Bright Horizons Family Solutions Inc (BFAM) 2002 Q3 法說會逐字稿

Ladies and gentlemen, good afternoon, and welcome to the Bright Horizons Family Solutions Third Quarter results conference call. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions following the presentation. It is now my pleasure to turn the floor over to your host, Mr. David Lissy. Sir, you may begin.

Thanks, Holly, and hello to everybody on the call today. We're excited to be talking with you today as we complete out fifth year as a public company and report on our 20th quarter. Our earnings results went out right after the market closed and are available currently at our website at www.brighthorizons.com. With me on the call this afternoon is Elizabeth Boland, our Chief Financial Office and let me ask Elizabeth to read our safe harbor statement.

Thanks. In accordance with regulation FDA, we use this kind of conference call and other public forums to provide the public and investing community with timely information about our business operations and financial performance as well as about our expectations for our future performance. We adhere to restrictions on selective disclosure and appreciate your understanding of the limits to which we will be able to comment on items not previously discussed in these forums. The risks and uncertainties that may cause our future operating results to vary from those that we describe in any forward-looking statements include our ability to 1) execute contracts for new center commitments; 2) to enroll children in our centers; 3) to retain clients and center management contracts; and 4) to expand and operate profitably abroad, as well as the affects of governmental tax and fiscal policies on employers considering work site childcare. The specific risk factors associated with our business are detailed in our SEC filings, including our Form 10K filed in March of 2002. A replay of this entire conference call will be available thru Friday, November 1st by calling 973-341-3080 and entering PIN code 3509665.

Thanks, Elizabeth. Today I'll discuss our results thus far in 2002, specifically our third quarter operating and financial results, as well as our outlook for the remainder of this year and for 2003. I'll also update you on our progress of our integration in the U.K. and the opportunities we continue to see there and give you an update on the economy's continued impact on our business. First, to summarize the highlights - - net income for the quarter of $3.8 million was up 35% over last year's third quarter on revenue of $105.4 million, a 21% increase. Earnings per share of 29 cents increased 32% over the 22 cents we reported in the third quarter of last year. We've continued to maintain strong operating discipline throughout this economic downturn and the consistency of our operating and financial performance bears witness to our continued ability to grow and manage costs despite the weak economy.

This quarter we added 11 new centers to our network - 9 in the U.S., 1 in the U.K., and 1 in Ireland. Domestically, we opened new centers for Reebok and MIT here in Massachusetts, J.M Family Enterprises in Florida, General Electric Medical Systems in Wisconsin and three new centers for the UAW Ford. In addition, the opening of a new dedicated back-up center for P&C Financial in Philadelphia, our 35th dedicated back-up in school-age program, continues to build on our leadership position in back-up childcare. As we mentioned on last quarter's call, we also opened the JFK Charter School in Atlantis, Florida, our second elementary school and our first employer-sponsored charter school. This program is an extension of our partnership with JFK Medical Center for whom we've managed a childcare and school-age program for the past 10 years. This program, which initially serves 162 children in grades K thru 3, has a unique blending of public funding and corporate support which enables us to operate a high quality school. We view this extension into elementary education as a natural continuation of the learning and development that occur in our pre-school and kindergarten programs. Although we do not plan an extensive growth in the charter or private school market, we are interested in expanding our reach in this area when we can find opportunities where clients wish to invest in a manner akin to our childcare model, as is the case with this program, or in geographic areas where we have a strong existing operating infrastructure with a demand profile to drive enrollment, as is the case with our school in Washington.

We're also excited about our continued growth in Europe. In September we opened a new center for Land Rover in Warrick, England. This serves as another example of leveraging our experiences here in the U.S. as the Land Rover team visited our programs for their parent company, Ford, as part of their research for this project. In July, we also opened a new center for IBM in Dublin, Ireland. This center is particularly excited as it represents not only a larger scale center than what is the norm in Ireland, but it also offers a state of the art program with indoor and outdoor environments that are already serving as a national example in Ireland of what is achievable in early education with employer support. Our grand opening ceremony last month attracted over 100 business and government leaders to the site and we're quite proud to be partnering with IBM, not only in this center, but throughout the U.S., Canada and the U.K.

We now operate 67 centers in the U.K. and Ireland and currently our European operations comprise approximately 5% of our consolidated results. So let me take a few minutes to update you on our June acquisition of KinderQuest and our outlook for the U.K. and Ireland. Both operationally and financially, the acquisitions we've made over the last couple of years in Europe have performed on plan. The integration of KinderQuest in our existing U.K. operations that we began last quarter, is well underway. In fact, Mary Ann Tocio, our President and Chief Operating Officer, who has been personally involved in leading this effort, recently returned from a series of meetings focused on our continued progress. Culturally, our shared commitment to high quality worksite childcare and early education has provided a quick bridge for developing lines of communication and a shared sense of mission. We currently have a small team of U.S. based employees on U.K. tours of duty who are working very closely with out European counterparts in operations, sales, IT and finance to ensure that our centers and field managers are properly supported and business operations are well integrated.

