<PAGE> 1
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 June 30, 2000.
Commission File Number 0-24699
-------
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)
200 Talcott Avenue South
Watertown, MA 02472
(Address of principal executive office)
(617) 673-8000
(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: 11,888,557 shares of common
stock, $.01 par value, at August 4, 2000.
<PAGE> 2
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
Number
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
A. Consolidated Balance Sheets at June 30, 2000 and
December 31, 1999 (Unaudited) 3
B. Consolidated Statements of Operations for the Three and Six
Months ended June 30, 2000 and 1999 (Unaudited) 4
C. Consolidated Statements of Cash Flows for the Six Months ended
June 30, 2000 and 1999 (Unaudited) 5
D. Notes to Consolidated Financial Statements (Unaudited) 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk 14
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 15
ITEM 2. Changes in Securities and Use of Proceeds 15
ITEM 3. Defaults Upon Senior Securities 15
ITEM 4. Submission of Matters to a Vote of Security Holders 15
ITEM 5. Other information 16
ITEM 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
EXHIBIT INDEX 18
</TABLE>
2
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Bright Horizons Family Solutions, Inc.
Consolidated Condensed Balance Sheets
(in thousands except share data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,429 $ 12,752
Accounts receivable, net 18,712 17,858
Prepaid expenses and other current assets 2,582 2,251
Current deferred tax asset 4,966 4,966
--------- ---------
Total current assets 33,689 37,827
Fixed assets, net 56,775 48,437
Goodwill and other intangible assets, net 22,716 15,909
Non-current deferred tax asset 4,192 4,192
Other assets 1,344 708
--------- ---------
Total assets $ 118,716 $ 107,073
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and
obligations under capital leases $ 172 $ 172
Accounts payable and accrued expenses 26,640 23,017
Deferred revenue, current portion 13,091 9,462
Income tax payable 18 780
Other current liabilities 998 1,054
--------- ---------
Total current liabilities 40,919 34,485
Long-term debt and obligations under
capital leases, net of current portion 496 515
Accrued rent 1,305 1,400
Other long-term liabilities 2,746 2,692
Deferred revenue, net of current portion 6,041 5,695
--------- ---------
Total liabilities 51,507 44,787
--------- ---------
Stockholders' equity:
Common Stock $.01 par value
Authorized: 30,000,000 shares
Issued: 12,339,000 and 12,310,000 shares at June 30, 2000 and
December 31, 1999, respectively
Outstanding: 11,844,000 and 11,815,000 at June 30, 2000 and
December 31, 1999, respectively 123 123
Additional paid in capital 75,753 75,641
Treasury stock, 495,000 shares at cost (7,081) (7,081)
Accumulated deficit (1,586) (6,397)
--------- ---------
Total stockholders' equity 67,209 62,286
--------- ---------
Total liabilities and stockholders' equity $ 118,716 $ 107,073
========= =========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements
3
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Bright Horizons Family Solutions, Inc.
Consolidated Statements of Operations
(in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues $72,066 $ 60,960 $138,688 $119,421
Cost of services 61,306 52,096 118,146 102,183
------- -------- -------- --------
Gross profit 10,760 8,864 20,542 17,238
Selling, general and administrative 6,046 5,267 11,589 10,394
Amortization 480 217 842 446
------- -------- -------- --------
Income from operations 4,234 3,380 8,111 6,398
Net interest income 49 145 124 356
------- -------- -------- --------
Income before tax 4,283 3,525 8,235 6,754
Income tax provision 1,784 1,446 3,424 2,770
------- -------- -------- --------
Net income $ 2,499 $ 2,079 $ 4,811 $ 3,984
======= ======== ======== ========
Earnings per share - basic $ 0.21 $ 0.17 $ 0.41 $ 0.33
======= ======== ======== ========
Weighted average shares - basic 11,836 12,095 11,828 11,942
======= ======== ======== ========
Earnings per share - diluted $ 0.20 $ 0.16 $ 0.39 $ 0.31
======= ======== ======== ========
Weighted average shares - diluted 12,345 12,753 12,334 12,745
======= ======== ======== ========
</TABLE>
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)
<TABLE>
<CAPTION>
Six months ended June 30,
2000 1999
<S> <C> <C>
Net income $ 4,811 $ 3,984
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 3,348 2,310
Asset writedowns and loss on disposal of fixed assets 14 21
Changes in assets and liabilities:
Accounts receivable, trade (728) (4,221)
Income taxes receivable -- 2,259
Prepaid expenses and other current assets 82 (1,323)
Accounts payable and accrued expenses 1,981 1,964
Income taxes payable (758) --
Deferred revenue 3,625 1,077
Accrued rent (45) (77)
Other long-term assets (133) 517
Other current and long-term liabilities (183) 22
