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 8, 2013

 

 

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))

 

 

 

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Item 2.02

Results of Operations and Financial Condition

On August 8, 2013, Bright Horizons Family Solutions Inc. issued a press release announcing its financial results for the fiscal quarter ended June 30, 2013. A copy of the press release is furnished as Exhibit 99.1 hereto.

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 8, 2013.

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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.

 

Date: August 8, 2013

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EXHIBIT INDEX

Exhibits.

 

99.1

Press Release of Bright Horizons Family Solutions Inc. dated August 8, 2013.

Exhibit 99.1

Bright Horizons Family Solutions^® Reports Second Quarter of 2013 Financial Results

WATERTOWN, August 8, 2013 /PRNewswire/ — Bright Horizons Family Solutions^® Inc. (NYSE: BFAM), a leading provider of high-quality child care and early education and other services designed to help employers and families address the challenges of work and life, today announced financial results for the second quarter of 2013.

Second quarter 2013 highlights (compared to second quarter 2012):

 

•

Revenue increased 15% to $311 million

 

•

Adjusted EBITDA* increased 18% to $57 million

 

•

Adjusted income from operations* rose 15% to $36 million

 

•

Adjusted net income* increased 99% to $23 million

 

•

Diluted adjusted earnings per pro forma common share* increased 59% to $0.35

Year to date June 30, 2013 highlights (compared to six months ended June 30, 2012):

 

•

Revenue increased 12% to $591 million

 

•

Adjusted EBITDA* increased 18% to $105 million

 

•

Adjusted income from operations* rose 14% to $66 million

 

•

Adjusted net income* increased 93% to $39 million

 

•

Diluted adjusted earnings per pro forma common share* increased 58% to $0.60

“We are pleased with our results this past quarter and through the first half of the year,” said David Lissy, Chief Executive Officer. “We continue to execute on our plan to grow organically as well as through strategic acquisitions that enhance our leadership in our field. Our full suite of solutions, including full service centers, back-up care and educational advisory services, continues to allow us to expand our relationships with the clients we serve and to help working families better integrate the challenges of work and life across key life stages. In April, we continued to expand our footprint in the UK with the addition of Kidsunlimited and, in July, we announced the completion of our acquisition of Children’s Choice, the third largest provider in the US employer-sponsored child care market. Both of these additions have allowed us to expand our center footprint and add new employer client relationships, as well as to add talented professionals to our team in the US and in the UK.”

Second quarter 2013 results

Revenue increased $39.4 million in the second quarter of 2013 from the second quarter of 2012 on contributions from new and ramping full service child care centers, average price increases of 3-4%, and expanded sales of back-up dependent care and educational advisory services.

In the second quarter of 2013, adjusted EBITDA increased $8.8 million and adjusted income from operations increased $4.7 million from the second quarter of 2012 primarily as a result of the $10.9 million increase in gross profit, partially offset by increases in selling, general and administrative expenses (“SG&A”), including investments in technology and marketing to support the growth of the business, and incremental overhead costs from Kidsunlimited. Enrollment gains in mature and ramping centers, contributions from new child care centers, as well as back-up dependent care and educational advisory clients that have been added since the second quarter of 2012, coupled with strong cost management have driven gross margin improvement from 23.8% in the second quarter of 2012 to 24.3% in 2013.

In 2013, the Company incurred $1.8 million in transaction costs related to the acquisition of Kidsunlimited, including $0.3 million in the second quarter. In the second quarter of 2012, the Company recognized $15.1 million of stock compensation expense in connection with an exchange of existing stock options for replacement stock options. Income from operations was therefore $35.4 million for the second quarter of 2013 compared to $16.1 million in the same 2012 period, and net income was $24.5 million for the second quarter of 2013 compared to a net loss of $1.9 million in 2012. Adjusted net income increased by $11.5 million, or 99%, to $23.1 million as compared to the second quarter of 2012, on expanded adjusted operating income and lower interest expense. Diluted adjusted earnings per pro forma common share was $0.35, compared to $0.22 in the second quarter of 2012, an increase of 59%.

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As of June 30, 2013, the Company operated 830 early care and education centers with the capacity to serve 92,800 children and families, a 6% increase in capacity since June 30, 2012.

