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) |
¨ | 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 |
Item 9.01 | Financial Statements and Exhibits |
BRIGHT HORIZONS FAMILY SOLUTIONS INC. | |||
By: | /s/ Elizabeth Boland | ||
Name: | Elizabeth Boland | ||
Title: | Chief Financial Officer |
• | Revenue increased 9% to $335 million |
• | Adjusted EBITDA* increased 11% to $55 million |
• | Adjusted income from operations* increased 12% to $33 million |
• | Adjusted net income* increased 16% to $21 million |
• | Diluted adjusted earnings per pro forma common share* increased 14% to $0.32 |
• | Overall revenue growth in 2014 of approximately 11% |
• | Adjusted EBITDA growth in 2014 in the range of 15-16% |
• | Adjusted net income growth in 2014 in the range of 23-25% |
• | Diluted adjusted earnings per pro forma common share growth in the range of 20-22% |
Contacts: | |||
Investors: | |||
Elizabeth Boland | |||
CFO - Bright Horizons | |||
eboland@brighthorizons.com | |||
617-673-8125 | |||
Jim Plocica | |||
VP - Shareholder Services - Bright Horizons | |||
jplocica@brighthorizons.com | |||
617-673-8041 | |||
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 OPERATIONS (In thousands, except share data) (Unaudited) | |||||||||||
Three Months Ended September 30, | |||||||||||
2014 | % | 2013 | % | ||||||||
Revenue | $ | 334,976 | 100.0 | % | $ | 308,663 | 100.0 | % | |||
Cost of services | 262,115 | 78.2 | % | 240,158 | 77.8 | % | |||||
Gross profit | 72,861 | 21.8 | % | 68,505 | 22.2 | % | |||||
Selling, general and administrative expenses | 32,856 | 9.8 | % | 33,017 | 10.7 | % | |||||
Amortization of intangible assets | 6,959 | 2.1 | % | 7,699 | 2.5 | % | |||||
Income from operations | 33,046 | 9.9 | % | 27,789 | 9.0 | % | |||||
Interest expense, net | (8,395 | ) | (2.5 | )% | (9,195 | ) | (3.0 | )% | |||
Income before income taxes | 24,651 | 7.4 | % | 18,594 | 6.0 | % | |||||
Income tax expense | (9,272 | ) | (2.8 | )% | (3,652 | ) | (1.2 | )% | |||
Net income | 15,379 | 4.6 | % | 14,942 | 4.8 | % | |||||
Net loss attributable to non-controlling interest | — | — | % | (102 | ) | — | % | ||||
Net income attributable to Bright Horizons Family Solutions Inc. | $ | 15,379 | 4.6 | % | $ | 15,044 | 4.8 | % | |||
Earnings per common share: | |||||||||||
Common stock—basic | $ | 0.23 | $ | 0.23 | |||||||
Common stock—diluted | $ | 0.23 | $ | 0.23 | |||||||
Weighted average number of common shares outstanding: | |||||||||||
Common stock—basic | 66,087,184 | 64,916,558 | |||||||||
Common stock—diluted | 67,635,657 | 66,831,413 |
BRIGHT HORIZONS FAMILY SOLUTIONS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share data) (Unaudited) | |||||||||||
Nine Months Ended September 30, | |||||||||||
2014 | % | 2013 | % | ||||||||
Revenue | $ | 1,015,231 | 100.0 | % | $ | 899,599 | 100.0 | % | |||
Cost of services | 782,107 | 77.0 | % | 689,879 | 76.7 | % | |||||
Gross profit | 233,124 | 23.0 | % | 209,720 | 23.3 | % | |||||
Selling, general and administrative expenses | 101,464 | 10.0 | % | 109,048 | 12.1 | % | |||||
Amortization of intangible assets | 22,068 | 2.2 | % | 22,049 | 2.5 | % | |||||
Income from operations | 109,592 | 10.8 | % | 78,623 | 8.7 | % | |||||
Loss on extinguishment of debt | — | — | % | (63,682 | ) | (7.1 | )% | ||||
Interest expense, net | (25,736 | ) | (2.5 | )% | (31,387 | ) | (3.5 | )% | |||
Income (loss) before income taxes | 83,856 | 8.3 | % | (16,446 | ) | (1.9 | )% | ||||
Income tax (expense) benefit | (30,715 | ) | (3.0 | )% | 5,114 | 0.6 | % | ||||
Net income (loss) | 53,141 | 5.3 | % | (11,332 | ) | (1.3 | )% | ||||
Net loss attributable to non-controlling interest | — | — | % | (212 | ) | — | % | ||||
