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 March 31, 2003.
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, Massachusetts 02472
(Address of principal executive offices)
(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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
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: 12,579,981 shares of common
stock, $.01 par value, at May 8, 2003.
FORM 10-Q
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
A. Consolidated Balance Sheets at March 31, 2003 (unaudited)
and December 31, 2002 3
B. Consolidated Statements of Operations for the Three Months
ended March 31, 2003 and 2002 (unaudited) 4
C. Consolidated Statements of Cash Flows for the Three Months
ended March 31, 2003 and 2002 (unaudited) 5
D. Notes to Consolidated Financial Statements (unaudited) 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 14
ITEM 4. Controls and Procedures 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 15
ITEM 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
CERTIFICATIONS 17
EXHIBITS 21
2
Bright Horizons Family Solutions, Inc.
Consolidated Balance Sheets
(in thousands except share data)
March 31, December 31,
2003 2002
----------- ------------
ASSETS (unaudited)
Current Assets:
Cash and cash equivalents $ 22,856 $ 28,193
Accounts receivable, net 27,010 22,564
Prepaid expenses and other current assets 3,746 4,603
Current deferred tax asset 9,745 9,745
--------- ---------
Total current assets 63,357 65,105
Fixed assets, net 90,851 88,472
Goodwill and other intangible assets, net 39,628 39,946
Non-current deferred tax asset 7,231 7,231
Other assets 632 536
--------- ---------
Total assets $ 201,699 $ 201,290
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and
obligations under capital leases $ 155 $ 162
Accounts payable and accrued expenses 43,397 48,835
Deferred revenue 22,623 21,531
Income tax payable 14 1,309
Other current liabilities 2,257 1,993
--------- ---------
Total current liabilities 68,446 73,830
Long-term debt and obligations under
capital leases, net of current portion 970 380
Accrued rent 2,678 1,955
Other long-term liabilities 4,515 4,503
Deferred revenue, net of current portion 10,514 10,995
--------- ---------
Total liabilities 87,123 91,663
--------- ---------
Stockholders' equity:
Preferred Stock: 5,000,000 shares authorized, none issued or outstanding
Common Stock $.01 par value
Authorized: 30,000,000 shares
Issued: 13,017,000 and 12,950,000 shares at March 31, 2003 and
December 31, 2002, respectively
Outstanding: 12,501,000 and 12,433,000 at March 31, 2003 and
December 31, 2002, respectively 130 129
Additional paid in capital 86,279 85,512
Treasury stock, 517,000 shares, at cost (7,560) (7,560)
Cumulative translation adjustment 1,538 1,885
Retained earnings 34,189 29,661
--------- ---------
Total stockholders' equity 114,576 109,627
--------- ---------
Total liabilities and stockholders' equity $ 201,699 $ 201,290
========= =========
The accompanying notes are an integral part of the consolidated
financial statements.
3
Bright Horizons Family Solutions, Inc.
Consolidated Statements of Income
(in thousands except per share data)
(Unaudited)
Three months ended March 31,
----------------------------
2003 2002
-------- --------
Revenue $112,407 $ 94,476
Cost of services 95,299 80,307
-------- --------
Gross profit 17,108 14,169
Selling, general and administrative 9,225 7,648
Amortization 127 109
-------- --------
Income from operations 7,756 6,412
Net interest income 38 23
-------- --------
Income before tax 7,794 6,435
Income tax provision 3,266 2,717
-------- --------
Net income $ 4,528 $ 3,718
======== ========
Earnings per share - basic $ 0.36 $ 0.30
======== ========
Weighted average shares - basic 12,451 12,298
======== ========
Earnings per share - diluted $ 0.35 $ 0.29
======== ========
Weighted average shares - diluted 13,012 12,978
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
4
Bright Horizons Family Solutions, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Three months ended March 31,
----------------------------
2003 2002
-------- --------
Net income $ 4,528 $ 3,718
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 2,618 2,221
Non cash expenses 12 --
Changes in assets and liabilities:
Accounts receivable (4,489) 262
Prepaid expenses and other current assets 856 164
Accounts payable and accrued expenses (5,329) (2,024)
Income taxes payable (1,294) (1,428)
Deferred revenue 549 2,953
Accrued rent 748 6
Other long-term assets (102) 148
Other current and long-term liabilities 272 (140)
-------- --------
Net cash (used) provided by operating activities (1,631) 5,880
-------- --------
Cash flows from investing activities:
Additions to fixed assets (5,052) (3,769)
-------- --------
Net cash used in investing activities (5,052) (3,769)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock from exercise
of options 756 549
Proceeds from note payable 699 --
Principal payments of long term debt and
obligations under capital leases (116) (36)
-------- --------
Net cash provided by financing activities 1,339 513
-------- --------
Effect of exchange rate changes on cash and cash equivalents 7 (4)
-------- --------
Net(decrease) increase in cash and cash equivalents (5,337) 2,620
Cash and cash equivalents, beginning of period 28,193 12,770
-------- --------
Cash and cash equivalents, end of period $ 22,856 $ 15,390
======== ========
Supplemental cash flow information:
Cash payments for interest $ 7 $ 29
======== ========
Cash payments for income taxes $ 4,562 $ 4,144
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
5
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 work/life consulting throughout the United States, Guam, Canada, the
United Kingdom, and Ireland.