-------- --------
Net cash provided by operating activities 12,014 6,533
-------- --------
Cash flows from investing activities:
Additions to fixed assets, net of acquired amounts (9,256) (6,444)
Proceeds from disposal of fixed assets 19 15
Increase in other assets (503) (400)
Payments for acquisitions, net of cash acquired (7,690) (587)
-------- --------
Net cash used for investing activities (17,430) (7,416)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock 112 4,207
Principal payments of long term debt and
obligations under capital leases (19) (517)
-------- --------
Net cash provided by financing activities 93 3,690
-------- --------
Net (decrease) increase in cash and cash equivalents (5,323) 2,807
Cash and cash equivalents, beginning of period 12,752 20,439
-------- --------
Cash and cash equivalents, end of period $ 7,429 $ 23,246
======== ========
Non-cash financing activities:
Tax benefit related to stock option exercises $ -- $ 2,406
======== ========
Supplemental cash flow information:
Cash payments for interest $ 87 $ 43
======== ========
Cash payments for income taxes $ 4,190 $ 591
======== ========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements
5
<PAGE> 6
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 and the United
Kingdom.
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.
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, 1999, 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 June 30, 2000, the results of its
operations for the three and six month periods ended June 30, 2000 and 1999, and
its cash flows for the six month periods ended June 30, 2000 and 1999, 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.
FOREIGN OPERATIONS - In the three month period ended June 30, 2000 the Company
acquired Nurseryworks Limited, based in London, England which operates nine
child care centers in the greater London area. In addition, the Company assumed
the operation of three child care centers for the U.S. Navy in Guam. The assets
and liabilities of the Company's United Kingdom subsidiaries, which are not
material to the Company's consolidated financial statements, are translated into
U.S. dollars at exchange rates in effect at the balance sheet date. Income and
expense items are translated at the average exchange rates prevailing during the
period. The cumulative
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translation effects for subsidiaries using a functional currency other than the
U.S. dollar is included as a cumulative translation adjustment in stockholders'
equity.
NEW PRONOUNCEMENTS - Beginning in the first quarter of fiscal 2001 the Company
will be required to adopt the provisions of Statement of Financial Accounting
Standards No.133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"), which establishes accounting and reporting standards for
derivative instruments and hedging activities. SFAS 133, as amended by Statement
of Accounting Standards No. 137, will require the Company to recognize all
derivatives as either assets or liabilities in the statement of financial
position and to measure those instruments at fair value. The accounting for
gains and losses from changes in the fair value of a particular derivative will
depend on the intended use of the derivative. The Company does not expect the
adoption of SFAS 133 to have a material impact on the Company's results of
operations, financial condition or cash flows.
In December 1999, the American Institute of Certified Public Accountants (AICPA)
issued Staff Accounting Bulletin (SAB) 101 to clarify the accounting rules on
revenue recognition and to provide more specific guidance on existing broad
revenue recognition rules. The Company will be required to adopt this new
framework beginning in the quarter ending December 31, 2000. The Company does
not expect the adoption of this bulletin to have a material effect on the
Company's results of operations, financial condition or cash flows.
In March 2000, the Financial Accounting Standards Board issued Interpretation
No. 44, "Accounting for Certain Transactions Involving Stock Compensation, an
interpretation of Accounting Principles Board (APB) Opinion No. 25." This
interpretation provides guidance on the application of APB Opinion No. 25
including (1) the definition of an employee, (2) the criteria for determining
whether a plan qualifies as a noncompensatory plan, (3) the accounting
consequence of various modifications to the terms of a previously fixed stock
option or award and (4) the accounting for an exchange of stock compensation
awards in a business combination. The Interpretation is effective July 1, 2000
and the effects of applying the Interpretation are recognized on a prospective
basis. The Company does not expect the adoption of this Interpretation to have a
material impact on the Company's results of operations, financial condition or
cash flows.
