Form 8-K BRIGHT HORIZONS FAMILY For: Feb 08

February 8, 2018 4:18 PM


 
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): February 8, 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 February 8, 2018, Bright Horizons Family Solutions Inc. (the “Company”) issued a press release announcing its financial results for the fiscal quarter and year ended December 31, 2017 and provided 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 (the “Exchange Act”), 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 February 8, 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:
February 8, 2018
By:
/s/ Elizabeth Boland
 
 
 
Elizabeth Boland
 
 
 
Chief Financial Officer
 
 
 
 






EXHIBIT INDEX
Exhibits
99.1 Press Release of Bright Horizons Family Solutions Inc. dated February 8, 2018.




Exhibit 99.1
Bright Horizons Family Solutions Reports Fourth Quarter and Full Year 2017 Financial Results

WATERTOWN, MA - (Business Wire - February 8, 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 fourth quarter and full year of 2017 and provided guidance for the full year of 2018.

Fourth Quarter 2017 Highlights (compared to fourth quarter 2016): 
Revenue increased 10% to $440 million
Income from operations increased 10% to $52 million
Net income increased 200% to $51 million and diluted earnings per common share increased 207% to $0.86

Non-GAAP measures
Adjusted income from operations* increased 9% to $54 million
Adjusted EBITDA* increased 7% to $82 million
Adjusted net income* increased 31% to $44 million and diluted adjusted earnings per common share* increased 30% to $0.73

Year Ended December 31, 2017 Highlights (compared to year ended December 31, 2016): 
Revenue increased 11% to $1.7 billion
Income from operations increased 4% to $205 million
Net income increased 66% to $157 million and diluted earnings per common share increased 67% to $2.59

Non-GAAP measures
Adjusted income from operations* increased 6% to $212 million
Adjusted EBITDA* increased 8% to $324 million
Adjusted net income* increased 24% to $162 million and diluted adjusted earnings per common share* increased 25% to $2.69

“We are pleased to report strong financial results for the fourth quarter and full year in 2017,said David Lissy, Executive Chairman. “Our solid financial results in 2017 reflect the positive momentum across our entire suite of solutions, and we continue to lead our field in investments in the people and systems to deliver high quality care, education and services to working families and our client partners.
“We are well positioned to continue to deliver on our growth plan in 2018,” added Stephen Kramer, Chief Executive Officer. “We continue to place the highest priority on achieving these results while maintaining a strong culture and best-in-class workplace. We are proud to have been recognized once again as a Top Ten Great Place to Work by the Boston Globe, one of a handful of companies to have made the list every year since its inception. We are equally honored to have been recognized as a Top Place to Work for Diversity by Fortune magazine this past December.”
Fourth Quarter 2017 Results
Revenue increased $41.3 million, or 10%, in the fourth quarter of 2017 from the fourth quarter of 2016 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.

Income from operations was $52.3 million for the fourth quarter of 2017 an increase from $47.3 million in the same 2016 period, due to increases in revenue and gross profit, partially offset by increases in selling, general and administrative expenses. The increase in gross profit reflects operating leverage from tuition increases and enrollment gains in mature and ramping centers, contributions from new child care centers, back-up dependent care and educational advisory clients that have been




added since the fourth quarter of 2016, and strong cost management. These gains were partially offset by costs incurred during the ramp-up of certain new lease/consortium centers opened during 2016 and 2017, investments in technology to support our service delivery and operating efficiency, costs incurred in relation to the integration of acquisitions, and costs associated with a secondary offering and credit agreement amendment. Net income was $51.4 million for the fourth quarter of 2017, an increase compared to net income of $17.1 million in the same 2016 period, primarily attributable to the prior period loss of $11.1 million on extinguishment of debt related to a refinancing, and the current period reduction of $22.3 million in tax expense associated with the federal tax legislation enacted in December 2017, the Tax Cuts and Jobs Act, referred to as “Tax Reform.” Tax expense in the fourth quarter of 2017 also reflects the tax benefit of $4.3 million associated with certain equity transactions which are now included in the provision for income taxes under Accounting Standards Update No. 2016-09 (“ASU 2016-09”) Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which was adopted as of January 1, 2017. In 2016, the excess tax benefit from stock-based compensation of $2.4 million was recorded to the balance sheet in accordance with previous guidance. Diluted earnings per common share was $0.86 for the fourth quarter of 2017 compared to $0.28 in the fourth quarter of 2016.

