Form 8-K

 

 

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): March 13, 2014

 

 

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))

 

 

 


Item 2.02 Results of Operations and Financial Condition

On March 13, 2014, Bright Horizons Family Solutions Inc. issued a press release announcing its financial results for the fiscal quarter ended December 31, 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 March 13, 2014.


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.
By:  

/s/ Elizabeth Boland

Name:   Elizabeth Boland
Title:   Chief Financial Officer

Date: March 13, 2014


EXHIBIT INDEX

Exhibits.

 

99.1    Press Release of Bright Horizons Family Solutions Inc. dated March 13, 2014.
EX-99.1

Exhibit 99.1

Bright Horizons Family Solutions® Reports Fourth Quarter of 2013 Financial Results

WATERTOWN, March 13, 2014/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 fourth quarter and full year of 2013.

Fourth quarter 2013 highlights (compared to fourth quarter 2012):

 

    Revenue increased 17% to $319 million

 

    Adjusted EBITDA* increased 13% to $53 million

 

    Adjusted income from operations* rose 11% to $32 million

 

    Adjusted net income* increased 126% to $21 million

 

    Diluted adjusted earnings per pro forma common share* increased 88% to $0.32

Year ended December 31, 2013 highlights (compared to year ended December 31, 2012):

 

    Revenue increased 14% to $1.22 billion

 

    Adjusted EBITDA* increased 15% to $209 million

 

    Adjusted income from operations* rose 13% to $127 million

 

    Adjusted net income* increased 107% to $78 million

 

    Diluted adjusted earnings per pro forma common share* increased 68% to $1.19

“We are very pleased to have completed 2013 with another quarter of strong operating and financial results” said David Lissy, Chief Executive Officer. “By a number of measures, 2013 was a record year for us as we achieved significant growth in all of our services and increased our position as the global leader in our field while returning to the public markets. I am very proud of our 25,000 employees who were once again recognized by Fortune magazine and by the Financial Times as one of the Best Places to Work in the U.S and in Europe,” Lissy continued. “Their steadfast commitment to our mission enables us to grow while delivering on our mission to provide high quality programs and solutions for the children, families, employees and clients we serve.”

Fourth quarter 2013 results

Revenue increased $45.8 million or 17% in the fourth quarter of 2013 from the fourth 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 fourth quarter of 2013, adjusted EBITDA increased $6.3 million or 13% and adjusted income from operations increased $3.2 million from the fourth quarter of 2012 primarily as a result of the $8.1 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 the acquisitions of Kidsunlimited and Children’s Choice earlier in 2013. Enrollment gains and strong cost management in mature and ramping centers, and new child care centers and back-up dependent care and educational advisory clients have contributed to gross profit gains in 2013. These gains are tempered by the costs incurred during the initial ramp up phase for certain new lease/consortium centers and the ongoing integration of the acquisitions we completed in 2013.

In 2013, the Company incurred $5.3 million in transaction costs related to acquisitions and secondary offerings of common stock; in total, approximately $1.2 million of such costs were incurred in the fourth quarter of 2013 compared to $0.4 million in the fourth quarter of 2012. Including these transaction and offering costs, income from operations was $30.4 million for the fourth quarter of 2013 compared to $27.9 million in the same 2012 period, and net income was $23.7 million for the fourth quarter of 2013 compared to $4.2 million in 2012. Adjusted net income increased by $11.8 million, or 126%, to $21.2 million as compared to the fourth quarter of 2012, on expanded adjusted operating income and lower interest expense. Diluted adjusted earnings per pro forma common share increased 88%, from $0.17 in the fourth quarter of 2012 to $0.32 in the fourth quarter of 2013.


As of December 31, 2013, the Company operated 880 early care and education centers with the capacity to serve 99,700 children and families, a 14% increase in capacity since December 31, 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”), expenses related to secondary offerings, 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 offerings, 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 expenses, 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

In 2013, the Company generated approximately $160 million of cash flow from operations compared to $107 million for the same period in 2012 and invested $69 million in fixed assets and $130 million in acquired businesses. Net cash provided by financing activities totaled $37 million in 2013. The Company raised $235 million of net proceeds from the IPO completed on January 30, 2013, and repaid all of its outstanding indebtedness 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. In 2013, the Company’s cash and cash equivalents decreased by $5 million to $30 million and the net debt position declined $138 million to $735 million at December 31, 2013.