 

*

Adjusted EBITDA, adjusted income from operations and adjusted net income are non-GAAP measures. Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization, straight line rent expense, stock compensation expense, expenses related to the IPO and refinancing that were completed in January 2013 (the “IPO and refinancing”), and the secondary offering that was completed in June 2013, expenses associated with completed acquisitions, and the Sponsor management agreement termination fee. Adjusted income from operations represents income from operations before expenses related to the completion of the IPO and secondary offering, and expenses associated with completed acquisitions. Adjusted net income represents net income determined in accordance with GAAP, adjusted for stock compensation expense, amortization expense, the Sponsor management agreement termination fee, IPO and refinancing expenses, secondary offering expense, expenses associated with completed acquisitions and the income tax provision (benefit) thereon. These non-GAAP measures are more fully described and are reconciled from the respective measures determined under GAAP in the table referred to below. Diluted adjusted earnings per pro forma common share is a non-GAAP measure, calculated using adjusted net income, and gives effect to the conversion of Class L common stock as if the conversion were completed at the beginning of the respective fiscal period. Please refer to “Non-GAAP Measures,” “Bright Horizons Family Solutions Inc. Non-GAAP Reconciliations,” and “Bright Horizons Family Solutions Inc. Diluted Adjusted Earnings per Pro Forma Common Share” for further detail.

Balance Sheet and Cash Flow

During the six months ended June 30, 2013, the Company generated approximately $98 million of cash flow from operations compared to $90 million for the same period in 2012 and invested $40 million in fixed assets and $64 million in acquired businesses. Net cash provided by financing activities totaled $35 million in the six months ended June 30, 2013. The Company raised $235 million of net proceeds from the IPO completed on January 30, 2013, and repaid all of its outstanding indebtedness under its senior notes, senior subordinated notes, Tranche B term loans, and Series C new term loans with the proceeds from the IPO and proceeds from the issuance of $790 million in new secured term loans. The Company did not sell any additional shares in the secondary offering completed in June 2013. During the six month period ending June 30, 2013, the Company’s cash and cash equivalents increased by $29 million to $63 million and the net debt position declined $169 million to $704 million at June 30, 2013.

2013 Outlook

As described below, the Company is updating certain targets regarding its 2013 expectations to reflect its results through June 30, 2013.

 

•

Overall revenue growth in 2013 in the range of 12-14%

 

•

Adjusted EBITDA growth in 2013 in the range of 14-17%

 

•

Adjusted net income in 2013 in the range of $77 to $79 million

 

•

Diluted adjusted earnings per pro forma common share in 2013 in the range of $1.17 to $1.21

In addition, for the full year in 2013, the Company estimates that pro forma diluted weighted average shares will approximate 66 million shares, comprised of approximately 62.8 million shares for the first six months of 2013 and approximately 67 million shares for the remainder of 2013. This includes the 11.6 million common shares issued in connection with the IPO in the first quarter of 2013 and assumes the conversion of the Class L shares into common shares as if that conversion occurred on January 1, 2013.

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 1-877-407-0784 or, for international callers, 1-201-689-8560, and asking for the Bright Horizons Family Solutions conference call, moderated by Chief Executive Officer David Lissy. Replays of the entire call will be available through August 16, 2013 at 1-877-870-5176 or, for international callers, at 1-858-384-5517, conference ID # 417237. A webcast of the conference call will also be available through the Investor Relations section of the Company’s web site, www.brighthorizons.com. A copy of this press release is available on the web site.

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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.” Bright Horizons Family Solutions’ 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, strategies and the industries in which we and our partners operate. 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, the following: 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; changes in our relationships with employer sponsors; our substantial indebtedness and the terms of such indebtedness; our ability to withstand seasonal fluctuations in the demand for our services; significant competition within our industry; our ability to implement our growth strategies successfully; as well as those risks and uncertainties described in the “Risk Factors” section of our Annual Report on Form 10-K filed March 26, 2013. 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, unless required by law.

Non-GAAP Measures

In addition to the results provided in accordance with U.S. generally accepted accounting principles (“GAAP”) throughout this document, the Company has provided non-GAAP measurements - adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per pro forma common share – which present operating results on a basis adjusted for certain items. The Company uses these non-GAAP measures as key performance measures for the purpose of evaluating performance internally. 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 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 pro forma common share may differ from similar measures reported by other companies. Adjusted EBITDA, adjusted income from operations, and adjusted net income are reconciled from the respective measures under GAAP in the attached table “Bright Horizons Family Solutions Inc. Non-GAAP Reconciliations”.