In the fourth quarter of 2017 adjusted EBITDA increased $5.7 million, or 7%, to $82.1 million, and adjusted income from operations increased $4.5 million, or 9%, to $53.6 million, from the fourth quarter of 2016 due primarily to the expanded gross profit. Adjusted net income increased by $10.2 million, or 31%, to $43.7 million on the expanded income from operations and a lower effective tax rate associated with the adoption of ASU 2016-09. The reduction in 2017 income tax expense associated with Tax Reform was not included in the effective rate for purposes of calculating adjusted net income. Diluted adjusted earnings per common share was $0.73 compared to $0.56 in the fourth quarter of 2016.

As of December 31, 2017, the Company operated 1,038 child care and early education centers with the capacity to serve 116,000 children and 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 year ended December 31, 2017, the Company generated approximately $236.3 million of cash flows from operations compared to $213.3 million for the same period in 2016 and invested $105.3 million in fixed assets and acquisitions compared to $302.8 million in the same 2016 period, which included the acquisition of Conchord Limited (Asquith). Net cash used in financing activities totaled $123.9 million in the year ended December 31, 2017 compared to $93.8 million of net cash provided during the same 2016 period.  During the year ended December 31, 2017, the Company's cash and cash equivalents grew $8.6 million to $23.2 million.
2018 Outlook
As described below, the Company is providing 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 2018 in the range of $151 million to $154 million and diluted earnings per common share in 2018 in the range of $2.55 to $2.59
Adjusted net income in the range of $184 million to $187 million and diluted adjusted earnings per common share in the range of $3.12 to $3.16
Diluted weighted average shares in the range of 59 million to 59.5 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 Executive Chairman David Lissy and Chief Executive Officer Stephen Kramer.  Replays of the entire call will be available through February 22, 2018 at 1-844-512-2921 or, for international callers, at 1-412-317-6671, conference ID #13656546.  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, future estimates and impact of Tax Reform and excess tax benefits, 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 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 newly enacted Tax Reform; and other risks and uncertainties more fully described in the “Risk Factors” section of our Annual Report on Form 10-K filed March 1, 2017, 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 and dispositions 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 adjusted diluted 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 adjusted diluted 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.'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
 
 
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 December 31,
 
2017
 
%
 
2016
 
%
Revenue
$
439,879

 
100.0
 %
 
$
398,537

 
100.0
 %
Cost of services
331,738

 
75.4
 %
 
299,321

 
75.1
 %
Gross profit
108,141

 
24.6
 %
 
99,216

 
24.9
 %
Selling, general and administrative expenses
47,555

 
10.8
 %
 
43,564

 
10.9
 %
Amortization of intangible assets
8,320

 
1.9
 %
 
8,304

 
2.0
 %
Income from operations
52,266

 
11.9
 %
 
47,348

 
12.0
 %
Loss on extinguishment of debt

 
 %
 
(11,117
)
 
(2.8
)%
Interest expense—net
(11,787
)
 
(2.7
)%
 
(11,434
)
 
(3.0
)%
Income before income taxes
40,479

 
9.2
 %
 
24,797

 
6.2
 %
Income tax benefit (expense)
10,965

 
2.5
 %
 
(7,677
)
 
(1.9
)%
Net income
$
51,444

 
11.7
 %
 
$
17,120

 
4.3
 %
 
 
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
 
 
Common stock—basic
$
0.88

 
 
 
$
0.29

 
 
Common stock—diluted
$
0.86

 
 
 
$
0.28

 
 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
Common stock—basic
58,372,989

 
 
 
58,936,701

 
 
Common stock—diluted
59,643,750

 
 
 
60,168,025

 
 






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

 
Years Ended December 31,
 
2017
 
%
 
2016
 
%
Revenue
$
1,740,905

 
100.0
 %
 
$
1,569,841

 
100.0
 %
Cost of services
1,310,295

 
75.3
 %
 
1,178,994

 
75.1
 %
Gross profit
430,610

 
24.7
 %
 
390,847

 
24.9
 %
Selling, general and administrative expenses
188,939

 
10.8
 %
 
163,967

 
10.4
 %
Amortization of intangible assets
32,561

 
1.9
 %
 
29,642

 
1.9
 %
Other expenses
3,671

 
0.2
 %
 

 
 %
Income from operations
205,439

 
11.8
 %
 
197,238

 
12.6
 %
Loss on extinguishment of debt

 
 %
 
(11,117
)
 
