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. | |||
Date: | February 8, 2018 | By: | /s/ Elizabeth Boland |
Elizabeth Boland | |||
Chief Financial Officer | |||
• | 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 |
• | 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 |
• | 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 |
• | 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 |
• | 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 |
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 |
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. |
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 |
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. |