Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 2, 2018
 
BRIGHT HORIZONS FAMILY SOLUTIONS INC.
(Exact name of Registrant as specified in its charter)
  
 
 
Delaware
 
001-35780
 
80-0188269
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification Number)
 
200 Talcott Avenue South
Watertown, MA
 
02472
(Address of principal executive offices)
 
(Zip code)
Registrant’s telephone number, including area code: (617) 673-8000
Not Applicable
(Former name or former address, if changed since last report)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR§240.12b-2).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
 





Item 2.02
Results of Operations and Financial Condition
On August 2, 2018, Bright Horizons Family Solutions Inc. issued a press release announcing its financial results for the fiscal quarter ended June 30, 2018 and updated certain financial guidance for the full year 2018. A copy of the press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.
The information contained in this Item, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for any purpose, and shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, regardless of any general incorporation language in any such filing.
Item 9.01
Financial Statements and Exhibits
(d)
Exhibits
99.1 Press Release of Bright Horizons Family Solutions Inc. dated August 2, 2018.





SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BRIGHT HORIZONS FAMILY SOLUTIONS INC.
 
 
Date:
August 2, 2018
By:
/s/ Elizabeth Boland
 
 
 
Elizabeth Boland
 
 
 
Chief Financial Officer





EXHIBIT INDEX
Exhibits
99.1 Press Release of Bright Horizons Family Solutions Inc. dated August 2, 2018.


Exhibit


Exhibit 99.1
Bright Horizons Family Solutions Reports Second Quarter of 2018 Financial Results
WATERTOWN, MA - (Business Wire - August 2, 2018) - Bright Horizons Family Solutions® Inc. (NYSE: BFAM), a leading provider of high-quality child care, early education and other services designed to help employers and families better address the challenges of work and family life, today announced financial results for the second quarter of 2018 and updated certain financial guidance for the full year 2018.
Second Quarter 2018 Highlights (compared to second quarter 2017):
Revenue increased 10% to $490 million
Income from operations increased 14% to $65 million
Net income increased 22% to $40 million and diluted earnings per common share increased 26% to $0.68
Non-GAAP measures
Adjusted income from operations* increased 13% to $66 million
Adjusted EBITDA* increased 10% to $95 million
Adjusted net income* increased 14% to $51 million and diluted adjusted earnings per common share* increased 18% to $0.87
“We are pleased to report strong financial results for the second quarter of 2018,” said Stephen Kramer, Chief Executive Officer.  “As we continue to provide our employer clients and the working families that we serve with the high quality, critical supports they need to maximize their productivity, our results continue to reflect positive momentum across our entire suite of solutions. These results are powered by our people and our culture,” Kramer continued. “I am proud that we continue to make important investments in our people, most recently by adding the Bright Horizons Early Education Degree Achievement Plan - a market-leading program for early childhood educators to earn their college degree with no financial barriers.”
Second Quarter 2018 Results
Revenue increased $44.2 million, or 10%, in the second quarter of 2018 from the second quarter of 2017 on contributions from new and ramping full service child care centers, average price increases of 3-4%, and expanded sales of our back-up dependent care and educational advisory services.
Income from operations was $64.6 million for the second quarter of 2018, an increase from $56.8 million in the same 2017 period. Increases in revenue and gross profit reflect contributions from enrollment gains in mature and ramping centers, new child care centers, back-up dependent care and educational advisory clients that have increased utilization levels or been added since the second quarter of 2017, and strong cost management. These gains were partially offset by investments in marketing and technology to support our customer user experience, service delivery and operating efficiency, and costs incurred during the pre-opening and ramp-up phase of newer lease/consortium centers. Net income was $40.4 million for the second quarter of 2018 compared to net income of $33.0 million in the same 2017 period, an increase of $7.4 million, or 22%, attributable to the expanded income from operations and a lower effective tax rate primarily due to the decrease in the federal corporate tax rate promulgated by the U.S. Tax Cuts and Jobs Act in December 2017. Diluted earnings per common share was $0.68 for the second quarter of 2018 compared to $0.54 in the same 2017 period.
In the second quarter of 2018, adjusted EBITDA increased $8.9 million, or 10%, to $95.4 million, and adjusted income from operations increased $7.5 million, or 13%, to $66.2 million, from the second quarter of 2017 due primarily to the expanded gross profit. Adjusted net income increased by $6.4 million, or 14%, to $50.9 million on the expanded income from operations and a lower effective tax rate. Diluted adjusted earnings per common share was $0.87 compared to $0.74 in the second quarter of 2017.
As of June 30, 2018, the Company operated 1,065 child care and early education centers with the capacity to serve 118,000 children and their families.




*Adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share are non-GAAP measures. Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization, straight line rent expense, stock-based compensation expense, and transaction costs. Adjusted income from operations represents income from operations before transaction costs. Adjusted net income represents net income determined in accordance with GAAP, adjusted for stock-based compensation expense, amortization expense, transaction costs and the income tax provision (benefit) thereon. Diluted adjusted earnings per common share is a non-GAAP measure, calculated using adjusted net income. These non-GAAP measures are more fully described and are reconciled from the respective measures determined under GAAP in “Presentation of Non-GAAP Measures” and the attached table “Bright Horizons Family Solutions Inc. Non-GAAP Reconciliations.”
Balance Sheet and Cash Flow
For the six months ended June 30, 2018, the Company generated approximately $188.7 million of cash flows from operations compared to $167.6 million for the same 2017 period and invested $89.8 million in fixed assets and acquisitions compared to $59.2 million in the same 2017 period. Net cash used in financing activities totaled $99.8 million in the six months ended June 30, 2018 compared to $89.9 million for the same 2017 period, and the Company reported a net reduction in cash and cash equivalents of $0.3 million to $22.9 million as of June 30, 2018.
2018 Outlook
As described below, the Company is updating certain financial guidance. For the full year 2018, the Company currently expects:
Revenue growth in 2018 in the range of 8-10%
Net income in the range of $150 million to $152 million and diluted earnings per common share in the range of $2.53 to $2.55
Adjusted net income in the range of $184 million to $186 million and diluted adjusted earnings per common share in the range of $3.13 to $3.16
Diluted weighted average shares of approximately 59 million shares
For a reconciliation of the non-GAAP measures to their most directly comparable GAAP measure, refer to the attached table “Bright Horizons Family Solutions Inc. Non-GAAP Reconciliations.”
Conference Call
Bright Horizons Family Solutions will host an investor conference call today at 5:00 pm ET.  Interested parties are invited to listen to the conference call by dialing 1-877-407-9039 or, for international callers, 1-201-689-8470, and asking for the Bright Horizons Family Solutions conference call moderated by Chief Executive Officer Stephen Kramer.  Replays of the entire call will be available through August 23, 2018 at 1-844-512-2921 or, for international callers, 1-412-317-6671, conference ID #13678191. The webcast of the conference call, including replays, and a copy of this press release are also available through the Investor Relations section of the Company’s web site, www.brighthorizons.com.