(0.7
)%
Interest expense—net
(44,039
)
 
(2.5
)%
 
(42,924
)
 
(2.7
)%
Income before income taxes
161,400

 
9.3
 %
 
143,197

 
9.2
 %
Income tax expense
(4,437
)
 
(0.3
)%
 
(48,437
)
 
(3.1
)%
Net income
$
156,963

 
9.0
 %
 
$
94,760

 
6.1
 %
 
 
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
 
 
Common stock—basic
$
2.65

 
 
 
$
1.59

 
 
Common stock—diluted
$
2.59

 
 
 
$
1.55

 
 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
Common stock—basic
58,873,196

 
 
 
59,229,069

 
 
Common stock—diluted
60,253,691

 
 
 
60,594,895

 
 






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

 
December 31,
 
2017
 
2016
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
23,227

 
$
14,633

Accounts receivable—net
117,138

 
97,212

Prepaid expenses and other current assets
52,096

 
42,554

Total current assets
192,461

 
154,399

Fixed assets—net
575,185

 
529,432

Goodwill
1,306,792

 
1,267,705

Other intangibles—net
348,540

 
374,566

Other assets
45,666

 
32,915

Total assets
$
2,468,644

 
$
2,359,017

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

 
$
10,750

Borrowings on revolving credit facility
127,100

 
76,000

Accounts payable and accrued expenses
132,897

 
125,400

Deferred revenue and other current liabilities
189,908

 
175,430

Total current liabilities
460,655

 
387,580

Long-term debt—net
1,046,011

 
1,054,009

Deferred income taxes
74,069

 
111,711

Other long-term liabilities
138,849

 
117,850

Total liabilities
1,719,584

 
1,671,150

Total stockholders’ equity
749,060

 
687,867

Total liabilities and stockholders’ equity
$
2,468,644

 
$
2,359,017







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

 
Years Ended December 31,
 
2017
 
2016
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
156,963

 
$
94,760

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
94,776

 
85,284

Loss on extinguishment of debt

 
11,117

Stock-based compensation
12,072

 
11,646

Deferred income taxes
(37,562
)
 
(12,121
)
Other non-cash adjustments—net
10,662

 
5,936

Changes in assets and liabilities
(639
)
 
16,675

Net cash provided by operating activities
236,272

 
213,297

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchases of fixed assets—net
(83,837
)
 
(74,100
)
Payments and settlements for acquisitions—net of cash acquired
(21,484
)
 
(228,737
)
Net cash used in investing activities
(105,321
)
 
(302,837
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Revolving credit facility—net
51,100

 
52,000

Borrowings of long-term debt—net

 
1,065,610

Extinguishment of long-term debt

 
(922,488
)
Payments for debt issuance costs
(1,711
)
 
(1,002
)
Payments of contingent consideration for acquisitions
(185
)
 
(915
)
Principal payments of long-term debt
(8,063
)
 
(7,163
)
Purchase of treasury stock
(162,195
)
 
(112,792
)
Proceeds from issuance of common stock upon exercise of options
22,625

 
11,679

Proceeds from issuance of restricted stock
4,363

 
3,682

Taxes paid related to the net share settlement of stock options and restricted stock
(29,798
)
 
(7,747
)
Tax benefits from stock-based compensation

 
12,891

Net cash (used in) provided by financing activities
(123,864
)
 
93,755

Effect of exchange rates on cash and cash equivalents
1,507

 
(1,121
)
Net increase in cash and cash equivalents
8,594

 
3,094

Cash and cash equivalents—beginning of period
14,633

 
11,539

Cash and cash equivalents—end of period
$
23,227

 
$
14,633









BRIGHT HORIZONS FAMILY SOLUTIONS INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)
 
Three months ended December 31, 2017
Full service
center-based
care
 
Back-up
dependent
care
 
Other
educational
advisory
services
 
Total
Revenue
$
362,843

 
$
60,093

 
$
16,943

 
$
439,879

Amortization of intangible assets
7,754

 
385

 
181

 
8,320

Income from operations
30,368

 
16,579

 
5,319

 
52,266

Adjusted income from operations (1)
31,705

 
16,579

 
5,319

 
53,603

 
 
