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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1999.
Commission File Number 0-24699
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BRIGHT HORIZONS FAMILY SOLUTIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 62-1742957
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
One Kendall Square, Building 200, Suite 223
Cambridge, Massachusetts 02139
(Address of principal executive office)
(617) 577-8020
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes [X] No [ ].
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date: 12,249,777 shares of common
stock, $.01 par value, at November 5, 1999.
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FORM 10-Q
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
A. Consolidated Balance Sheets at September 30, 1999
(Unaudited) and December 31, 1998 3
B. Consolidated Statements of Operations for the Three and
Nine Months ended September 30, 1999 and 1998 (Unaudited) 4
C. Consolidated Statements of Cash Flows for the Nine Months
ended September 30, 1999 and 1998 (Unaudited) 5
D. Notes to Consolidated Financial Statements (Unaudited) 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk 15
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 16
ITEM 2. Changes in Securities and Use of Proceeds 16
ITEM 3. Defaults Upon Senior Securities 16
ITEM 4. Submission of Matters to a Vote of Security Holders 16
ITEM 5. Other information 16
ITEM 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
EXHIBIT INDEX 18
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Bright Horizons Family Solutions, Inc.
Consolidated Balance Sheets
(in thousands except share data)
September 30, December 31,
1999 1998
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 13,203 $ 20,439
Accounts receivable, net 17,852 13,302
Income taxes receivable 2,238 2,243
Prepaid expenses and other current assets 2,119 1,520
Current portion of deferred tax asset 4,645 4,579
--------- --------
Total current assets 40,057 42,083
Fixed assets, net 42,331 31,482
Deferred charges, net 685 693
Goodwill and other intangible assets, net 14,750 14,095
Long term portion of deferred tax asset 2,599 2,599
Other assets 398 511
--------- --------
Total assets $ 100,820 $ 91,463
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt and
obligations under capital leases $ 67 $ 67
Accounts payable and accrued expenses 19,893 21,759
Deferred revenue, current portion 9,128 7,565
Other current liabilities 1,038 652
--------- --------
Total current liabilities 30,126 30,043
Long term debt and obligations under
capital leases 86 618
Accrued rent 1,472 1,560
Other long term liabilities 2,642 2,731
Deferred revenue, net of current portion 4,834 3,131
--------- --------
Total liabilities 39,160 38,083
--------- --------
Stockholders' equity:
Common stock $.01 par value, 30,000,000 shares
authorized, 12,229,000 and 11,554,000 shares issued and
outstanding at September 30, 1999 and December 31, 1998,
respectively 122 115
Additional paid in capital 74,685 67,589
Treasury stock at cost, 325,000 shares at September 30, 1999 (4,682) --
Accumulated deficit (8,465) (14,324)
--------- --------
Total stockholders' equity 61,660 53,380
--------- --------
Total liabilities and stockholders' equity $ 100,820 $ 91,463
========= ========
The accompanying notes are an integral part of the
consolidated financial statements.
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Bright Horizons Family Solutions, Inc.
Consolidated Statements of Operations (Unaudited)
(in thousands except per share data)
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
Revenues $ 61,139 $ 53,161 $ 180,560 $ 154,336
Cost of services 52,774 46,272 154,957 133,275
-------- -------- --------- ---------
Gross profit 8,365 6,889 25,603 21,061
Selling, general and administrative expenses 5,172 4,742 15,566 14,094
Amortization expense 229 172 675 706
Other charges (Note 3) -- 7,500 -- 7,500
-------- -------- --------- ---------
Income (loss) from operations 2,964 (5,525) 9,362 (1,239)
Net interest income 211 317 567 935
-------- -------- --------- ---------
Income (loss) before tax 3,175 (5,208) 9,929 (304)
Income tax (provision) benefit (1,299) 1,159 (4,069) (853)
-------- -------- --------- ---------
Net income (loss) $ 1,876 $ (4,049) $ 5,860 $ (1,157)
======== ======== ========= =========
Earnings (loss) per share - basic $ 0.15 $ (0.36) $ 0.49 $ (0.10)
======== ======== ========= =========
Weighted average shares - basic 12,104 11,207 11,996 11,099
======== ======== ========= =========
Earnings (loss) per share - diluted $ 0.15 $ (0.36) $ 0.46 $ (0.10)
======== ======== ========= =========
Weighted average shares - diluted 12,608 11,207 12,699 11,099
======== ======== ========= =========
The accompanying notes are an integral part of the
consolidated financial statements.