On January 30, 2013, the Company completed its IPO in which 11.6 million shares of common stock were sold at a price of $22.00 per share (including the overallotment option which was exercised by the underwriters and completed on February 21, 2013). Prior to the IPO, on January 11, 2013, each share of the Company’s Class L common stock converted into 35.1955 shares of common stock. The number of common shares used in the calculations of diluted adjusted earnings per pro forma common share for the six months ended June 30, 2013 and 2012 give effect to the conversion of all outstanding shares of Class L common stock at the conversion factor of 35.1955 common shares for each Class L share, as if the conversion was completed at the beginning of the respective fiscal period. The calculations of diluted adjusted earnings per pro forma common share also include the dilutive effect of stock options, using the treasury stock method. Shares sold in the IPO are included in the diluted adjusted earnings per pro forma common share calculations beginning on the date that such shares were actually issued. Diluted adjusted earnings per pro forma common share is calculated using adjusted net income, as defined above. See the attached table “Bright Horizons Family Solutions Inc. Diluted Adjusted Earnings per Pro Forma Common Share” for further detail.

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 life. The Company provides center-based full service child care, back-up dependent care and educational advisory services to more than 850

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clients across the United States, the United Kingdom, Ireland, the Netherlands, Canada and India, including more than 130 FORTUNE 500 companies and more than 75 of Working Mother magazine’s 2012 “100 Best Companies for Working Mothers”. Bright Horizons is one of FORTUNE magazine’s “100 Best Companies to Work For” and is one of the UK’s 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

VP – Solebury Communications Group LLC

kdoherty@soleburyir.com

203-428-3233

Media:

Ilene Serpa

VP – Communications – Bright Horizons

iserpa@brighthorizons.com

617-673-8044

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Bright Horizons Family Solutions Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, $ in thousands except per share amounts)

 

		Three Months Ended June 30,
		2013				%				2012				%
Revenue		$	310,813				100.0	%		$	271,463				100.0	%
Cost of services			235,388				75.7	%			206,910				76.2	%
Gross profit			75,425				24.3	%			64,553				23.8	%
Selling general & administrative expenses			32,426				10.4	%			41,859				15.4	%
Amortization			7,602				2.5	%			6,633				2.5	%
Income from operations			35,397				11.4	%			16,061				5.9	%
Interest expense, net			(8,924	)			–2.9	%			(20,499	)			–7.6	%
Income (loss) before tax			26,473				8.5	%			(4,438	)			–1.7	%
Income tax provision (benefit)			1,966				0.6	%			(2,524	)			–0.9	%
Net income (loss)			24,507				7.9	%			(1,914	)			–0.8	%
Net (loss) income attributable to non-controlling interest			(72	)			0.0	%			53				0.0	%
Net income (loss) attributable to Bright Horizons Family Solutions Inc.		$	24,579				7.9	%		$	(1,967	)			–0.8	%
Accretion of Class L preference			—								19,589
Accretion of Class L preference for vested options			—								3,926
Net income (loss) available to common shareholders		$	24,579							$	(25,482	)
Allocation of net income (loss) to common stockholders—basic and diluted:
Class L		$	—							$	19,589
Common stock		$	24,579							$	(25,482	)
Earnings (loss) per share:
Class L—basic and diluted		$	—							$	14.76
Common stock:
Basic		$	0.38							$	(4.20	)
Diluted		$	0.37							$	(4.20	)
Weighted average number of common shares outstanding:
Class L—basic and diluted			—								1,327,115
Common stock:
Basic			64,732,730								6,062,664
Diluted			66,635,484								6,062,664

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Bright Horizons Family Solutions Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, $ in thousands except per share amounts)

 