Forward-Looking Statements
This press release includes statements that express the Company’s opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements.” The Company’s actual results may vary significantly from the results anticipated in these forward-looking statements, which can generally be identified by the use of forward-looking terminology, including the terms “believes,” “expects,” “may,” “will,” “should,” “seeks,” “projects,” “approximately,” “intends,” “plans,” “estimates” or “anticipates,” or, in each case, their negatives or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They include statements regarding the Company’s intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth plan, strategies, our service offerings, our clients, estimated effective tax rate, estimates and impact of recently enacted tax legislation and excess tax benefits, our investments in education, and our 2018 financial guidance. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Company believes that these risks and uncertainties include, but are not limited to, changes in the demand for child care and other dependent care services, including variation in enrollment trends and lower than expected demand from employer sponsor clients; the possibility that acquisitions may disrupt our operations and expose us to additional risk; our ability to pass on our increased costs; our indebtedness and the terms of such indebtedness; our ability to withstand seasonal fluctuations in the demand for our services; our ability to implement our growth strategies successfully; the impact of recently enacted tax legislation; and other risks and uncertainties more fully described in the “Risk Factors” section of our Annual Report on Form 10-K filed February 28, 2018, and other filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the time of this release and we do not undertake to publicly update or revise them, whether as a result of new information, future events or otherwise, except as required by law.
Presentation of Non-GAAP Measures
In addition to the results provided in accordance with U.S. generally accepted accounting principles (“GAAP”) throughout this press release, the Company has provided non-GAAP measurements - adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share - which present operating results on a basis adjusted for certain items.  The Company uses these non-GAAP measures as key performance indicators for the purpose of evaluating performance internally, and in connection with determining incentive compensation for Company management, including executive officers.  Adjusted EBITDA is also used in connection with the determination of certain ratio requirements under our credit agreement. We also believe these non-GAAP measures provide investors with useful information with respect to our historical operations. These non-GAAP measures are not intended to replace, and should not be considered superior to, the presentation of our financial results in accordance with GAAP. The use of the terms adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share may differ from similar measures reported by other companies and may not be comparable to other similarly titled measures.  Adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share are reconciled from the respective measures under GAAP in the attached table “Bright Horizons Family Solutions Inc. Non-GAAP Reconciliations.”
Guidance for non-GAAP financial measures excludes stock-based compensation, amortization of intangible assets, expenses related to the completion of secondary offerings and debt financing transactions, and expenses associated with completed acquisitions as well as tax effects associated with these items. These adjustments to net income and diluted earnings per common share in future periods are generally expected to be similar to the types of charges and costs excluded from adjusted net income and diluted adjusted earnings per common share in prior quarters, although we can provide no assurance as to the timing or magnitude of any such adjustments. The exclusion of these charges and costs in future periods will have an impact on the Company’s adjusted net income and diluted adjusted earnings per common share.
About Bright Horizons Family Solutions Inc.
Bright Horizons Family Solutions® is a leading provider of high-quality child care, early education and other services designed to help employers and families better address the challenges of work and family life. The Company provides full service center-based child care, back-up dependent care and educational advisory services to more than 1,100 clients across the United States, the United Kingdom, the Netherlands, Canada and India, including more than 150 Fortune 500 companies and more than 80 of Working Mother magazine’s 2017 “100 Best Companies for Working Mothers.”  Bright Horizons has been recognized 17 times as one of Fortune magazine’s “100 Best Companies to Work For” and is one of the U.K. and Netherlands’ Best Workplaces as designated by the Great Place to Work® Institute. Bright Horizons is headquartered in Watertown, MA. The Company’s web site is located at www.brighthorizons.com.




Contacts:
Investors:
 
Elizabeth Boland
 
 
CFO - Bright Horizons
 
 
eboland@brighthorizons.com
 
 
617-673-8125
 
Kevin Doherty
 
 
MD - Solebury Communications Group
 
 
kdoherty@soleburyir.com
 
 
203-428-3233
Media:
 
Ilene Serpa
 
 
VP - Communications - Bright Horizons
 
 
iserpa@brighthorizons.com
 
 
617-673-8044




BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
(Unaudited)

 
Three Months Ended June 30,
 
2018
%
 
2017
%
Revenue
$
489,699

100.0
 %
 
$
445,546

100.0
 %
Cost of services
363,662

74.3
 %
 
331,205

74.3
 %
Gross profit
126,037

25.7
 %
 
114,341

25.7
 %
Selling, general and administrative expenses
53,137

10.9
 %
 
48,869

11.0
 %
Amortization of intangible assets
8,276

1.6
 %
 
8,666

2.0
 %
Income from operations
64,624

13.2
 %
 
56,806

12.7
 %
Interest expense—net
(12,161
)
(2.5
)%
 
(10,654
)
(2.4
)%
Income before income tax
52,463

10.7
 %
 
46,152

10.3
 %
Income tax expense
(12,037
)
(2.4
)%
 
(13,112
)
(2.9
)%
Net income
$
40,426

8.3
 %
 
$
33,040

7.4
 %
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
Common stock—basic
$
0.70

 
 
$
0.56

 
Common stock—diluted
$
0.68

 
 
$
0.54

 
 
 
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
 
 
Common stock—basic
57,613,596

 
 
59,053,200

 
Common stock—diluted
58,761,229

 
 
60,379,657

 






BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
(Unaudited)