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Bright Horizons Family Solutions, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Nine months ended September 30,
1999 1998
Net income (loss) $ 5,860 $ (1,157)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization 3,481 2,840
Loss on disposal of fixed assets 7 --
Deferred income taxes -- (1,928)
Changes in assets and liabilities:
Accounts receivable, trade (4,399) (418)
Income taxes receivable 2,486 --
Prepaid expenses and other current assets (596) 279
Accounts payable and accrued expenses (2,034) 8,438
Income taxes payable -- (962)
Deferred revenue 769 2,619
Accrued rent (89) 65
Other long-term assets 516 --
Other current and long-term liabilities 102 (677)
-------- --------
Total adjustments 243 10,256
-------- --------
Net cash provided by operating activities 6,103 9,099
-------- --------
Cash flows from investing activities:
Additions to fixed assets, net of acquired amounts (11,544) (9,695)
Proceeds from disposal of fixed assets 20 51
Decrease in deferred charges 9 172
Increase in other assets (400) (127)
Payments for acquisitions (832) (1,422)
-------- --------
Net cash used for investing activities (12,747) (11,021)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock 4,622 2,972
Purchase of treasury stock (4,682) (1,133)
Principal payments of long term debt and
obligations under capital leases (532) (199)
-------- --------
Net cash (used in) provided by financing activities (592) 1,640
-------- --------
Net decrease in cash and cash equivalents (7,236) (282)
Cash and cash equivalents, beginning of period 20,439 25,384
-------- --------
Cash and cash equivalents, end of period $ 13,203 $ 25,102
======== ========
Non-cash financing activities:
Options issued in connection with acquisition -- 375
Tax benefit related to stock option exercises 2,481 1,326
-------- --------
$ 2,481 $ 1,701
======== ========
Non-cash investing activities:
Transfer of fixed assets in connection with
child care center management contract $ 2,300 $ --
======== ========
Supplemental cash flow information:
Cash payments for interest $ 45 $ 42
======== ========
Cash payments for income taxes $ 1,666 $ 1,028
======== ========
The accompanying notes are an integral part of the
consolidated financial statements.
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ITEM 1.D. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The Company and Basis of Presentation
ORGANIZATION - Bright Horizons Family Solutions, Inc. (the "Company") was
incorporated under the laws of the state of Delaware on April 27, 1998 and
commenced substantive operations upon the completion of the merger by and
between Bright Horizons, Inc. ("BRHZ") and CorporateFamily Solutions, Inc.
("CFAM") on July 24, 1998 (the "Merger"). The Company provides workplace
services for employers and families including childcare, early education and
strategic worklife consulting throughout the United States.
The Company operates its family centers under various types of arrangements,
which generally can be classified in two forms: (i) the corporate-sponsored
model, where the Company operates a family center on the premises of a corporate
sponsor and gives priority enrollment to the corporate sponsor's employees and
(ii) the management contract model, where the Company manages a work-site family
center under a cost-plus arrangement, typically for a single employer. The
Company receives tuition revenue from parents, and management fees and operating
subsidies from corporate sponsors for its childcare services.
BUSINESS COMBINATION AND BASIS OF PRESENTATION -- The accompanying financial
statements have been prepared by the Company in accordance with the accounting
policies described in the Company's audited financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998, and
should be read in conjunction with the notes thereto.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.
In the opinion of the Company's management, the accompanying unaudited
consolidated financial statements contain all adjustments which are necessary to
present fairly its financial position as of September 30, 1999, the results of
its operations for the three and nine month periods ended September 30, 1999 and
1998, and its cash flows for the nine month periods ended September 30, 1999 and
1998, and are of a normal and recurring nature. The results of operations for
interim periods are not necessarily indicative of the operating results to be
expected for the full year.
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2. Treasury Stock
On July 20, 1999, the Company's Board of Directors approved a stock repurchase
plan authorizing the Company to repurchase up to 500,000 shares of its common
stock. On October 20, 1999, the Company's Board of Directors authorized the
repurchase of an additional 750,000 shares under the plan that allows shares of
the Company's common stock to be purchased in the open market or through
privately negotiated transactions. The Company carries the treasury shares at
cost. At September 30, 1999 the Company had repurchased 325,000 shares at an
average price of $14.41, which remain in the treasury. Shares repurchased will
be available for reissue under the Company's stock incentive plan as well as
other appropriate uses.