The Company operates its family centers under various types of arrangements,
which generally can be classified in two forms: (i) the sponsor model, where the
Company operates a childcare and early education center on the premises of a
sponsor and gives priority enrollment to the sponsor's employees or affiliates,
and (ii) the management model, where the Company manages a work-site childcare
and early education center under a cost-plus arrangement, typically for a single
employer.
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, 2002, 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 March 31, 2003, and the results of
its operations for the three month periods ended March 31, 2003 and 2002, and
its cash flows for the three month period ended March 31, 2003 and 2002, 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.
SEGMENT INFORMATION - The Company operates solely in one segment, providing
workplace services to employers and families including childcare, early
education and work/life consulting and generates in excess of 90% of revenue and
operating profit domestically.
STOCK-BASED COMPENSATION - SFAS No. 123, "Accounting for Stock-Based
Compensation," encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for employee stock-based compensation
using the intrinsic value method as prescribed in Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related
6
interpretations. Under APB Opinion No. 25, no compensation cost related to
employee stock options has been recognized as options are granted with exercise
prices equal to or greater than the fair market value at the date of grant. The
Company accounts for options granted to non-employees and certain options issued
in connection with acquisitions using the fair value method, in accordance with
the provisions of SFAS No. 123. Had compensation cost for the stock option plans
been determined based on the fair value at the grant date for awards in 1995
through March 2003, consistent with the provisions of SFAS No. 123, the
Company's net income and earnings per share would have been reduced to the
following pro forma amounts for periods ended March 31, 2003 and 2002.
Period Ended: March 31, March 31,
2003 2002
----------- -----------
Net income:
As reported $ 4,528,000 $ 3,718,000
Pro forma $ 3,612,000 $ 2,801,000
Earnings per share - Basic:
As reported $ 0.36 $ 0.30
Pro forma $ 0.29 $ 0.21
Earnings per share - Diluted:
As reported $ 0.35 $ 0.29
Pro forma $ 0.28 $ 0.20
Because the method of accounting prescribed by SFAS No. 123 has not been applied
to options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in future
years.
The fair value of each option on its date of grant has been estimated for pro
forma purposes using the Black-Scholes option pricing model using the following
weighted average assumptions:
2003 2002
-------- --------
Expected dividend yield 0.0% 0.0%
Expected stock price volatility 51.6% 51.6%
Risk free interest rate 1.90% 3.20%
Expected life of options 7.3 years 7.3 years
Weighted-average fair value per share of options
granted during the year
$ 14.54 $ 16.76
COMPREHENSIVE INCOME - The Company applies the provisions of SFAS No. 130,
"Reporting Comprehensive Income," which establishes standards for reporting and
displaying comprehensive income and its components in the consolidated financial
statements. Comprehensive income is defined as the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. The only components of comprehensive
income reported by
7
the Company are net income and foreign currency translation adjustments.
For the Three Months Ended March 31,
------------------------------------
2003 2002
------- -------
Net income $ 4,528 $ 3,718
Foreign currency translation adjustments (347) (36)
------- -------
Comprehensive income $ 4,181 $ 3,682
======= =======
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -
In November 2002, the EITF issued EITF No. 00-21, Accounting for Revenue
Arrangements with Multiple Deliverables. EITF No. 00-21 addresses certain
aspects of the accounting by a vendor for arrangements under which it will
perform multiple revenue-generating activities. EITF No. 00-21 establishes three
principles: revenue arrangements with multiple deliverables should be divided
into separate units of accounting, arrangement consideration should be allocated
among the separate units of accounting based on their relative fair values, and
revenue recognition criteria should be considered separately for separate units
of accounting. EITF No. 00-21 is effective for all revenue arrangements entered
into in fiscal periods beginning after June 15, 2003, with early adoption
permitted. The Company does not expect this standard to have an impact on its
revenue recognition policies.