 
Six Months Ended June 30,
 
2018
%
 
2017
%
Revenue
$
953,356

100.0
 %
 
$
867,710

100.0
 %
Cost of services
713,775

74.9
 %
 
648,435

74.7
 %
Gross profit
239,581

25.1
 %
 
219,275

25.3
 %
Selling, general and administrative expenses
103,349

10.8
 %
 
95,015

11.0
 %
Amortization of intangible assets
16,324

1.7
 %
 
16,050

1.8
 %
Income from operations
119,908

12.6
 %
 
108,210

12.5
 %
Interest expense—net
(23,664
)
(2.5
)%
 
(21,428
)
(2.5
)%
Income before income tax
96,244

10.1
 %
 
86,782

10.0
 %
Income tax expense
(18,520
)
(1.9
)%
 
(12,368
)
(1.4
)%
Net income
$
77,724

8.2
 %
 
$
74,414

8.6
 %
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
Common stock—basic
$
1.33

 
 
$
1.25

 
Common stock—diluted
$
1.31

 
 
$
1.22

 
 
 
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
 
 
Common stock—basic
57,902,208

 
 
59,154,153

 
Common stock—diluted
59,104,631

 
 
60,641,468

 






BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

 
June 30, 2018
 
December 31, 2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
22,912

 
$
23,227

Accounts receivable—net
90,975

 
117,138

Prepaid expenses and other current assets
46,370

 
52,096

Total current assets
160,257

 
192,461

Fixed assets—net
583,249

 
575,185

Goodwill
1,342,158

 
1,306,792

Other intangibles—net
337,993

 
348,540

Other assets
58,097

 
45,666

Total assets
$
2,481,754

 
$
2,468,644

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
10,750

 
$
10,750

Borrowings under revolving credit facility
112,300

 
127,100

Accounts payable and accrued expenses
146,176

 
132,897

Deferred revenue and other current liabilities
199,998

 
189,908

Total current liabilities
469,224

 
460,655

Long-term debt—net
1,041,280

 
1,046,011

Deferred income taxes
75,588

 
74,069

Other long-term liabilities
146,640

 
138,849

Total liabilities
1,732,732

 
1,719,584

Total stockholders’ equity
749,022

 
749,060

Total liabilities and stockholders’ equity
$
2,481,754

 
$
2,468,644







BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
Six Months Ended June 30,
 
2018
 
2017
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
77,724

 
$
74,414

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
49,933

 
46,604

Stock-based compensation expense
6,589

 
5,514

Deferred income taxes
(2,347
)
 
4,192

Other non-cash adjustments—net
1,754

 
4,140

Changes in assets and liabilities
55,044

 
32,733

Net cash provided by operating activities
188,697

 
167,597

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchases of fixed assets—net
(39,155
)
 
(42,195
)
Payments and settlements for acquisitions—net of cash acquired
(50,624
)
 
(17,026
)
Net cash used in investing activities
(89,779
)
 
(59,221
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Revolving credit facility—net
(14,800
)
 
(9,000
)
Principal payments of long-term debt
(5,375
)
 
(2,688
)
Payments for debt issuance costs
(292
)
 
(1,314
)
Purchase of treasury stock
(85,725
)
 
(73,223
)
Taxes paid related to the net share settlement of stock options and restricted stock
(7,074
)
 
(23,309
)
Proceeds from issuance of common stock upon exercise of options
11,661

 
15,351

Proceeds from issuance of restricted stock
4,457

 
4,305

Payments of contingent consideration for acquisitions
(2,615
)
 

Net cash used in financing activities
(99,763
)
 
(89,878
)
Effect of exchange rates on cash and cash equivalents
530

 
1,206

Net (decrease) increase in cash and cash equivalents
(315
)
 
19,704

Cash and cash equivalents—beginning of period
23,227

 
14,633

Cash and cash equivalents—end of period
$
22,912

 
$
34,337







BRIGHT HORIZONS FAMILY SOLUTIONS INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)
 
Full service
center-based
child care
 
Back-up
dependent
care
 
Educational
advisory
services
 
Total
Three Months Ended June 30, 2018
 
 
 
 
 
 
 
Revenue
$
414,121

 
$
58,822

 
$
16,756

 
$
489,699

Income from operations
44,940

 
16,141

 
3,543

 
64,624

Adjusted income from operations (1)
46,527

 
16,141

 
3,543

 
66,211

 
 
 
 
 
 
 
 
Three Months Ended June 30, 2017
 
 
 