Net income (loss) attributable to Bright Horizons Family Solutions Inc. | $ | 53,141 | 5.3 | % | $ | (11,120 | ) | (1.3 | )% | ||
Earnings (loss) per common share: | |||||||||||
Common stock—basic | $ | 0.81 | $ | (0.18 | ) | ||||||
Common stock—diluted | $ | 0.79 | $ | (0.18 | ) | ||||||
Weighted average number of common shares outstanding: | |||||||||||
Common stock—basic | 65,755,911 | 61,815,607 | |||||||||
Common stock—diluted | 67,433,972 | 61,815,607 |
BRIGHT HORIZONS FAMILY SOLUTIONS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) | |||||||
September 30, 2014 | December 31, 2013 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 109,008 | $ | 29,585 | |||
Accounts receivable—net | 64,660 | 78,691 | |||||
Other current assets | 56,769 | 56,894 | |||||
Total current assets | 230,437 | 165,170 | |||||
Fixed assets—net | 398,635 | 390,894 | |||||
Goodwill | 1,096,840 | 1,096,283 | |||||
Other intangibles—net | 413,485 | 435,060 | |||||
Other assets | 14,441 | 15,263 | |||||
Total assets | $ | 2,153,838 | $ | 2,102,670 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Current portion of long-term debt | $ | 7,900 | $ | 7,900 | |||
Accounts payable and accrued expenses | 103,839 | 107,626 | |||||
Deferred revenue and other current liabilities | 126,038 | 139,562 | |||||
Total current liabilities | 237,777 | 255,088 | |||||
Long-term debt | 752,657 | 756,323 | |||||
Deferred income taxes | 139,963 | 139,888 | |||||
Other long-term liabilities | 70,969 | 62,234 | |||||
Total liabilities | 1,201,366 | 1,213,533 | |||||
Total stockholders’ equity | 952,472 | 889,137 | |||||
Total liabilities and stockholders’ equity | $ | 2,153,838 | $ | 2,102,670 |
BRIGHT HORIZONS FAMILY SOLUTIONS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) | |||||||
Nine months ended September 30, | |||||||
2014 | 2013 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income (loss) | $ | 53,141 | $ | (11,332 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | 58,332 | 53,313 | |||||
Loss on extinguishment of debt | — | 63,682 | |||||
Interest paid in kind | — | 2,143 | |||||
Stock-based compensation | 6,462 | 9,528 | |||||
Deferred income taxes | (59 | ) | 367 | ||||
Other non-cash adjustments, net | 4,598 | 4,348 | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable | 13,938 | 10,977 | |||||
Prepaid expenses and other current assets | (1,121 | ) | (21,123 | ) | |||
Accounts payable and accrued expenses | (3,617 | ) | (553 | ) | |||
Other, net | (10,363 | ) | 10,115 | ||||
Net cash provided by operating activities | 121,311 | 121,465 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of fixed assets | (47,953 | ) | (55,159 | ) | |||
Payments for acquisitions, net of cash acquired | (6,522 | ) | (125,389 | ) | |||
Settlement of purchase price for prior year acquisitions | 1,030 | — | |||||
Net cash used in investing activities | (53,445 | ) | (180,548 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Borrowings of long-term debt, net | — | 769,360 | |||||
Extinguishment of long-term debt | — | (972,468 | ) | ||||
Proceeds from initial public offering, net | — | 234,944 | |||||
Line of credit, net | — | 20,600 | |||||
Principal payments of long-term debt | (5,925 | ) | (5,925 | ) | |||
Purchase of treasury stock | (7,233 | ) | — | ||||
Proceeds from issuance of common stock upon exercise of options | 13,656 | 8,671 | |||||
Proceeds from issuance of restricted stock | 4,709 | — | |||||
Tax benefit from stock-based compensation | 6,856 | 4,845 | |||||
Net cash provided by financing activities | 12,063 | 60,027 | |||||
Effect of exchange rates on cash and cash equivalents | (506 | ) | (43 | ) | |||
Net increase in cash and cash equivalents | 79,423 | 901 | |||||
Cash and cash equivalents—beginning of period | 29,585 | 34,109 | |||||