2. Notes Payable
The Company entered into an agreement to develop a childcare and early education
center, which will be funded by proceeds from a note payable, with a client, not
to exceed $2.6 million. The note will bear interest at 5.75% and will be payable
over a term of 54 months, commencing August 2003. Through March 31, 2003, the
Company has borrowed approximately $699,000 of the amount available. This amount
is secured by the Company's leasehold interest in the childcare center.
3. Earnings Per Share
Earnings per share has been calculated in accordance with SFAS 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.
8
The following tables present information necessary to calculate earnings per
share:
Three months Ended March 31, 2003
--------------------------------------------
Earnings Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Basic earnings per share:
Income available to common
stockholders $4,528,000 12,451,000 $ 0.36
========
Effect of dilutive securities:
Stock options -- 561,000
---------- ----------
Diluted earnings per share $4,528,000 13,012,000 $ 0.35
========== ========== ========
Three months Ended March 31, 2002
--------------------------------------------
Earnings Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Basic earnings per share:
Income available to common
stockholders $3,718,000 12,298,000 $ 0.30
========
Effect of dilutive securities:
Stock options -- 680,000
---------- ----------
Diluted earnings per share $3,718,000 12,978,000 $ 0.29
========== ========== ========
The weighted average number of shares excluded from the above calculations for
the three months ended March 31, 2003 was approximately 306,000, as their effect
would be anti-dilutive. There were no anti-dilutive shares in the three months
ended March 31, 2002. For the three-month periods ended March 31, 2003 and 2002,
the Company had no warrants or preferred stock outstanding.
4. Commitments and Contingencies
The Company self-insures a portion of its workers compensation and medical
insurance plans. While management believes that the amounts accrued for these
obligations is sufficient, any significant increase in the number of claims and
costs associated with claims made under these plans could have a material
adverse effect on the Company's financial position or results of operations.
The Company is a defendant in certain legal matters in the ordinary course of
business. Management believes the resolution of such legal matters will not have
a material effect on the Company's financial condition or results of operations.
The Company is guarantor on a lease for a childcare center that was transitioned
to another provider. The lease guarantee expires in June 2006. Management
estimates that its current obligations associated with this lease, including
real estate taxes and related expenses, to be approximately $700,000.
9
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, 2002 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
child care, early education and strategic work/life consulting, operating 476
child care and early education centers at March 31, 2003. During the three-month
period ending March 31, 2003, the Company opened 15 new centers and closed 4
centers. The Company has the capacity to serve approximately 55,000 children in
37 states, the District of Columbia, Canada, Guam, Ireland and the United
Kingdom and has partnerships with many leading employers, including 82 Fortune
500 companies. Working Mother's 2002 list of the "100 Best Companies for Working
Mothers" includes 54 clients of the Company. Historical revenue growth has
resulted primarily from the addition of new centers as well as increased
enrollment at existing centers. The Company reports its operating results on a
calendar year basis.
The Company's business is subject to seasonal and quarterly fluctuations. Demand
for child care and early education services have historically decreased 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 remainder of the school year. Results of
operations may also fluctuate from quarter to quarter as a result of, among
other things, the performance of existing centers including enrollment and
staffing fluctuations, 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 model mix
(sponsor vs. management) of new and existing centers, competitive factors and
general economic conditions.
10
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data as a
percentage of revenue for the three-month periods ended March 31, 2003 and 2002:
Three Months Ended
March 31,
--------------------
2003 2002
----- -----
Revenue 100.0% 100.0%
Cost of services 84.8 85.0
----- -----
Gross profit 15.2 15.0
Selling, general & administrative 8.2 8.1
Amortization 0.1 0.1
----- -----
Income from operations 6.9 6.8
Net interest income (expense) 0.0 0.0
----- -----
Income before income taxes 6.9 6.8
Income tax provision 2.9 2.9
----- -----
Net income 4.0% 3.9%
===== =====
Three Months Ended March 31, 2003 Compared to the Three Months Ended March 31,
2002
Revenue. Revenue increased $17.9 million, or 19.0%, to $112.4 million for the
three months ended March 31, 2003 from $94.5 million for the three months ended
March 31, 2002. The growth in revenues is primarily attributable to the net
addition of 78 family centers since March 31, 2002, modest growth in the
existing base of family centers and tuition increases at existing centers of
approximately 4% to 5%.