3. Other Charges
In connection with the Merger, the Company recognized a charge of $7.5 million
($5.4 million after tax) in the quarter ended September 30, 1998, which included
transaction costs of $2.8 million, non cash asset impairment charges of $1.3
million, severance costs of $0.5 million and one time incremental integration
costs directly related to the Merger totaling $2.9 million. At September 30,
1999, $840,000 of these costs are included in accrued expenses in the
accompanying consolidated balance sheet. The Company expects the majority of the
remaining accrued liability associated with the charge to be paid by December
31, 1999.
4. Earnings (Loss) Per Share
Earnings (Loss) per share has been calculated in accordance with Statement of
Financial Accounting Standards No. 128 "Earnings per Share", ("SFAS 128"), which
established standards for computing and presenting earnings per share. The
computation of net earnings per share is based on the weighted average number of
common shares and common equivalent shares outstanding during the period. Common
equivalent shares include stock options, warrants and preferred stock, and are
determined using the modified treasury stock method. For the three and nine
month periods ended September 30, 1999 and 1998, the Company had no warrants or
preferred stock outstanding.
The following tables present information necessary to calculate earnings (loss)
per share:
Three months Ended September 30, 1999
--------------------------------------------
Earnings (loss) Shares Per Share
(Numerator) (Denominator) Amount
----------- ---------- ----------
Basic earnings (loss) per share:
Income (loss) available to common
stockholders $ 1,876,000 12,104,000 $ 0.15
==========
Effect of dilutive securities:
Stock options -- 504,000
----------- ----------
Diluted earnings (loss) per share $ 1,876,000 12,608,000 $ 0.15
=========== ========== ==========
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Three months Ended September 30, 1998
--------------------------------------------
Earnings (loss) Shares Per Share
(Numerator) (Denominator) Amount
----------- ---------- ----------
Basic earnings (loss) per share:
Income (loss) available to common
stockholders $(4,049,000) 11,207,000 $ (0.36)
==========
Effect of dilutive securities:
Stock options -- --
----------- ----------
Diluted earnings (loss) per share $(4,049,000) 11,207,000 $ (0.36)
=========== ========== ==========
The above diluted earnings per share has been calculated in accordance with SFAS
128. The conversion of stock options was not assumed as the effect would have
been anti-dilutive.
Nine months Ended September 30, 1999
--------------------------------------------
Earnings (loss) Shares Per Share
(Numerator) (Denominator) Amount
----------- ---------- ----------
Basic earnings (loss) per share:
Income (loss) available to common
stockholders $ 5,860,000 11,996,000 $ 0.49
==========
Effect of dilutive securities:
Stock options -- 703,000
----------- ----------
Diluted earnings (loss) per share $ 5,860,000 12,699,000 $ 0.46
=========== ========== ==========
Nine months Ended September 30, 1998
--------------------------------------------
Earnings (loss) Shares Per Share
(Numerator) (Denominator) Amount
----------- ---------- ----------
Basic earnings (loss) per share:
Income (loss) available to common
stockholders $(1,157,000) 11,099,000 $ (0.10)
==========
Effect of dilutive securities:
Stock options -- --
----------- ----------
Diluted earnings (loss) per share $(1,157,000) 11,099,000 $ (0.10)
=========== ========== ==========
The above diluted earnings per share has been calculated in accordance with SFAS
128. The conversion of stock options was not assumed as the effect would have
been anti-dilutive.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Form 10-Q contains certain forward-looking statements regarding, among
other things, the anticipated financial and operating results of the Company.
Investors are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company undertakes no
obligation to publicly release any modifications or revisions to these
forward-looking statements to reflect events or circumstances occurring after
the date hereof or to reflect the occurrence of unanticipated events. In
connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company cautions investors that future
financial and operating results may differ materially from those projected in
forward-looking statements made by, or on behalf of, the Company. Such
forward-looking statements involve known and unknown risks, uncertainties, and
other factors that may cause the actual results, performance, or achievements of
the Company to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. See "Risk
Factors" included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998 and incorporated herein by reference for a description of a
number of risks and uncertainties which could affect actual results.