 
 
 
 
 
 
Three months ended December 31, 2016
 
 
 
 
 
 
 
Revenue
$
330,566

 
$
54,097

 
$
13,874

 
$
398,537

Amortization of intangible assets
7,729

 
431

 
144

 
8,304

Income from operations
28,109

 
15,879

 
3,360

 
47,348

Adjusted income from operations (2)
29,826

 
15,879

 
3,360

 
49,065


(1)
Adjusted income from operations represents income from operations excluding expenses incurred in connection with an amendment to the credit agreement and a secondary offering.
(2)
Adjusted income from operations represents income from operations excluding expenses incurred in connection with a secondary offering, completed acquisitions and costs in connection with a debt refinancing.

Year ended December 31, 2017
Full service
center-based
care
 
Back-up
dependent
care
 
Other
educational
advisory
services
 
Total
Revenue
$
1,457,754

 
$
224,264

 
$
58,887

 
$
1,740,905

Amortization of intangibles assets
30,259

 
1,539

 
763

 
32,561

Income from operations
130,289

 
60,373

 
14,777

 
205,439

Adjusted income from operations (1)
137,242

 
60,373

 
14,777

 
212,392

 
 
 
 
 
 
 
 
Year ended December 31, 2016
 
 
 
 
 
 
 
Revenue
$
1,321,699

 
$
200,106

 
$
48,036

 
$
1,569,841

Amortization of intangibles assets
27,862

 
1,204

 
576

 
29,642

Income from operations
129,693

 
57,620

 
9,925

 
197,238

Adjusted income from operations (2)
132,178

 
57,620

 
9,925

 
199,723


(1)
Adjusted income from operations represents income from operations excluding expenses incurred related to the disposition of assets in Ireland, amendments to the credit agreement, and secondary offerings.
(2)
Adjusted income from operations represents income from operations excluding expenses incurred in connection with secondary offerings, completed acquisitions and costs in connection with an amendment to the credit agreement and a debt refinancing.







BRIGHT HORIZONS FAMILY SOLUTIONS INC.
NON-GAAP RECONCILIATIONS
(In thousands, except share data)
(Unaudited)
    
 
Three Months Ended December 31,
 
Years Ended December 31,
 
2017
 
2016
 
2017
 
2016
Net income
$
51,444

 
$
17,120

 
$
156,963

 
$
94,760

Interest expense—net
11,787

 
11,434

 
44,039

 
42,924

Income tax (benefit) expense
(10,965
)
 
7,677

 
4,437

 
48,437

Depreciation
16,167

 
14,890

 
62,215

 
55,642

Amortization of intangible assets (a)
8,320

 
8,304

 
32,561

 
29,642

EBITDA
76,753

 
59,425

 
300,215

 
271,405

Additional adjustments:
 
 
 
 
 
 
 
Loss on extinguishment of debt (b)

 
11,117

 

 
11,117

Deferred rent (c)
698

 
948

 
4,345

 
2,562

Stock-based compensation expense
3,295

 
3,170

 
12,072

 
11,646

Transaction costs (d)
1,337

 
1,717

 
6,953

 
2,485

Total adjustments
5,330

 
16,952

 
23,370

 
27,810

Adjusted EBITDA
$
82,083

 
$
76,377

 
$
323,585

 
$
299,215

 
 
 
 
 
 
 
 
Income from operations
$
52,266

 
$
47,348

 
$
205,439

 
$
197,238

Transaction costs (d)
1,337

 
1,717

 
6,953

 
2,485

Adjusted income from operations
$
53,603

 
$
49,065

 
$
212,392

 
$
199,723

 
 
 
 
 
 
 
 
Net income
$
51,444

 
$
17,120

 
$
156,963

 
$
94,760

Income tax (benefit) expense
(10,965
)
 
7,677

 
4,437

 
48,437

Income before tax
40,479

 
24,797

 
161,400

 
143,197

Stock-based compensation expense
3,295

 
3,170

 
12,072

 
11,646

Amortization of intangible assets (a)
8,320

 
8,304

 
32,561

 
29,642

Loss on extinguishment of debt (b)

 
11,117

 