Gross Profit. Cost of services consists of center operating expenses, including
payroll and benefits for center personnel, facilities costs, which include
depreciation, supplies and other expenses incurred at the family center level.
Gross profit increased $2.9 million, or 20.7%, to $17.1 million for the three
month period ended March 31, 2003 from $14.2 million for the three months ended
March 31, 2002. As a percentage of revenue, gross profit increased to 15.2% for
the three months ended March 31, 2003 compared to 15.0% for the three months
ended March 31, 2002.
The modest increase in gross profit margins for the three-month period ended
March 31, 2003 compared to the same period in 2002 resulted from increased
enrollment in the Company's ramping centers, cost savings attributable to labor
management at the Company's domestic centers, and growth in the Company's
European operations, which produce a higher profit margin than domestic centers.
As noted above, the Company's operations are subject to seasonal variation and,
as a result, the Company expects gross profit to approximate 14.7% to 14.8% for
the full year in 2003.
11
Selling, General and Administrative Expenses. Selling, general and
administrative("SG&A") expenses consist of regional and district management
personnel, corporate management and administrative functions, and development
expenses for new and existing centers. Selling, general and administrative
expenses increased $1.6 million, or 20.6%, to $9.2 million for the three months
ended March 31, 2003 from $7.6 million for the three months ended March 31,
2002. As a percentage of revenue, SG&A expenses increased to 8.2% for the three
months ended March 31, 2003 from 8.1% for the same period in 2002.
The dollar increase in SG&A expenses is primarily attributable to investments,
both domestic and international, in regional and divisional management, as well
as general corporate and administrative personnel necessary to support long-term
growth. SG&A expenses, as a percentage of revenue, increased during the current
quarter in connection with the integration of businesses acquired in Europe in
the latter half of 2002. The Company expects SG&A spending, as a percentage of
revenue, to remain in the 8.1% to 8.2% range in 2003.
Amortization. Amortization expense totaled $128,000 for the three months ended
March 31, 2003, as compared to $109,000 in the same period for 2002.
Income from Operations. Income from operations totaled $7.8 million for the
three months ended March 31, 2003, an increase of $1.4 million, or 21.0%, from
$6.4 million in the same period for 2002 as a result of the factors discussed
above.
Net Interest Income. Net interest income was approximately $38,000 for the three
months ended March 31, 2003 as compared to $23,000 for the three months ended
March 31, 2002. The increase in net interest income in 2003 from 2002 is
attributable to higher levels of invested cash in 2003.
Income Tax Provision. The Company's effective income tax rate was approximately
41.9% for the three-month period ended March 31, 2003 and 42.2% for the three-
month period ended March 31, 2002.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are the ongoing operations of its
existing centers and the addition of new centers through development or
acquisition. The Company's primary sources of liquidity have been existing cash
balances and cash flow from operations, supplemented by borrowing capacity under
the Company's revolving line of credit. The Company had a working capital
deficit of $5.1 million and $8.7 million as of March 31, 2003 and December 31,
2002, respectively.
Cash used in operations was $1.6 million for the three months ended March 31,
2003, as compared to $5.8 million of cash provided by operations for the three
months ended March 31, 2002. The decrease is primarily the result of increases
in client accounts receivable due to the timing of client invoicing and
collections, as well as reductions in accounts payable and accrued expenses,
primarily accrued salaries, which vary according to the payroll cycle.
Cash used in investing activities increased to $5.1 million for the three months
ended March 31, 2003 from $3.8 million for the three months ended March 31,
2002. This
12
was a result of an increase of $1.3 million in fixed asset additions in 2003 as
compared to the same period in 2002. Of the $5.1 million of fixed asset
additions for the three months ended March 31, 2003, approximately $2.9 million
relates to new family centers, with the remainder utilized for the refurbishment
of existing family centers. Management expects the current level of center
related fixed asset spending to remain the same or increase slightly in 2003.