General
The Company provides workplace services for employers and families, including
childcare, early education and strategic worklife consulting, operating 291
family centers at September 30, 1999. The Company has the capacity to serve more
than 35,000 families in 34 states and the District of Columbia. The Company has
partnerships with many of the nation's leading employers, including 68 Fortune
500 companies. Working Mother's 1999 list of the "100 Best Companies for Working
Mothers" includes 42 clients of the Company. The Company's historical revenue
growth has primarily resulted from the addition of new family centers as well as
increased enrollment at existing family centers. The Company reports its
operating results on a calendar year basis.
The Company's business is subject to seasonal and quarterly fluctuations. The
Company's experience has been that the demand for child development services
decreases during the summer months. During this season, families are often on
vacation or have alternative child care arrangements. Demand for the Company's
services generally increases in September upon the beginning of the new school
year and remains relatively stable throughout the rest of the school year. The
Company's results of operations may also fluctuate from quarter to quarter as a
result of, among other things, the performance of existing centers, the number
and timing of new center openings and/or acquisitions, the length of time
required for new centers to achieve profitability, center closings,
refurbishment or relocation, the sponsorship model mix of new and existing
centers, the timing and level of sponsorship payments, competitive factors and
general economic conditions.
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RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data as a
percentage of revenue for the three and nine month periods ended September 30,
1999 and 1998:
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Net revenues 100.0% 100.0% 100.0% 100.0%
Cost of services 86.3 87.0 85.8 86.4
------ ------ ------ ------
Gross profit 13.7 13.0 14.2 13.6
Selling, general & administrative
expenses 8.5 8.9 8.6 9.1
Amortization expense 0.4 0.4 0.4 0.5
Other charges 0.0 14.1 0.0 4.8
------ ------ ------ ------
Income (loss) from operations 4.8 (10.4) 5.2 (0.8)
Net interest income 0.4 0.6 0.3 0.6
------ ------ ------ ------
Income (loss) before income taxes 5.2 (9.8) 5.5 (0.2)
Income tax (provision) benefit (2.1) 2.2 (2.3) (0.5)
------ ------ ------ ------
Net income (loss) 3.1% (7.6)% 3.2% (0.7)%
====== ====== ====== ======
Three and Nine Months Ended September 30, 1999 Compared to the Three and Nine
Months Ended September 30, 1998
Net Revenues. Net revenues increased $7.9 million, or 15.0%, to $61.1 million
for the three months ended September 30, 1999 from $53.2 million for the three
months ended September 30, 1998. Net revenues increased $26.3 million, or 17.0%,
to $180.6 million for the nine months ended September 30, 1999 from $154.3
million for the nine months ended September 30, 1998. The growth in revenues is
attributable to the net addition of 22 child development centers since September
30, 1998, enrollment increases in the Company's newer family centers, and
tuition increases at existing centers of approximately 3% to 4%.
Gross Profit. Cost of services consists of center operating expenses, including
payroll and benefits for center personnel, facilities costs including
depreciation, and supplies and other expenses incurred at the center level.
Gross profit increased $1.5 million, or 21.4%, to $8.4 million for the three
months ended September 30, 1999 from $6.9 million for the three months ended
September 30, 1998. As a percentage of net revenues, gross profit increased to
13.7% for the three months ended September 30, 1999 compared to 13.0% for the
same period in 1998. Gross profit increased $4.5 million, or 21.6%, to $25.6
million for the nine months ended September 30, 1999 from $21.1 million for the
nine months ended September 30, 1998. As a percentage of net revenues, gross
profit was 14.2% for the nine months ended September 30, 1999, compared to 13.6%
for the same period in 1998.
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The Company showed an increase in gross profit margin in 1999 compared to 1998
primarily as a result of (1) newer centers reaching mature operating levels more
quickly, and (2) proportionately lower operating costs in mature family centers
arising from operating efficiency measures achieved during 1999. In addition,
fifteen family centers have been closed or transitioned to other service
providers since September 30, 1998. The closing and transition of
underperforming centers also contributed to the improvement in gross margin.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist of regional and district management personnel,
corporate management and administrative functions, marketing, and development
expenses for new and existing centers. Selling, general and administrative
expenses increased $430,000, or 9.1%, to $5.2 million for the three months ended
September 30, 1999 from $4.7 million for the three months ended September 30,
1998. As a percentage of net revenues, selling, general and administrative
expenses decreased to 8.5% for the three months ended September 30, 1999 from
8.9% for the same 1998 period. Selling, general and administrative expenses
increased $1.5 million, or 10.4%, to $15.6 million for the nine months ended
September 30, 1999 from $14.1 million for the nine months ended September 30,
1998. As a percentage of net revenues, selling, general and administrative
expenses decreased to 8.6% for the nine months ended September 30, 1999 from
9.1% for the nine months ended September 30, 1998.