2014 Outlook

As described below, the Company is providing certain targets regarding its 2014 expectations.

 

    Overall revenue growth in 2014 in the range of 10-12%

 

    Adjusted EBITDA growth in 2014 in the range of 15-17%

 

    Adjusted net income in 2014 in the range of $96 to $99 million

 

    Diluted adjusted earnings per share in 2014 in the range of $1.42 to $1.46

 

    Diluted weighted average shares of approximately 67.5 million shares

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 David Lissy. Replays of the entire call will be available through March 20, 2014 at 1-877-870-5176 or, for international callers, at 1-858-384-5517, conference ID # 13576700. 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.

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”.

The number of common shares used in the calculations of diluted adjusted earnings per pro forma common share for the years ended December 31, 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 our IPO are included in the diluted adjusted earnings per pro forma common share calculations beginning on the date that such shares were actually issued (January 30, 2013 or, in the case of the shares subject to the underwriters’ option to purchase additional shares, February 21, 2013). 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 900 clients across the United States, the United Kingdom, Ireland, the Netherlands, Canada and India, including more than 130 FORTUNE 500 companies and more than 80 of Working Mother magazine’s 2013 “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

Director – Solebury Communications Group LLC

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 OPERATIONS

(Unaudited, $ in thousands except per share amounts)

 

     Three Months Ended December 31,  
     2013     %     2012     %  

Revenue

   $ 319,177       100.0   $ 273,426       100.0

Cost of services

     247,961       77.7     210,321       76.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     71,216       22.3     63,105       23.1

Selling general and administrative expenses

     32,779       10.3     28,526       10.4

Amortization of intangible assets

     8,026       2.5     6,635       2.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     30,411       9.5     27,944       10.2

Interest expense, net

     (9,154 )     (2.9 %)      (22,010 )     (8.0 %) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before tax

     21,257       6.6     5,934       2.2

Income tax benefit (expense)

     2,419       0.8     (1,707 )     (0.6 %) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     23,676       7.4     4,227       1.6

Net (loss) income attributable to non-controlling interest

     (67 )     0.0     53       0.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Bright Horizons Family Solutions Inc.

   $ 23,743       7.4   $ 4,174       1.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Accretion of Class L preference

     —            20,810    

Accretion of Class L preference for vested options

     —            776    
  

 

 

     

 

 

   

Net income (loss) available to common shareholders

   $ 23,743       $ (17,412 )  
  

 

 

     

 

 

   

Allocation of net income (loss) to common stockholders—basic and diluted:

        

Class L

   $ —          $ 20,810    

Common stock

   $ 23,743       $ (17,412 )  

Earnings (loss) per share:

        

Class L—basic and diluted

   $ —          $ 15.68    

Common stock:

        

Basic

   $ 0.36       $ (2.87 )  

Diluted

   $ 0.35       $ (2.87 )  

Weighted average number of common shares outstanding:

        

Class L—basic and diluted

     —            1,327,115    

Common stock:

        

Basic

     65,190,234         6,062,664    

Diluted

     67,008,493         6,062,664    


Bright Horizons Family Solutions Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, $ in thousands except per share amounts)

 

     Years Ended December 31,  
     2013     %     2012     %  

Revenue

   $ 1,218,776       100.0   $ 1,070,938       100.0

Cost of services

     937,840       76.9     825,168       77.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     280,936       23.1     245,770       22.9

Selling general and administrative expenses

     141,827       11.6     123,373       11.5

Amortization of intangible assets

     30,075       2.5     26,933       2.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     109,034       9.0     95,464       8.9

Loss on extinguishment of debt

     (63,682 )     (5.2 %)      —          0.0

Interest expense, net

     (40,541 )     (3.4 %)      (83,712 )     (7.8 %) 
  

 

 

   

 

 

   

 

 

   

 

 

 
     (104,223 )     (8.6 %)      (83,712 )     (7.8 %) 

Income before tax

     4,811       0.4     11,752       1.1

Income tax benefit (expense)

     7,533       0.6     (3,243 )     (0.3 %) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     12,344       1.0     8,509       0.8

Net (loss) income attributable to non-controlling interest

     (279 )     0.0     347       0.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Bright Horizons Family Solutions Inc.