RECLASSIFICATIONS -- Certain amounts in the prior year financial statements have
been reclassified to conform with the current year's presentation.
2. Line of Credit
The Company entered into a $40.0 million unsecured line of credit for working
capital, acquisition financing and general corporate purposes with two banks
effective March 30, 2000. The credit facility consists of a revolving line of
credit, which expires on June 30, 2002, at which time any outstanding
indebtedness will be converted into a three-year term loan. At the Company's
option, the line of credit will bear interest at either i) Prime or ii) LIBOR
plus a spread based on debt levels and coverage ratios.
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The agreement requires the Company to comply with certain covenants, which
include, among other things, the maintenance of specified financial ratios, and
prohibits the payment of dividends without bank approval. No amounts have been
advanced under the facility as of June 30, 2000. This facility replaces the line
of credit facility that the Company had in place at December 31, 1999.
3. Earnings Per Share
Earnings 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
The following tables present information necessary to calculate earnings per
share:
<TABLE>
<CAPTION>
Three months ended June 30, 2000
-----------------------------------------
Earnings Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic earnings per share:
Income available to common stockholders $2,499,000 11,836,000 $ 0.21
========
Effect of dilutive securities:
Stock options -- 509,000
---------- ----------
Diluted earnings per share $2,499,000 12,345,000 $ 0.20
========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
Three months ended June 30, 1999
-----------------------------------------
Earnings Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic earnings per share:
Income available to common stockholders $2,079,000 12,095,000 $ 0.17
========
Effect of dilutive securities:
Stock options -- 658,000
---------- ----------
Diluted earnings per share $2,079,000 12,753,000 $ 0.16
========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
Six months ended June 30, 2000
-----------------------------------------
Earnings Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic earnings per share:
Income available to common stockholders $4,811,000 11,828,000 $ 0.41
========
Effect of dilutive securities:
Stock options -- 506,000
---------- ----------
Diluted earnings per share $4,811,000 12,334,000 $ 0.39
========== ========== ========
</TABLE>
8
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<TABLE>
<CAPTION>
Six months ended June 30, 1999
-----------------------------------------
Earnings Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic earnings per share:
Income available to common stockholders $3,984,000 11,942,000 $ 0.33
========
Effect of dilutive securities:
Stock options -- 803,000
---------- ----------
Diluted earnings per share $3,984,000 12,745,000 $ 0.31
========== ========== ========
</TABLE>
The weighted average number of shares excluded from the above calculations for
the three month and six months ended June 30, 2000 were 546,917 and 547,228
respectively, and 60,105 and 31,648 for the three and six months ended June 30,
1999, respectively as their effect would be 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, 1999 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 325
family centers at June 30, 2000. The Company has the capacity to serve more than
40,000 families in 34 states, the District of Columbia, the United Kingdom and
the Pacific rim. The Company has partnerships with many of the nation's leading
employers, including 75 Fortune 500 companies. Working Mother's 1999 list of the
"100 Best Companies for Working Mothers" includes 45 clients of the Company. The
Company's historical revenue growth has been primarily due to 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.
In the three month period ended June 30, 2000 the Company acquired Nurseryworks
Limited, based in London, England which operates nine child care centers in the
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greater London area. In addition, the Company assumed the operation of three
child care centers for the U.S. Navy in Guam. The operations of the Company's
non-domestic child care centers are not material to the Company's operating
results, financial position or cash flows.
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data as a
percentage of revenue for the three and six month periods ending June 30, 2000
and 1999:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net revenues 100.0% 100.0% 100.0% 100.0%
Cost of services 85.1 85.5 85.2 85.6
----- ----- ----- -----
Gross profit 14.9 14.5 14.8 14.4
Selling, general & administrative 8.4 8.6 8.4 8.7
Amortization 0.6 0.3 0.6 0.4
----- ----- ----- -----
Income from operations 5.9 5.6 5.8 5.3
Interest income 0.1 0.2 0.1 0.3
----- ----- ----- -----
Income before income taxes 6.0 5.8 5.9 5.6
Income tax provisions 2.5 2.4 2.4 2.3
----- ----- ----- -----
Net income 3.5% 3.4% 3.5% 3.3%
===== ===== ===== =====
</TABLE>
Three and Six Months Ended June 30, 2000 Compared to the Three and Six Months
Ended June 30, 1999
Net Revenues. Net revenues increased $11.1 million, or 18.2%, to $72.1 million
for the three months ended June 30, 2000 from $61.0 million for the three months
ended June 30, 1999. Net revenues increased $19.3 million, or 16.1%, to $138.7
million for the six months ended June 30, 2000 from $119.4 million for the six
months ended June 30, 1999. The growth in revenues is attributable to the net
addition of 40 child development centers since June 30, 1999, enrollment
increases in the Company's newer family centers, and tuition increases at
existing centers of approximately 4% to 6%.