		Six Months Ended June 30,
		2013				%				2012				%
Revenue		$	590,936				100.0	%		$	529,585				100.0	%
Cost of services			449,721				76.1	%			407,012				76.9	%
Gross profit			141,215				23.9	%			122,573				23.1	%
Selling general & administrative expenses			76,031				12.9	%			67,226				12.7	%
Amortization			14,350				2.4	%			13,182				2.5	%
Income from operations			50,834				8.6	%			42,165				7.9	%
Loss on extinguishment of debt			(63,682	)			–10.8	%			—				0.0	%
Interest expense, net			(22,192	)			–3.7	%			(40,370	)			–7.6	%
(Loss) income before tax			(35,040	)			–5.9	%			1,795				0.3	%
Income tax (benefit) provision			(8,766	)			–1.5	%			119				0.0	%
Net (loss) income			(26,274	)			–4.4	%			1,676				0.3	%
Net (loss) income attributable to non-controlling interest			(110	)			0.0	%			134				0.0	%
Net (loss) income attributable to Bright Horizons Family Solutions Inc.		$	(26,164	)			–4.4	%		$	1,542				0.3	%
Accretion of Class L preference			—								38,102
Accretion of Class L preference for vested options			—								3,992
Net loss available to common shareholders		$	(26,164	)						$	(40,552	)
Allocation of net loss to common stockholders—basic and diluted:
Class L			—							$	38,102
Common stock		$	(26,164	)						$	(40,552	)
Earnings (loss) per share:
Class L—basic and diluted			—							$	28.75
Common stock:
Basic		$	(0.43	)						$	(6.70	)
Diluted		$	(0.43	)						$	(6.70	)
Weighted average number of common shares outstanding:
Class L—basic and diluted			—								1,325,297
Common stock—basic and diluted			60,265,132								6,054,360

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Bright Horizons Family Solutions Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 

		June 30, 2013				December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents		$	62,999			$	34,109
Accounts receivable, net			56,664				62,714
Other current assets			53,547				39,194
Total current assets			173,210				136,017
Fixed assets, net			366,802				340,376
Goodwill			1,047,049				997,344
Other intangibles, net			434,398				432,580
Other assets			11,292				9,791
Total assets		$	2,032,751			$	1,916,108
LIABILITIES, NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt		$	7,900			$	2,036
Accounts payable and accrued expenses			111,066				97,207
Deferred revenue and other current liabilities			126,379				102,650
Total current liabilities			245,345				201,893
Long-term debt			758,766				904,607
Deferred income taxes			151,820				148,880
Other long term liabilities			56,435				52,388
Total liabilities			1,212,366				1,307,768
Redeemable noncontrolling interest			7,894				8,126
Common stock, Class L, at accreted distribution value (1)			—				854,101
Total stockholders’ equity (deficit)			812,491				(253,887	)
Total liabilities, noncontrolling interest and stockholders’ equity (deficit)		$	2,032,751			$	1,916,108

 

(1)

Prior to filing a registration statement with the Securities and Exchange Commission (“SEC”) related to our initial public offering, Class L common stock was classified within stockholders’ equity (deficit). In order to comply with SEC requirements as a public company, we reclassified Class L common stock outside of permanent equity for all periods presented. For further discussion on Class L common stock, see the consolidated financial statements and notes thereto for the year ended December 31, 2012 included in the Company’s Annual Report on Form 10-K.

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Bright Horizons Family Solutions Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

		Six Months Ended June 30,
		2013				2012
Cash flows from operating activities
Net (loss) income		$	(26,274	)		$	1,676
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization			35,856				32,617
Loss on extinguishment of debt			63,682				—
Interest paid in kind			2,143				11,497
Stock based compensation			8,305				15,799
Deferred income taxes			431				(13,310	)
Other non-cash adjustments, net			513				898
Changes in assets and liabilities:
Accounts receivable			7,691				12,688
Prepaid expenses and other current assets			(18,256	)			7,115
Accounts payable and accrued expenses			5,213				17,767
Other, net			19,122				3,696
Net cash provided by operating activities			98,426				90,443
Cash flows from investing activities
Purchases of fixed assets			(39,662	)			(27,688	)
Payments for acquisitions—net of cash acquired			(64,213	)			(108,168	)
Net cash used in investing activities			(103,875	)			(135,856	)
Cash Flows from financing activities
Borrowings of long-term debt			769,360				82,321
Principal payments of long-term debt			(3,950	)			(5,048	)
Extinguishment of long-term debt			(972,468	)			—
Proceeds from initial public offering, including over-allotment, net			234,944				—
Proceeds from issuance of common stock upon exercise of options			4,668				2,115
Tax benefit from stock-based compensation			2,791				3,506
Purchase of treasury stock			—				(5,140	)
Net cash provided by financing activities			35,345				77,754
Effect of exchange rate changes on cash			(1,006	)			(25	)
Net increase in cash and cash equivalents			28,890				32,316
Cash and cash equivalents, beginning of period			34,109				30,448
Cash and cash equivalents, end of period		$	62,999			$	62,764

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Bright Horizons Family Solutions Inc.