   $ 12,623       1.0   $ 8,162       0.8
  

 

 

   

 

 

   

 

 

   

 

 

 

Accretion of Class L preference

     —            79,211    

Accretion of Class L preference for vested options

     —            5,436    
  

 

 

     

 

 

   

Net income (loss) available to common shareholders

   $ 12,623       $ (76,485 )  
  

 

 

     

 

 

   

Allocation of net income (loss) to common stockholders—basic and diluted:

        

Class L

   $ —          $ 79,211    

Common stock

   $ 12,623       $ (76,485 )  

Earnings (loss) per share:

        

Class L—basic and diluted

   $ —          $ 59.73    

Common stock:

        

Basic

   $ 0.20       $ (12.62 )  

Diluted

   $ 0.20       $ (12.62 )  

Weighted average number of common shares outstanding:

        

Class L—basic and diluted

     —            1,326,206    

Common stock:

        

Basic

     62,659,264         6,058,512    

Diluted

     64,509,036         6,058,512    


Bright Horizons Family Solutions Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 

     December 31, 2013      December 31, 2012  

ASSETS

     

Current assets:

     

Cash and cash equivalents

   $ 29,585       $ 34,109   

Accounts receivable, net

     78,691         62,714   

Other current assets

     56,894         39,194   
  

 

 

    

 

 

 

Total current assets

     165,170         136,017   

Fixed assets, net

     390,894         340,376   

Goodwill

     1,096,283         997,344   

Other intangibles, net

     435,060         432,580   

Other assets

     15,263         9,791   
  

 

 

    

 

 

 

Total assets

   $ 2,102,670       $ 1,916,108   
  

 

 

    

 

 

 

LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY (DEFICIT)

     

Current liabilities:

     

Current portion of long-term debt

   $ 7,900       $ 2,036   

Accounts payable and accrued expenses

     107,626         97,207   

Deferred revenue and other current liabilities

     139,562         102,650   
  

 

 

    

 

 

 

Total current liabilities

     255,088         201,893   

Long-term debt

     756,323         904,607   

Deferred income taxes

     139,888         148,880   

Other long-term liabilities

     62,234         52,388   
  

 

 

    

 

 

 

Total liabilities

     1,213,533         1,307,768   

Redeemable non-controlling interest

     —           8,126   

Common stock, Class L, at accreted distribution value

     —           854,101   

Total stockholders’ equity (deficit)

     889,137         (253,887
  

 

 

    

 

 

 

Total liabilities, non-controlling interest and stockholders’ equity (deficit)

   $ 2,102,670       $ 1,916,108   
  

 

 

    

 

 

 


Bright Horizons Family Solutions Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

     Years Ended December 31,  
     2013     2012  

Cash flows from operating activities:

    

Net income

   $ 12,344      $ 8,509   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     72,808        61,348   

Loss on extinguishment of debt

     63,682        —     

Interest paid in kind and amortization of original issue discount and deferred financing costs

     4,906        30,537   

Stock-based compensation

     10,692        17,596   

Deferred income taxes

     (13,410     (12,045

Other non-cash adjustments, net

     713        879   

Changes in assets and liabilities:

    

Accounts receivable

     (11,458     (1,580

Prepaid expenses and other current assets

     (18,779     (4,328

Accounts payable and accrued expenses

     365        1,155   

Other, net

     37,816        4,911   
  

 

 

   

 

 

 

Net cash provided by operating activities

     159,679        106,982   

Cash flows from investing activities:

    

Purchases of fixed assets, net

     (69,320     (69,065

Purchase of long-term investments

     (2,000     —     

Payments for acquisitions-net of cash acquired

     (129,812     (111,825
  

 