 
 
 
 
Revenue
$
378,058

 
$
53,678

 
$
13,810

 
$
445,546

Income from operations
39,754

 
14,247

 
2,805

 
56,806

Adjusted income from operations (2)
41,699

 
14,247

 
2,805

 
58,751

(1)
Adjusted income from operations represents income from operations excluding expenses incurred in connection with the May 2018 amendment to the credit agreement and completed acquisitions, which have been allocated to the full service center-based child care segment.
(2)
Adjusted income from operations represents income from operations excluding expenses incurred in connection with the May 2017 amendment to the credit agreement and secondary offering, which have been allocated to the full service center-based child care segment.
 
Full service
center-based
child care
 
Back-up
dependent
care
 
Educational
advisory
services
 
Total
Six Months Ended June 30, 2018
 
 
 
 
 
 
 
Revenue
$
806,746

 
$
113,501

 
$
33,109

 
$
953,356

Income from operations
81,851

 
30,266

 
7,791

 
119,908

Adjusted income from operations (1)
83,766

 
30,266

 
7,791

 
121,823

 
 
 
 
 
 
 
 
Six Months Ended June 30, 2017
 
 
 
 
 
 
 
Revenue
$
736,817

 
$
104,086

 
$
26,807

 
$
867,710

Income from operations
75,179

 
27,908

 
5,123

 
108,210

Adjusted income from operations (2)
77,124

 
27,908

 
5,123

 
110,155

(1)
Adjusted income from operations represents income from operations excluding expenses incurred in connection with the May 2018 amendment to the credit agreement, the March 2018 secondary offering, and completed acquisitions, which have been allocated to the full service center-based child care segment.
(2)
Adjusted income from operations represents income from operations excluding expenses incurred in connection with the May 2017 amendment to the credit agreement and secondary offering, which have been allocated to the full service center-based child care segment.





BRIGHT HORIZONS FAMILY SOLUTIONS INC.
NON-GAAP RECONCILIATIONS
(In thousands, except share data)
(Unaudited)
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
40,426

 
$
33,040

 
$
77,724

 
$
74,414

Interest expense—net
12,161

 
10,654

 
23,664

 
21,428

Income tax expense
12,037

 
13,112

 
18,520

 
12,368

Depreciation
16,974

 
14,524

 
33,609

 
30,554

Amortization of intangible assets (a)
8,276

 
8,666

 
16,324

 
16,050

EBITDA
89,874

 
79,996

 
169,841

 
154,814

Additional Adjustments:
 
 
 
 
 
 
 
Deferred rent (b)
218

 
1,430

 
226

 
2,583

Stock-based compensation expense (c)
3,698

 
3,137

 
6,589

 
5,514

Transaction costs (d)
1,587


1,945

 
1,915

 
1,945

Total adjustments
5,503

 
6,512

 
8,730

 
10,042

Adjusted EBITDA
$
95,377

 
$
86,508

 
$
178,571

 
$
164,856

 
 
 
 
 
 
 
 
Income from operations
$
64,624

 
$
56,806

 
$
119,908

 
$
108,210

Transaction costs (d)
1,587

 
1,945

 
1,915

 
1,945

Adjusted income from operations
$
66,211

 
$
58,751

 
$
121,823

 
$
110,155

 
 
 
 
 
 
 
 
Net income
$
40,426

 
$
33,040

 
$
77,724

 
$
74,414

Income tax expense
12,037

 
13,112

 
18,520

 
12,368

Income before income tax
52,463

 
46,152

 
96,244

 
86,782

Stock-based compensation expense (c)
3,698

 
3,137

 
6,589

 
5,514

Amortization of intangible assets (a)
8,276

 
8,666

 
16,324

 
16,050

Transaction costs (d)
1,587

 
1,945

 
1,915

 
1,945

Adjusted income before income tax
66,024

 
59,900

 
121,072

 
110,291

Adjusted income tax expense (e)
(15,119
)
 
(15,403
)
 
(27,587
)
 
(28,890
)
Adjusted net income
$
50,905

 
$
44,497

 
$
93,485

 
$
81,401

 
 
 
 
 
 
 
 
