by changes in political, social, legal, economic, or other factors, such as the economic and political uncertainty resulting from the United Kingdom’s exit from the European Union (commonly referred to as “Brexit”) and the global economic impact from the current COVID-19 health crisis, our business and operating results may be materially and adversely affected.
+Added: If the international markets in which we compete are affected by changes in political, social, legal, economic, or other factors, such as the economic and political uncertainty resulting from the United Kingdom’s exit from the European Union (“Brexit”) and the global economic impact from the current COVID-19 pandemic, our business and operating results may be materially and adversely affected.
Uncertainty as a result of Brexit or COVID-19 may last for years and could also impact our clients’ businesses and operations.
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Stock repurchases could also increase the volatility of the price of our common stock and could diminish our cash reserves.
−Removed: We have a share repurchase program pursuant to which the Company was authorized to repurchase shares of our common stock up to a total repurchase price of $300 million, of which $194.9 million remained available at December 31, 2020.
+Added: On December 16, 2021, our board of directors authorized a new share repurchase program under which up to $400 million of our outstanding common stock may be repurchased, of which $380.6 million remained available as of December 31, 2021.
+Added: The share repurchase program replaced and canceled the prior $300 million authorization announced in June 2018, of which approximately $0.2 million remained available as of the termination date.
Although our board of directors has authorized the stock repurchase program, the stock repurchase program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares and may be suspended or terminated at any time.
−Removed: Stock may be purchased from time to time, in the open market or through private transactions, subject to market conditions, in compliance with applicable state and federal securities laws.
+Added: Stock may be purchased from time to time, in the open market at prevailing market prices, in private transactions, under Rule 10b5-1 plans, or by other means, subject to market conditions, in compliance with applicable state and federal securities laws.
The timing and amount of repurchases, if any, will depend upon several factors, including market and business conditions, restrictions in our debt agreements, the trading price of our common stock and the nature of other investment opportunities.
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Additionally, our stock repurchase program could diminish our cash reserves, which may impact our ability to finance future growth and to pursue possible future strategic opportunities and acquisitions.
−Removed: There can be no assurance that any stock repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we determine to repurchase our stock.
−Removed: There is no assurance that our stock repurchase program will enhance long-term stockholder value and short-term stock price fluctuations could reduce the program’s effectiveness.
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+Added: There can be no assurance that any stock repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we determine to repurchase our stock and short-term stock price fluctuations could reduce the program’s effectiveness.
Our stock price could be extremely volatile, and, as a result, you may not be able to resell your shares at or above the price you paid for them.
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• additions and departures of key personnel;
−Removed: • strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments, or changes in business strategy;
+Added: • strategic decisions by us or our competitors, such as acquisitions, divestitures, initial public offerings, spin-offs, joint ventures, strategic investments, or changes in business strategy;
+Added: • changing client and customer (parents or client employees) preferences;
• the passage of legislation or other regulatory developments affecting us or our industry;
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• changes in accounting principles;
+Added: • changes in business activity or the economy;
• terrorist acts, acts of war, or periods of widespread civil unrest;
−Removed: • pandemics, natural disasters and other calamities;
+Added: • pandemics, natural disasters and other calamities, including developments related to the COVID-19 pandemic;
• changes in general market and economic conditions.
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This type of litigation could result in substantial costs and divert our management’s attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.
−Removed: Your percentage ownership in us may be diluted by future issuances of capital stock, which could reduce your influence over matters on which stockholders vote.
+Added: Your percentage ownership may be diluted by future issuances of capital stock, which could reduce your influence over matters on which stockholders vote.
Pursuant to our restated bylaws, our board of directors has the authority, without action or vote of our stockholders, to issue all or any part of our authorized but unissued shares of common stock, including shares issuable upon the exercise of options, or shares of our authorized but unissued preferred stock.
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As a result, you may lose your ability to sell your stock for a price in excess of the prevailing market price due to these protective measures, and efforts by stockholders to change our direction or management may be unsuccessful.
−Removed: T a ble of Contents
Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.