SEGMENT INFORMATION

(Unaudited, in thousands)

 

		Full service center-based care				Back-up dependent care				Other educational advisory services				Total
Three Months Ended June 30, 2013
Revenue		$	269,910			$	35,717			$	5,186			$	310,813
Amortization of intangibles			7,346				181				75				7,602
Income from operations			24,062				10,927				408				35,397
Adjusted income from operations (1)			24,974				10,927				408				36,309
Three Months Ended June 30, 2012
Revenue		$	235,592			$	31,635			$	4,236			$	271,463
Amortization of intangibles			6,377				181				75				6,633
Income (loss) from operations			10,731				6,402				(1,072	)			16,061
Adjusted income from operations (1)			22,188				9,259				131				31,578

 

(1)

Adjusted income from operations represents income from operations excluding expenses incurred in connection with the completion of the IPO in January 2013, the secondary offering in June 2013, the modification of stock options in May 2012 and transaction costs associated with the acquisition of a business in 2013.

 

		Full service center-based care				Back-up dependent care				Other educational advisory services				Total
Six Months Ended June 30, 2013
Revenue		$	512,160			$	68,878			$	9,898			$	590,936
Amortization of intangibles			13,837				362				151				14,350
Income (loss) from operations			32,934				18,394				(494	)			50,834
Adjusted income from operations (1)			45,180				20,247				286				65,713
Six Months Ended June 30, 2012
Revenue		$	459,632			$	61,747			$	8,206			$	529,585
Amortization of intangibles			12,669				362				151				13,182
Income (loss) from operations			27,907				15,209				(951	)			42,165
Adjusted income from operations (1)			39,364				18,066				252				57,682

 

(1)	Adjusted income from operations represents income from operations excluding expenses incurred in connection with the completion of the IPO in 2013, the secondary offering in 2013, the modification of stock options in 2012 and transaction costs associated with the acquisition of a business in 2013.

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Bright Horizons Family Solutions Inc.

NON-GAAP RECONCILIATIONS

(Unaudited, in thousands)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Net income (loss)		$	24,507			$	(1,914	)		$	(26,274	)		$	1,676
Interest expense, net			8,924				20,499				22,192				40,370
Income tax expense (benefit)			1,966				(2,524	)			(8,766	)			119
Depreciation			10,553				8,214				20,251				16,103
Amortization (a)			7,602				6,633				14,350				13,182
EBITDA			53,552				30,908				21,753				71,450
Additional Adjustments:
Straight line rent expense (b)			524				372				1,363				600
Stock compensation expense (c)			1,685				15,574				8,305				15,799
Sponsor management fee (d)			—				625				7,674				1,250
Loss on extinguishment of debt (e)			—				—				63,682				—
Stock offering costs (f)			647				400				647				400
Expenses related to acquisitions (g)			265				—				1,764				—
Total adjustments			3,121				16,971				83,435				18,049
Adjusted EBITDA		$	56,673			$	47,879			$	105,188			$	89,499
Income from operations		$	35,397			$	16,061			$	50,834			$	42,165
Stock compensation for performance-based awards and effect of option modification, respectively (c)			—				15,117				4,968				15,117
Sponsor termination fee (d)			—				—				7,500				—
Stock offering costs (f)			647				400				647				400
Acquisition-related costs (g)			265				—				1,764				—
Adjusted income from operations		$	36,309			$	31,578			$	65,713			$	57,682
Net (loss) income		$	24,507			$	(1,914	)		$	(26,274	)		$	1,676
Income tax (benefit) expense			1,966				(2,524	)			(8,766	)			119
(Loss) income before tax			26,473				(4,438	)			(35,040	)			1,795
Stock compensation expense (c)			1,685				15,574				8,305				15,799
Sponsor management fee (d)			—				625				7,674				1,250
Amortization (a)			7,602				6,633				14,350				13,182
Loss on extinguishment of debt (e)			—				—				63,682				—
Stock offering costs (f)			647				400				647				400
Acquisition-related costs (g)			265				—				1,764				—
Adjusted income before tax			36,672				18,794				61,382				32,426
Income tax expense (h)			(13,568	)			(7,196	)			(22,712	)			(12,420	)
Adjusted net income		$	23,104			$	11,598			$	38,670			$	20,006