The decrease in selling, general and administrative expenses as a percentage of
revenue during the first nine months of this year is primarily attributable to a
larger revenue base and increased efficiencies. The dollar increase is primarily
attributable to investments in the areas of divisional and regional management,
communications, sales and development, and information technology necessary to
support long term growth.
Other Charges. In the quarter ended September 30, 1998, the Company recorded
other charges of $7.5 million, as described in Note 3 of the accompanying
consolidated financial statements, which represented non-recurring costs and
charges related to the consummation of the Merger and the integration of the
operations of Bright Horizons, Inc. and Corporate Family Solutions, Inc.
following the Merger.
Income (Loss) from Operations. Income from operations totaled $3.0 million for
the three months ended September 30, 1999, as compared with the loss from
operations of $5.5 million for the three months ended September 30, 1998.
Excluding the other charges (described above) incurred in the third quarter of
1998, operating income for the three months ended September 30, 1999 would have
increased $1.0 million, or 50.1%, from $2.0 million in the same 1998 period.
Income from operations totaled $9.4 million for the nine months ended September
30, 1999 as compared with the loss from operations of $1.2 million for the nine
months ended September 30, 1998. Excluding other charges of $7.5 million for the
nine months ended September 30, 1998, income from operations would have
increased $3.1 million, or 49.5%, to $9.4 million, for the nine months ended
September 30, 1999 from $6.3 million for the nine months ended September 30,
1998.
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Net Interest Income. Net interest income of $211,000 for the three months ended
September 30, 1999 decreased $106,000 from $317,000 of net interest income for
the three months ended September 30, 1998. Net interest income of $567,000 for
the nine months ended September 30, 1999 decreased $368,000 from $935,000 of net
interest income for the nine months ended September 30, 1998. The decrease in
net interest income is attributable to lower levels of invested cash.
Income Taxes (Provision) Benefit. For the three and nine month periods ended
September 30, 1999 the Company had an effective tax rate of approximately 41%.
The Company had an effective tax benefit rate of 22% for the quarter ended
September 30, 1998 due to the non-deductibility of certain transaction costs
associated with the Merger. For the nine months ended September 30, 1998, the
tax provision was $853,000 on a net loss of $304,000, due to the non-deductible
items included in other charges indicated above. Excluding the effects of these
non-deductible expenses, the effective tax rate would have been 41% for the
three and nine month periods ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are the ongoing operations of its
existing family centers and the addition of new family centers through
development or acquisition. The Company's primary source of liquidity in 1999
and 1998 has been from cash provided by operating activities and existing cash
balances. The Company had working capital of $9.9 million and $12.0 million as
of September 30, 1999 and December 31, 1998, respectively.
Cash provided from operations totaled $6.1 million for the nine months ended
September 30, 1999, compared to $9.1 million for the nine months ended September
30, 1998. This $3.0 million decrease was principally the result of higher
accounts receivable arising from increased revenues, amounts recoverable from
clients for start-up expenses associated with new centers, and the timing of
collections. A decrease in accounts payable and accrued expenses, due in part to
payments for liabilities associated with the Merger, also contributed to the
decrease in cash provided from operations.
Cash used in investing activities increased to $12.7 million for the nine months
ended September 30, 1999, from $11.0 million for the nine months ended September
30, 1998. Of the $11.5 million of fixed asset additions for the nine months
ended September 30, 1999, approximately $8.0 million relates to new family
centers, with the remaining balance being used primarily for the refurbishment
and expansion of existing family centers. Management expects the current level
of center related fixed asset spending to continue for the remainder of 1999,
and to remain at this level, or increase slightly in 2000.
Cash (used in) provided by financing activities decreased to ($592,000) for the
nine months ended September 30, 1999, from $1.6 million for the nine months
ended September 30, 1998. During the nine months ended September 30, 1999, the
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Company repurchased $4.7 million of its common stock compared to a repurchase of
$1.1 million in the same period in 1998. In the nine months ended September 30,
1999, the Company repaid debt of $532,000, including the retirement of an
outstanding mortgage. During the nine months ended September 30, 1999, the
Company received $4.6 million in net proceeds from the issuance of common stock
as compared to $3.0 million in the same period in 1998.