 

   

 

 

 

Net cash used in investing activities

     (201,132     (180,890

Cash flows from financing activities:

    

Borrowings of long-term debt

     769,360        82,321   

Principal payments of long term-debt

     (7,900     (5,472

Extinguishment of long-term debt

     (972,468     —     

Proceeds from initial public offering

     234,944        —     

Proceeds from the issuance of common stock upon exercise of options

     11,040        2,115   

Purchase of non-controlling interest

     (4,139     —     

Tax benefit from stock-based compensation

     5,923        3,381   

Purchase of treasury stock

     —          (5,140
  

 

 

   

 

 

 

Net cash provided by financing activities

     36,760        77,205   

Effect of exchange rate changes on cash and cash equivalents

     169        364   
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (4,524     3,661   

Cash and cash equivalents, beginning of period

     34,109        30,448   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 29,585      $ 34,109   
  

 

 

   

 

 

 


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 December 31, 2013

           

Revenue

   $ 274,496       $ 36,906       $ 7,775       $ 319,177   

Amortization of intangibles

     7,769         181         76         8,026   

Income from operations

     17,961         11,100         1,350         30,411   

Adjusted income from operations (1)

     19,151         11,100         1,350         31,601   

Three months ended December 31, 2012

           

Revenue

   $ 232,536       $ 35,327       $ 5,563       $ 273,426   

Amortization of intangibles

     6,378         181         76         6,635   

Income from operations

     16,046         10,272         1,626         27,944   

Adjusted income from operations (1)

     16,416         10,365         1,664         28,445   

 

(1) Adjusted income from operations represents income from operations excluding expenses incurred in connection with the IPO, completed in January 2013, secondary offerings of stock in 2013 and transaction costs associated with the acquisitions of businesses in 2013.

 

     Full service
center-based
care
     Back-up
dependent
care
     Other
educational
advisory
services
     Total  

Year ended December 31, 2013

           

Revenue

   $ 1,049,854       $ 144,432       $ 24,490       $ 1,218,776   

Amortization of intangibles

     29,048         725         302         30,075   

Income from operations

     67,287         39,710         2,037         109,034   

Adjusted income from operations (1)

     82,470         41,563         2,817         126,850   

Year ended December 31, 2012

           

Revenue

   $ 922,214       $ 130,082       $ 18,642       $ 1,070,938   

Amortization of intangibles

     25,906         725         302         26,933   

Income (loss) from operations

     60,154         33,863         1,447         95,464   

Adjusted income from operations (1)

     72,718         36,997         2,767         112,482   

 

(1) Adjusted income from operations represents income from operations excluding expenses incurred in connection with the IPO, completed in January 2013, secondary offerings of stock in 2013, transaction costs associated with the acquisitions of businesses in 2013 and the modification of stock options in May 2012.


Bright Horizons Family Solutions Inc.

NON-GAAP RECONCILIATIONS

(Unaudited, in thousands)

 

     Three Months Ended December 31,     Years Ended December 31,  
     2013     2012     2013     2012  

Net income

   $ 23,676      $ 4,227      $ 12,344      $ 8,509   

Interest expense, net

     9,154        22,010        40,541        83,712   

Income tax (benefit) expense

     (2,419     1,707        (7,533     3,243   

Depreciation

     11,469        9,503        42,733        34,415   

Amortization (a)

     8,026        6,635        30,075        26,933   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     49,906        44,082        118,160        156,812   

Additional Adjustments:

        

Straight line rent expense (b)

     1,118        1,047        2,985        2,142   

Stock compensation expense (c)

     1,164        896        10,692        17,596   

Sponsor management fee (d)

     —          625        7,674        2,500   

Loss on extinguishment of debt (e)

     —          —          63,682        —     

Stock offering costs (f)

     689       401       1,336        1,801   

Acquisition-related costs (g)

     501        —          4,012        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments

     3,472        2,969        90,381        24,039   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 53,378      $ 47,051      $ 208,541      $ 180,851   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