 

(a)	Represents amortization of intangible assets, including $10.1 million for the six months ended June 30, 2012 and 2013 associated with intangible assets recorded in connection with our going private transaction in May 2008.

(b)	Represents rent in excess of cash paid for rent, recognized on a straight line basis over the lease life in accordance with Accounting Standards Codification (“ASC”) Topic 840, Leases.

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(c)	Represents non-cash stock-based compensation expense, including performance-based stock compensation charge.

(d)	Represents fees paid to our Sponsor under a management agreement, including the Sponsor termination fee.

(e)	Represents redemption premiums and write off of unamortized debt issue costs and original issue discount associated with indebtedness that was repaid in connection with a refinancing.

(f)	Represents costs incurred in connection with secondary offering of common stock completed in June 2013 and costs incurred in connection with the initial public offering of common stock completed in January 2013, respectively.

(g)	Represents costs associated with the acquisition of businesses.

(h)	Represents income tax expense calculated on adjusted income before tax at the effective rate of 37.0% in 2013 and 38.3% in 2012.

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Bright Horizons Family Solutions Inc.

DILUTED ADJUSTED EARNINGS PER PRO FORMA COMMON SHARE

(Unaudited, $ in thousands except per share amounts)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Diluted earnings (loss) per pro forma common share:
Net income (loss)		$	24,507			$	(1,914	)		$	(26,274	)		$	1,676
Pro forma weighted average number of common shares—diluted:
Weighted average number of Class L shares over period in which Class L shares were outstanding (1)			—				1,327,115				1,327,115				1,325,297
Adjustment to weight Class L shares over respective period			—				—				(1,253,387	)			—
Weighted average number of Class L shares over period			—				1,327,115				73,728				1,325,297
Class L conversion factor			35.1955				35.1955				35.1955				35.1955
Weighted average number of converted Class L common shares			—				46,708,476				2,594,916				46,644,491
Weighted average number of common shares			64,732,730				6,062,664				60,265,132				6,054,360
Pro forma weighted average number of common shares—basic			64,732,730				52,771,140				62,860,048				52,698,851
Incremental dilutive shares (2)			1,902,754				—				—				84,121
Pro forma weighted average number of common shares—diluted			66,635,484				52,771,140				62,860,048				52,782,972
Diluted earnings (loss) per pro forma common share		$	0.37			$	(0.04	)		$	(0.42	)		$	0.03
Diluted adjusted earnings per pro forma common share:
Adjusted net income		$	23,104			$	11,598			$	38,670			$	20,006
Pro forma weighted average number of common shares—basic			64,732,730				52,771,140				62,860,048				52,698,851
Incremental dilutive shares (2)			1,902,754				39,650				1,832,986				84,121
Pro forma weighted average number of common shares—diluted			66,635,484				52,810,790				64,693,034				52,782,972
Diluted adjusted earnings per pro forma common share		$	0.35			$	0.22			$	0.60			$	0.38

 

(1)

The weighted average number of Class L shares in the actual Class L earnings per share calculation for the three and six months June 30, 2013 represents the weighted average from the beginning of the period up through the date of conversion of the Class L shares into common shares. As such, the pro forma weighted average number of common shares includes an adjustment to the weighted average number of Class L shares outstanding to reflect the length of time the Class L shares were outstanding prior to conversion relative to the respective three and six month periods. The converted Class L shares are already included in the weighted average number of common shares outstanding for the period after their conversion.

(2)	Represents the dilutive effect of stock options using the treasury stock method. For purposes of the diluted loss per pro forma common share for the six months ended June 30, 2013 and three months ended June 30, 2012, there is no dilutive effect since there was a loss recorded during the period.