Cash and cash equivalents—end of period | $ | 109,008 | $ | 35,010 |
Full service center-based care | Back-up dependent care | Other educational advisory services | Total | ||||||||||||
Three months ended September 30, 2014 | |||||||||||||||
Revenue | $ | 282,798 | $ | 43,493 | $ | 8,685 | $ | 334,976 | |||||||
Amortization of intangibles | 6,634 | 181 | 144 | 6,959 | |||||||||||
Income from operations | 19,079 | 12,356 | 1,611 | 33,046 | |||||||||||
Adjusted income from operations (1) | 19,079 | 12,356 | 1,611 | 33,046 | |||||||||||
Three months ended September 30, 2013 | |||||||||||||||
Revenue | $ | 263,198 | $ | 38,648 | $ | 6,817 | $ | 308,663 | |||||||
Amortization of intangibles | 7,442 | 181 | 76 | 7,699 | |||||||||||
Income from operations | 16,392 | 10,215 | 1,182 | 27,789 | |||||||||||
Adjusted income from operations (1) | 18,139 | 10,215 | 1,182 | 29,536 |
(1) | Adjusted income from operations represents income from operations excluding transaction costs associated with the acquisition of businesses in 2013. |
Full service center-based care | Back-up dependent care | Other educational advisory services | Total | ||||||||||||
Nine months ended September 30, 2014 | |||||||||||||||
Revenue | $ | 870,546 | $ | 120,689 | $ | 23,996 | $ | 1,015,231 | |||||||
Amortization of intangibles | 21,090 | 543 | 435 | 22,068 | |||||||||||
Income from operations | 70,587 | 36,229 | 2,776 | 109,592 | |||||||||||
Adjusted income from operations (1) | 71,137 | 36,229 | 2,776 | 110,142 | |||||||||||
Nine months ended September 30, 2013 | |||||||||||||||
Revenue | $ | 775,358 | $ | 107,526 | $ | 16,715 | $ | 899,599 | |||||||
Amortization of intangibles | 21,279 | 543 | 227 | 22,049 | |||||||||||
Income from operations | 49,326 | 28,609 | 688 | 78,623 | |||||||||||
Adjusted income from operations (1) | 63,320 | 30,463 | 1,466 | 95,249 |
(1) | Adjusted income from operations represents income from operations excluding expenses incurred in connection with the completion of the IPO in January 2013, secondary offerings, and transaction costs associated with the acquisition of businesses in 2013. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net income (loss) | $ | 15,379 | $ | 14,942 | $ | 53,141 | $ | (11,332 | ) | ||||||
Interest expense, net | 8,395 | 9,195 | 25,736 | 31,387 | |||||||||||
Income tax expense (benefit) | 9,272 | 3,652 | 30,715 | (5,114 | ) | ||||||||||
Depreciation | 12,423 | 11,013 | 36,264 | 31,264 | |||||||||||
Amortization of intangible assets (a) | 6,959 | 7,699 | 22,068 | 22,049 | |||||||||||
EBITDA | 52,428 | 46,501 | 167,924 | 68,254 | |||||||||||
Additional Adjustments: | |||||||||||||||
Deferred rent (b) | 817 | 504 | 2,132 | 1,867 | |||||||||||
Stock compensation expense (c) | 2,039 | 1,223 | 6,462 | 9,528 | |||||||||||
Sponsor management fee (d) | — | — | — | 7,674 | |||||||||||
Loss on extinguishment of debt (e) | — | — | — | 63,682 | |||||||||||
Expenses related to secondary offering | — | — | 550 | 647 | |||||||||||
Acquisition-related costs (f) | — | 1,747 | — | 3,511 | |||||||||||
Total adjustments | 2,856 | 3,474 | 9,144 | 86,909 | |||||||||||
Adjusted EBITDA | $ | 55,284 | $ | 49,975 | $ | 177,068 | $ | 155,163 | |||||||
Income from operations | $ | 33,046 | $ | 27,789 | $ | 109,592 | $ | 78,623 | |||||||
Performance-based stock compensation expense (c) | — | — | — | 4,968 | |||||||||||
Sponsor termination fee (d) | — | — | — | 7,500 | |||||||||||
Expenses related to secondary offering | — | — | 550 | 647 | |||||||||||
Acquisition-related costs (f) | — | 1,747 | — | 3,511 | |||||||||||
Adjusted income from operations | $ | 33,046 | $ | 29,536 | $ | 110,142 | $ | 95,249 | |||||||