 
11,117

Transaction costs (d)
1,337

 
1,717

 
6,953

 
2,485

Adjusted income before tax
53,431

 
49,105

 
212,986

 
198,087

Adjusted income tax expense (e)
(9,736
)
 
(15,650
)
 
(50,819
)
 
(67,350
)
Adjusted net income
$
43,695

 
$
33,455

 
$
162,167

 
$
130,737

 
 
 
 
 
 
 
 
Weighted average number of common shares—diluted
59,643,750

 
60,168,025

 
60,253,691

 
60,594,895

Diluted adjusted earnings per common share
$
0.73

 
$
0.56

 
$
2.69

 
$
2.16








BRIGHT HORIZONS FAMILY SOLUTIONS INC.
NON-GAAP RECONCILIATIONS
(In thousands, except share data)
(Unaudited)
    
 
Forward Guidance (g)
 
Three Months Ended March 31, 2018
 
Year Ended December 31, 2018
 
Low
 
High
 
Low
 
High
Net income
$
34,500

 
$
35,000

 
$
151,400

 
$
153,700

Allocation of net income to unvested participating shares
(200
)
 
(200
)
 
(800
)
 
(800
)
Income tax expense (f)
7,300

 
7,400

 
41,200

 
42,000

Income before income taxes
41,600

 
42,200

 
191,800

 
194,900

Adjustments:
 
 
 
 
 
 
 
Stock-based compensation expense
3,800

 
3,800

 
15,000

 
15,000

Amortization of intangible assets (a)
8,100

 
8,100

 
32,000

 
32,000

Transaction costs (d)

 

 

 

Adjusted income before income taxes
53,500

 
54,100

 
238,800

 
241,900

Tax impact on adjusted income before taxes (f)
(12,100
)
 
(12,200
)
 
(54,300
)
 
(55,200
)
Adjusted net income attributable to common stockholders
$
41,400

 
$
41,900

 
$
184,500

 
$
186,700

 
 
 
 
 
 
 
 
Per common share information:
 
 
 
 
 
 
 
Diluted earnings
$
0.58

 
$
0.59

 
$
2.55

 
$
2.59

Income tax expense (f)
0.12

 
0.13

 
0.70

 
0.71

       Income before income taxes
0.70

 
0.72

 
3.25

 
3.30

Adjustments:
 
 
 
 
 
 
 
Stock-based compensation expense
0.06

 
0.06

 
0.25

 
0.25

Amortization of intangible assets (a)
0.14

 
0.14

 
0.54

 
0.54

Transaction costs (d)

 

 

 

Tax impact on adjusted income before taxes (f)
(0.20
)
 
(0.21
)
 
(0.92
)
 
(0.93
)
Diluted adjusted earnings per common share
$
0.70

 
$
0.71

 
$
3.12

 
$
3.16

(a)
Represents amortization of intangible assets, including approximately $4.7 million for each of the three months ended December 31, 2017 and 2016, and $18.5 million and $18.1 million for the years ended December 31, 2017 and 2016, respectively, associated with intangible assets recorded in connection with our going private transaction in May 2008.
(b)
Represents the write-off of unamortized deferred financing costs and original issue discount associated with indebtedness that was repaid in connection with a refinancing.
(c)
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.
(d)
Represents costs incurred in connection with completed acquisitions, secondary offerings, the disposition of assets in Ireland, amendments to the credit agreement, and a debt refinancing.
(e)
Represents income tax expense calculated on adjusted income before tax at an effective tax rate of approximately 24% and 34% in 2017 and 2016, respectively. The tax rate for 2017 represents a tax rate of approximately 36% applied to the adjusted income before tax for the full year, less the effect of excess tax benefits related to certain equity transactions of $4.3 million for the three months ended December 31, 2017 and of $26.5 million for the year ended December 31, 2017.
(f)
Represents estimated income tax expense using the tax rate of approximately 27% to 28% for the year ended December 31, 2018, based on projected consolidated income before tax and including the impact of Tax Reform as well as an estimate of excess tax benefits related to certain equity transactions, which the Company estimates in the range of $3.5 million to $4.5 million for the three months ended March 31, 2018 and of $10.0 million to $12.0 million for the year ended December 31, 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. The final impact of Tax Reform 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)
Forward guidance amounts are estimated based on a number of assumptions and actual results could differ materially from estimates provided herein.


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