Gross Profit. Cost of services consists of center operating expenses, including
payroll and benefits for center personnel, facilities costs including
depreciation, supplies and other expenses incurred at the center level. Gross
profit increased $1.9 million, or 21.4%, to $10.8 million for the three months
ended June 30, 2000 from $8.9 million for the three months ended June 30, 1999.
As a percentage of net revenues, gross profit increased to 14.9% for the three
months ended June 30, 2000 compared to 14.5% for the same period in 1999. Gross
profit increased $3.3 million, or 19.2%, to $20.5 million for the six months
ended June 30, 2000 from $17.2 million for the six months
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ended June 30, 1999. As a percentage of net revenues, gross profit was 14.8% for
the six months ended June 30, 2000, compared to 14.4% for the same period in
1999.
The Company showed an increase in gross profit margin for the three and six
month periods ending June 30, 2000 compared to the same periods in 1999 as a
result of a greater proportion of centers achieving mature operating levels,
strong enrollment in newer family centers and proportionately lower operating
costs in certain family centers arising from operating efficiency measures.
Finally, since June 30, 1999 eight family centers have been closed or
transitioned to other service providers. 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, and marketing and development
expenses for new and existing centers. Selling, general and administrative
expenses increased $779,000, or 14.8%, to $6.0 million for the three months
ended June 30, 2000 from $5.3 million for the three months ended June 30, 1999.
As a percentage of net revenues, selling, general and administrative expenses
decreased to 8.4% for the three months ended June 30, 2000 from 8.6% for the
same 1999 period. Selling, general and administrative expenses increased $1.2
million, or 11.5%, to $11.6 million for the six months ended June 30, 2000 from
$10.4 million for the six months ended June 30, 1999. As a percentage of net
revenues, selling, general and administrative expenses decreased to 8.4% for the
six months ended June 30, 2000 from 8.7% for the six months ended June 30, 1999.
The decrease in selling and general administrative expenses as a percentage of
revenue during the first six months of this year is primarily attributable to a
larger revenue base and increased efficiencies. The dollar increase is primarily
attributable to investments in regional management, sales personnel, and
operations personnel necessary to support long term growth.
Amortization. Amortization increased $263,000, or 121.2%, to $480,000 for the
three months ended June 30, 2000 from $217,000 for the three months ended June
30, 1999. Amortization increased $396,000, or 88.8%, to $842,000 for the six
months ended June 30, 2000 from $446,000 for the six months ended June 30, 1999.
The increase is attributable to the amortization of intangible assets arising
from acquisitions.
Income from Operations. Income from operations increased 25.3%, or $854,000, to
$4.2 million for the three months ended June 30, 2000 from $3.4 million for the
three months ended June 30, 1999. Income from operations increased 26.8%, or
$1.7 million, to $8.1 million for the six months ended June 30, 2000 from $6.4
million for the six months ended June 30, 1999.
Net Interest Income. Net interest income of $49,000 for the three months ended
June 30, 2000 decreased $96,000 from $145,000 of net interest income for the
three months ended June 30, 1999. Net interest income of $124,000 for the six
months
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ended June 30, 2000 decreased $232,000 from $356,000 of net interest income for
the six months ended June 30, 1999. The decrease in net interest income is
attributable to lower levels of invested cash.
Income Taxes Provision. The Company's effective income tax rate was
approximately 41.6% for the three months and six month periods ended June 30,
2000 and 41.0% for the three and six month periods ended June 30, 1999.
Management expects the increase in tax rate from 1999 to remain in effect
throughout 2000.
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 has been
from cash provided by operating activities. The Company had deficit working
capital of $7.2 million as of June 30, 2000 and working capital of $3.3 million
as of December 31, 1999. The decrease in working capital is the result of the
utilization of surplus cash and cash equivalent balances to fund long term
investments in fixed assets, new family centers, and the funding of
acquisitions. Management believes that the Company will continue to operate
with a working capital deficit for the next 6 to 12 months after which time the
Company anticipates it will generate cash flow from operating activities in
excess of its projected investment needs.