On July 20, 1999, the Board of Directors approved a plan to repurchase up to
500,000 shares of the Company's common stock, which was subsequently increased
to a total of 1,250,000 shares by the Board of Directors on October 20, 1999. At
September 30, 1999 the Company had repurchased 325,000 shares at an average
price of $14.41. Share repurchases under the stock repurchase program will be
made from time to time with the Company's cash in accordance with applicable
securities regulations in open market or privately negotiated transactions. The
actual number of shares purchased and cash used, as well as the timing of
purchases and the prices paid will depend on future market conditions.
Management believes that funds provided by operations, the Company's existing
cash and cash equivalent balances and borrowings available under the revolving
lines of credit will be adequate to meet planned operating and capital
expenditure needs for at least the next 18 months. However, if the Company were
to make any significant acquisitions or make significant investments in
facilities for new or existing centers for corporate sponsors, it may be
necessary for the Company to obtain additional debt or equity financing. There
can be no assurance that the Company would be able to obtain such financing on
reasonable terms, if at all.
YEAR 2000 CONVERSION
The term "Year 2000 issue" refers to the necessity of converting computer
information systems so that such systems recognize more than two digits to
identify a year in any given date field and are thereby able to differentiate
between years in the twentieth and twenty-first centuries ending with the same
two digits (e.g. 1900 and 2000). The Company has and will continue to coordinate
the implementation of changes to computer systems and applications necessary to
achieve a Year 2000 date conversion with no material adverse effect on or
disruption to its business operations. The Company is also evaluating non-system
issues relative to the Year 2000 and beyond.
The Company has communicated with suppliers, customers, financial institutions
and others with which it does business to coordinate Year 2000 conversion and
will continue to monitor their progress to assess the potential impact in the
event of non-compliance. The Company believes the potential failure of third
parties' systems will not have a material adverse impact on the Company's
operations, cash flows or financial condition.
The Company completed several projects as part of planned upgrades or
replacements and not as part of the Company's Year 2000 conversion. The Company
believes that the implementation of these projects had the effect of making
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substantially all of the Company's hardware and information systems Year 2000
compliant.
During the nine months ended September 30, 1999, as part of normal upgrades and
replacements, the Company spent approximately $1.2 million to upgrade
information technology. The Company anticipates that it will make additional
capital expenditures of approximately $200,000 to upgrade its hardware and
information systems in 1999. The upgrades planned for 1999 are part of planned
upgrades or replacements done in the normal course of business and not as part
of the Company's Year 2000 conversion. The projected costs for 1999 are based
upon management's best estimates, which were derived utilizing numerous
assumptions of future events. There can be no guarantee, however, that these
cost estimates will be achieved, and actual results could differ materially. The
Company believes that the Company's past efforts, in conjunction with the
planned upgrades and replacements in 1999, will substantially make its hardware
and information systems Year 2000 compliant.
As part of its Year 2000 preparations, the Company has identified its most
reasonably likely worst case scenario as the replacement of hardware, software
and equipment that are not Year 2000 compliant. Notwithstanding the foregoing,
management does not currently believe that the costs of assessment, remediation
or replacement of the Company's systems will have a material adverse effect on
the Company's operations, cash flows or financial condition.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Company's investment strategies,
types of financial instruments held or the risks associated with such
instruments which would materially alter the market risk disclosures made in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings:
Not Applicable
ITEM 2. Changes in Securities and Use of Proceeds:
None
ITEM 3. Defaults Upon Senior Securities:
None
ITEM 4. Submission of Matters to a Vote of Security Holders:
None
ITEM 5. Other information:
Not Applicable
ITEM 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
Exhibit 3 - Amended and Restated Bylaws
Exhibit 27 (for SEC use only)
(b) Reports on Form 8-K.
1) The Company filed a Current Report on Form 8-K on July 22, 1999,
relating to the approval of a stock repurchase plan by the board
of directors on July 20, 1999.
2) The Company filed a current Report on Form 8-K on October
25,1999, relating to the approval of an increase in the stock
repurchase plan by the Board of Directors on October 20, 1999.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized:
Date: November 12, 1999
BRIGHT HORIZONS FAMILY SOLUTIONS, INC.
By: /s/ Elizabeth Boland
----------------------------------------
Elizabeth Boland
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial and Accounting
Officer)
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EXHIBIT INDEX
3 Amended and Restated Bylaws
27 Financial Data Schedule (for SEC use only)
18