   $ 30,411      $ 27,944      $ 109,034      $ 95,464   

Stock compensation for performance-based awards (2013) and effect of option modification (2012) (c)

     —          100       4,968        15,217   

Sponsor termination fee (d)

     —          —          7,500        —     

Stock offering costs (f)

     689        401       1,336        1,801   

Acquisition-related costs (g)

     501        —          4,012        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted income from operations

   $ 31,601      $ 28,445      $ 126,850      $ 112,482   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 23,676      $ 4,227      $ 12,344      $ 8,509   

Income tax (benefit) expense

     (2,419     1,707        (7,533     3,243   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before tax

     21,257        5,934        4,811        11,752   

Stock compensation expense (c)

     1,164        896        10,692        17,596   

Sponsor management fee (d)

     —          625        7,674        2,500   

Amortization (a)

     8,026        6,635        30,075        26,933   

Loss on extinguishment of debt (e)

     —          —          63,682        —     

Stock offering costs (f)

     689       401       1,336        1,801   

Acquisition-related costs (g)

     501        —          4,012        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted income before tax

     31,637        14,491        122,282        60,582   

Income tax expense (h)

     (10,483     (5,128     (44,022     (22,775
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 21,154      $ 9,363      $ 78,260      $ 37,807   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Represents amortization of intangible assets, including $20 million in 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.
(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 offerings of common stock 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 36.0% in 2013 and 37.6% in 2012.


Bright Horizons Family Solutions Inc.

DILUTED ADJUSTED EARNINGS PER PRO FORMA COMMON SHARE

(Unaudited, $ in thousands except per share amounts)

 

     Three months ended December 31,      Years ended December 31,  
     2013      2012      2013     2012  

Diluted earnings per pro forma common share:

          

Net income

   $ 23,676       $ 4,227       $ 12,344      $ 8,509   
  

 

 

    

 

 

    

 

 

   

 

 

 

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        1,326,206   

Adjustment to weight Class L shares over respective period

     —           —           (1,290,251     —     
  

 

 

    

 

 

    

 

 

   

 

 

 

Weighted average number of Class L shares over period

     —           1,327,115         36,864        1,326,206   

Class L conversion factor

     35.1955         35.1955         35.1955        35.1955   
  

 

 

    

 

 

    

 

 

   

 

 

 

Weighted average number of converted Class L common shares

     —           46,708,476         1,297,479        46,676,483   

Weighted average number of common shares

     65,190,234         6,062,664         62,659,264        6,058,512   
  

 

 

    

 

 

    

 

 

   

 

 

 

Pro forma weighted average number of common shares—basic

     65,190,234         52,771,140         63,956,743        52,734,995   

Incremental dilutive shares (2)

     1,818,259         817,781        1,849,772        256,418   
  

 

 

    

 

 

    

 

 

   

 

 

 

Pro forma weighted average number of common shares—diluted

     67,008,493         53,588,921         65,806,515        52,991,413   
  

 

 

    

 

 

    

 

 

   

 

 

 

Diluted earnings per pro forma common share

   $ 0.35       $ 0.08       $ 0.19      $ 0.16   
  

 

 

    

 

 

    

 

 

   

 

 

 

Diluted adjusted earnings per pro forma common share:

          

Adjusted net income

   $ 21,154       $ 9,363       $ 78,260      $ 37,807   
  

 

 

    

 

 

    

 

 

   

 

 

 

Pro forma weighted average number of common shares—basic

     65,190,234         52,771,140         63,956,743        52,734,995   

Incremental dilutive shares (2)

     1,818,259         817,781         1,849,772        256,418   
  

 

 

    

 

 

    

 

 

   

 

 

 

Pro forma weighted average number of common shares—diluted

     67,008,493         53,588,921         65,806,515        52,991,413   
  

 

 

    

 

 

    

 

 

   

 

 

 

Diluted adjusted earnings per pro forma common share

   $ 0.32       $ 0.17       $ 1.19      $ 0.71   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

(1) The weighted average number of Class L shares in the actual Class L earnings per share calculation for the three and twelve months December 31, 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 twelve 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.