Net income (loss) | $ | 15,379 | $ | 14,942 | $ | 53,141 | $ | (11,332 | ) | ||||||
Income tax expense (benefit) | 9,272 | 3,652 | 30,715 | (5,114 | ) | ||||||||||
Income (loss) before tax | 24,651 | 18,594 | 83,856 | (16,446 | ) | ||||||||||
Stock compensation expense (c) | 2,039 | 1,223 | 6,462 | 9,528 | |||||||||||
Sponsor management fee (d) | — | — | — | 7,674 | |||||||||||
Amortization of intangible assets (a) | 6,959 | 7,699 | 22,068 | 22,049 | |||||||||||
Loss on extinguishment of debt (e) | — | — | — | 63,682 | |||||||||||
Expenses related to secondary offering | — | — | 550 | 647 | |||||||||||
Acquisition-related costs (f) | — | 1,747 | — | 3,511 | |||||||||||
Adjusted income before tax | 33,649 | 29,263 | 112,936 | 90,645 | |||||||||||
Income tax expense (g) | (12,282 | ) | (10,827 | ) | (41,401 | ) | (33,539 | ) | |||||||
Adjusted net income | $ | 21,367 | $ | 18,436 | $ | 71,535 | $ | 57,106 | |||||||
(a) | Represents amortization of intangible assets, including approximately $5.0 million and $15.0 million for the three and nine months ended September 30, 2014 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 life of the lease in accordance with Accounting Standards Codification Topic 840, Leases. |
(c) | Represents non-cash stock-based compensation expense, including performance-based stock compensation charge in 2013. |
(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 associated with the acquisition of businesses. |
(g) | Represents income tax expense calculated on adjusted income before tax at the effective rate of approximately 37% in both 2014 and 2013. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Diluted earnings (loss) per pro forma common share: | |||||||||||||||
Net income (loss) | $ | 15,379 | $ | 14,942 | $ | 53,141 | $ | (11,332 | ) | ||||||
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 | |||||||||||
Adjustment to weight Class L shares over respective period | — | — | — | (1,277,963 | ) | ||||||||||
Weighted average number of Class L shares over period | — | — | — | 49,152 | |||||||||||
Class L conversion factor | — | — | — | 35.1955 | |||||||||||
Weighted average number of converted Class L common shares | — | — | — | 1,729,929 | |||||||||||
Weighted average number of common shares | 66,087,184 | 64,916,558 | 65,755,911 | 61,815,607 | |||||||||||
Pro forma weighted average number of common shares—basic | 66,087,184 | 64,916,558 | 65,755,911 | 63,545,536 | |||||||||||
Incremental dilutive shares (2) | 1,548,473 | 1,914,855 | 1,678,061 | — | |||||||||||
Pro forma weighted average number of common shares—diluted | 67,635,657 | 66,831,413 | 67,433,972 | 63,545,536 | |||||||||||
Diluted earnings (loss) per pro forma common share | $ | 0.23 | $ | 0.22 | $ | 0.79 | $ | (0.18 | ) | ||||||
Diluted adjusted earnings per pro forma common share: | |||||||||||||||
Adjusted net income | $ | 21,367 | $ | 18,436 | $ | 71,535 | $ | 57,106 | |||||||
Pro forma weighted average number of common shares—basic | 66,087,184 | 64,916,558 | 65,755,911 | 63,545,536 | |||||||||||
Incremental dilutive shares (2) | 1,548,473 | 1,914,855 | 1,678,061 | 1,860,276 | |||||||||||
Pro forma weighted average number of common shares—diluted | 67,635,657 | 66,831,413 | 67,433,972 | 65,405,812 | |||||||||||
Diluted adjusted earnings per pro forma common share | $ | 0.32 | $ | 0.28 | $ | 1.06 | $ | 0.87 |
(1) | The weighted average number of Class L shares in the actual Class L earnings per share calculation for the nine months ended September 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 nine month period. 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 nine months ended September 30, 2013, there is no dilutive effect since there was a loss recorded during the period. |