Weighted average number of common shares—diluted
58,761,229

 
60,379,657

 
59,104,631

 
60,641,468

Diluted adjusted earnings per common share
$
0.87

 
$
0.74

 
$
1.58

 
$
1.34






BRIGHT HORIZONS FAMILY SOLUTIONS INC.
NON-GAAP RECONCILIATIONS
(In thousands, except share data)
(Unaudited)
 
Forward Guidance (h)
 
Three Months Ended 
September 30, 2018
 
Year Ended 
 December 31, 2018
 
Low
 
High
 
Low
 
High
Net income
$
32,500

 
$
33,300

 
$
150,000

 
$
151,500

Net income allocated to unvested participating shares
(200
)
 
(200
)
 
(800
)
 
(800
)
Income tax expense (f)
10,200

 
10,500

 
41,200

 
41,750

Income before income tax
42,500

 
43,600

 
190,400

 
192,450

Stock-based compensation expense (c)
3,900

 
4,000

 
14,250

 
14,500

Amortization of intangible assets (a)
8,100

 
8,100

 
32,250

 
32,250

Transaction costs (d)

 

 
1,900

 
1,900

Adjusted income before income tax
54,500

 
55,700

 
238,800

 
241,100

Tax impact on adjusted income before income tax (g)
(12,300
)
 
(12,700
)
 
(54,400
)
 
(55,000
)
Adjusted net income attributable to common stockholders
$
42,200

 
$
43,000


$
184,400

 
$
186,100

 
 
 
 
 
 
 
 
Per common share information:
 
 
 
 
 
 
 
Diluted earnings per common share
$
0.55

 
$
0.56

 
$
2.53

 
$
2.55

Income tax expense (f)
0.17

 
0.18

 
0.70

 
0.71

Income before income tax
0.72

 
0.74

 
3.23

 
3.26

Stock-based compensation expense (c)
0.07

 
0.07

 
0.24

 
0.25

Amortization of intangible assets (a)
0.14

 
0.14

 
0.55

 
0.55

Transaction costs (d)

 

 
0.03

 
0.03

Tax impact on adjusted income before income tax (g)
(0.21
)
 
(0.22
)
 
(0.92
)
 
(0.93
)
Diluted adjusted earnings per common share
$
0.72

 
$
0.73

 
$
3.13

 
$
3.16

(a)
Represents amortization of intangible assets, including approximately $4.7 million in each quarter of 2018 and 2017, associated with intangible assets recorded in connection with our going private transaction in May 2008.
(b)
Represents rent expense in excess of cash paid for rent, recognized on a straight line basis over the life of the lease in accordance with Accounting Standards Codification Topic 840, Leases.
(c)
Represents non-cash stock-based compensation expense in accordance with Accounting Standards Codification Topic 718, Compensation-Stock Compensation.
(d)
Represents transaction costs incurred in connection with the May 2017 and May 2018 amendments to the credit agreement, the May 2017 and March 2018 secondary offerings, and completed acquisitions.
(e)
Represents income tax expense calculated on adjusted income before income tax at an effective tax rate of approximately 23% and 26% for 2018 and 2017, respectively. The tax rate for 2018 represents a tax rate of approximately 27-28% applied to the expected adjusted income before tax for the full year, less the estimated effect of additional excess tax benefits related to equity transactions for the full year 2018, which the Company estimates will be in the range of $10.5 million to $12.5 million. However, the timing, volume and tax benefits associated with such future equity activity will affect these estimates and the estimated effective tax rate for the year.
(f)
Represents estimated income tax expense using an effective tax rate of approximately 22% for the year ended December 31, 2018, based on projected consolidated income before income tax and including the estimated impact of excess tax benefits related to equity transactions, which the Company estimates in the range of $10.5 million to $12.5 million for the full year in 2018. However, the timing, volume and tax benefits associated with such future equity activity will affect these estimates and the estimated effective tax rate for the year. In addition, the impact of the U.S. Tax Cuts and Jobs Act may differ from these estimates due to, among other things, changes in interpretations, analysis and assumptions made by the Company, additional guidance that may be issued, and tax planning the Company may undertake.
(g)
Represents estimated tax on adjusted income before income tax using an effective tax rate of approximately 23%.
(h)
Forward guidance amounts are estimated based on a number of assumptions and actual results could differ materially from the estimates provided herein.