Cash provided by operating activities totaled $12.0 million for the six months
ended June 30, 2000, compared to $6.5 million for the six months ended June 30,
1999. The increase in cash provided by operations is the result of a smaller
overall net increase in accounts receivable in 2000 due to improved timing of
collections, increases in net income before depreciation and amortization and
additional deferred revenue. These amounts were offset by an increase in
payments for income taxes in the period ended June 30, 2000.
Cash used in investing activities increased to $17.4 million for the six months
ended June 30, 2000, from $7.4 million for the six months ended June 30, 1999.
In addition to acquisitions of child care centers, totaling $7.7 million in
2000, the Company had $9.3 million of fixed asset additions for the six months
ended June 30, 2000. Of the $9.3 million of fixed asset additions approximately
$6.2 million relates to new family centers, $2 million related expenditures at
the corporate level, including the relocation of the Company's corporate office,
with the remaining balance being used primarily for the refurbishment and
expansion of existing family centers. Management expects the current level of
fixed asset spending to decrease slightly for the remainder of 2000.
Cash provided by financing activities decreased to $93,000 for the six months
ended June 30, 2000, from $3.7 million for the six months ended June 30, 1999.
During the six months ended June 30, 2000, the Company received $112,000 in net
proceeds from the issuance of common stock, as compared to $4.2 million in the
same period in 1999. In the six months ended June 30, 2000, the Company repaid
long-term debt of $19,000.
Management believes that funds provided by operations, the Company's existing
cash and cash equivalent balances and borrowings available under the line 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 acquisition(s) or make significant investment(s) in facilities for
new or existing centers
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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.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate 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, 1999.
Foreign Currency Exchange Rate Risk
The Company's exposure to fluctuations in foreign currency exchange rates is
primarily the result of foreign subsidiaries domiciled in the United Kingdom.
The Company does not currently use financial derivative instruments to hedge
foreign currency exchange rate risks associated with the United Kingdom
subsidiaries.
The assets and liabilities of the Company's United Kingdom subsidiaries, whose
functional currency is the British pound, are translated into U.S. dollars at
exchange rates in effect at the balance sheet date. Income and expense items are
translated at the average exchange rates prevailing during the period. The
cumulative translation effects for the subsidiaries are included in cumulative
translation adjustment in stockholders' equity.
The Company operates subsidiaries in the United Kingdom. Such subsidiaries are
not material to the Company's consolidated results of operations; therefore, the
impact of a 10% change in the exchange would not have a significant impact on
the Company's results of operations or financial position.
14
<PAGE> 15
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:
The Company held its annual meeting of stockholders on May 25, 2000. At the
annual meeting, the stockholders of the Company voted to elect three Class II
directors for a term of three years and until their successors are duly elected
and qualified. The following table sets forth the number of votes cast for and
against/withheld with respect to each of the director nominees:
<TABLE>
<CAPTION>
Nominee For Against/Withheld
<S> <C> <C>
E. Townes Duncan 10,623,694 4,929
Sara Lawrence-Lightfoot 10,623,430 5,193
Marguerite W. Sallee 10,623,580 5,043
</TABLE>
In addition to the foregoing directors, the following table sets forth the other
members of the Board of Directors whose term of office continued after the
meeting and the year in which his or her term expires:
<TABLE>
<CAPTION>
Name Term Expires
<S> <C>
William H. Donaldson 2001
Fred K. Foulkes 2001
Linda A. Mason 2001
Ian M. Rolland 2001
JoAnne Brandes 2002
Joshua Bekenstein 2002
Roger H. Brown 2002
Robert D. Lurie 2002
</TABLE>
15
<PAGE> 16
ITEM 5. Other information:
Not Applicable
ITEM 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
Exhibit 27 (for SEC use only)
(b) Reports on Form 8-K.
None
16
<PAGE> 17
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: August 9, 2000
BRIGHT HORIZONS FAMILY SOLUTIONS, INC.
By: /s/ Elizabeth Boland
------------------------------------------
Elizabeth Boland
Chief Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
17
<PAGE> 18
EXHIBIT INDEX
27 Financial Data Schedule (for Commission use only)
18