Cash provided by financing activities totaled $1.3 million for the three months
ended March 31, 2003 compared to $513,000 in the three months ended March 31,
2002. The Company received $756,000 from stock option exercises in the three
months ended March 31, 2003, as compared to $549,000 in the same period in 2002.
The Company also received approximately $699,000 in proceeds from a note payable
to fund the construction of a client sponsored center.
Management believes that funds provided by operations and the Company's existing
cash and cash equivalent balances and borrowings available under its line of
credit will be adequate to meet planned operating and capital expenditure needs
for at least the next 12 months.
OTHER REPORTING MATTERS
We considered the disclosure requirements of FR-60 regarding critical accounting
policies and FR-61 regarding liquidity and capital resources, certain trading
activities, and related party/certain other disclosures, and concluded that
nothing materially changed during the quarter that would warrant further
disclosure under these releases.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In November 2002, the EITF issued EITF No. 00-21, Accounting for Revenue
Arrangements with Multiple Deliverables. EITF No. 00-21 addresses certain
aspects of the accounting by a vendor for arrangements under which it will
perform multiple revenue-generating activities. EITF No. 00-21 establishes three
principles: revenue arrangements with multiple deliverables should be divided
into separate units of accounting, arrangement consideration should be allocated
among the separate units of accounting based on their relative fair values, and
revenue recognition criteria should be considered separately for separate units
of accounting. EITF No. 00-21 is effective for all revenue arrangements entered
into in fiscal periods beginning after June 15, 2003, with early adoption
permitted. The Company does not expect this standard to have an impact on its
revenue recognition policies.
13
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, 2002.
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 and
Ireland. The Company does not currently use financial derivative instruments to
hedge foreign currency exchange rate risks associated with its foreign
subsidiaries.
The assets and liabilities of the Company's Canada, Ireland, and United Kingdom
subsidiaries 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.
There have been no changes in the Company's foreign operations that would
materially alter the disclosures on foreign currency exchange risk made in the
Company's Annual Report on Form 10-K for the year ended December 31, 2002.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. Within 90 days prior to the
date of this quarterly report (the "Evaluation Date"), the Company's Chief
Executive Officer and Chief Financial Officer have reviewed and evaluated the
effectiveness of the Company's "disclosure controls and procedures" (as defined
in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15(d)-14(c)). Based
on that evaluation, these officers concluded that as of the Evaluation Date,
the Company's disclosure controls and procedures were adequate and effective to
ensure that material information required to be disclosed in this report
regarding the Company and its consolidated subsidiaries has been made known to
them by others within Company.
Changes in Internal Controls. There were no significant changes in the
Company's internal controls or in other factors that could significantly affect
the Company's disclosure controls and procedures subsequent to the Evaluation
Date. There were no significant deficiencies or material weaknesses identified,
and therefore no corrective actions were taken.
14
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings:
Not Applicable
ITEM 2. Changes in Securities and Use of Proceeds:
Not applicable
ITEM 3. Defaults Upon Senior Securities:
None
ITEM 4. Submission of Matters to a Vote of Security Holders:
Not applicable
ITEM 5. Other information:
Not applicable
ITEM 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
99.1 Certificate of Chief Executive Officer relating
to Quarterly Report on Form 10-Q for period
ended March 31, 2003.
99.2 Certificate of Chief Financial Officer relating
to Quarterly Report on Form 10-Q for period
ended March 31, 2003.
(b) Reports on Form 8-K
Not Applicable
15
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: May 15, 2003
BRIGHT HORIZONS FAMILY SOLUTIONS, INC.
By: /s/ Elizabeth J. Boland
------------------------------------
Elizabeth J. Boland
Chief Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
16
CERTIFICATION
I, David H. Lissy, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Bright Horizons Family
Solutions, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent
17
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 15, 2003
/s/ David H. Lissy
---------------------------------
David H. Lissy
Chief Executive Officer
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CERTIFICATION
I, Elizabeth J. Boland, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Bright Horizons Family
Solutions, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that
19
could significantly affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 15, 2003
/s/ Elizabeth J. Boland
---------------------------------
Elizabeth J. Boland
Chief Financial Officer
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EXHIBIT INDEX
99.1 Certificate of Chief Executive Officer relating to Quarterly
Report on Form 10-Q for period ended March 31, 2003.
99.2 Certificate of Chief Financial Officer relating to Quarterly
Report on Form 10-Q for period ended March 31, 2003.
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