Although Bright Horizons Europe will operate as a separate entity and continue to be sensitive to local customs and culture, its internal systems will be set to mirror and interface with our U.S. based center management and accounting and general ledger systems. This investments in systems necessary to operate the business effectively, will provide an appropriate foundation on which to grow. While it's still early, the progress to date has been encouraging. In particular, we've been pleased to have already added several new commitments to our pipeline of centers under development since our combination with KinderQuest.

From a market perspective, we see long term growth potential in the U.K. and Ireland. The favorable demographic trends are similar to those we've experienced here in the U.S. It's estimated that in the next 10 years, 80% of the 2 million new jobs in the U.K. will be taken by women and that my the end of the year 2012, nearly three quarters of all women with children under the age of 5 will be working. In addition, there's a growing recognition of the significant value of quality early education, which is resulting in a gradual shift from informal care environments to more professional, structured and developmentally appropriate provision of care in early education. With almost 70 centers throughout the U.K. and Ireland, Bright Horizons is now positioned as the clear partner of choice for employers to seek high quality solutions enabling us to leverage the same competitive advantages in the U.K. and Ireland that we've built over time here in the U.S.

Let me now turn to the economy and how Bright Horizons in positioned in terms of advantages and challenges. As I've mentioned before, we continue to feel some of the lingering effects of the overall poor economic conditions. Namely, a lengthening of the sales cycle as employers cautiously review new proposals and slower enrollments in certain areas being the most hard hit by layoffs. In addition, as we have throughout our history, we continue to work with clients to become more efficient where possible in managing centers by assessing things like hours of operation, ancillary programs offered, and appropriate employee cost sharing levels. The wide majority of these changes over time tend to occur in cost plus centers. To the extent that we make operational adjustments to reflect these changes, we continue to see lower revenue growth at these centers though our operating profit, which is fixed under cost plus contracts, remains unaffected.

To date, we've been able to mitigate many of the negative effects of the recession. We continue to backfill enrollment in many of the centers affected by layoffs, either by families on our wait list or by opening a given center to community enrollment or another nearby employer. In addition, more favorable labor markets at the teacher level have resulted in an easing of wage pressures in most markets, which not only provide us better financial stability, but reduce turnover and ultimately improve program quality. In fact, during 2002, we've seen our overall average turnover rate drop by 19%, and turnover for employees here longer than 6 months, which is our core statistic, is 20% so far this year, compared to our industry where 50+ ranges are the average.

Our pipeline and new centers under development continues to be steady in the mid 50s, backfilling new commitments as we continue to open new centers. From our point of view, outside of the technology industry where we've seen the most downside in our prospect base, and the healthcare industry, which has had the most upside in activity due to the national nursing crisis, there really is no discernible pattern across industries. We continue to find pockets of interest across a wide range of industries and geographies.

As we've noted over the past 2 years, we focused our marketing effort on counter-cyclical industries such as hospitals, higher education and the non-profit and government sectors. While continuing to develop contacts and relationships in the cyclical industries, efforts we believe will pay off as the economy begins to turn around. The focus on counter-cyclical industries has produced 16 new center commitments over the course of the past 18 months and we now operate 40 centers for hospitals and medical systems, 1 in higher education and 60 in the government and non-profit sectors, including approximately 30 that joined our network with the KinderQuest acquisition.

Finally, from a growth standpoint, we continue to operate in a highly fragmented industry, with the majority of the higher quality programs being run by local providers or regional chain lists. As we've spoken to you about in the past, we continue to see a good opportunity to leverage our strong balance sheet and take advantage of high quality acquisition opportunities that we expect will continue to present themselves throughout the remainder of this year and next. So as we look ahead to the remainder of this year and into 2003, we are anticipating the continued lingering effects of the economy. As a result, our outlook for next year considers neither an economic recovery nor a material worsening of conditions. For the remainder of this year, we remain on target to meet our goals. We expect to end the year with approximately 470 centers, including the addition of 90 to 92 centers and 12 to 13 closures. We expect revenue growth for fiscal year 2002 to approximate 18 to 19% over fiscal year 2001 and project earnings per share of $1.17 to $1.18 per share, a 30% plus growth rate over fiscal 2001 levels.

Going forward into 2003, we are reiterating our guidance of 17 to 20$ top line growth and earnings per share of $1.39 to $1.42. Elizabeth will provide you with a little more detail in a few moments. Overall, I'm pleased to be reporting these results to you and look ahead to continued, consistent performance. Bright Horizons has grown stronger over time by investing in their operations, growth and infrastructure while leveraging overall and, most of all, by delivering on our mission and becoming the employer of choice in our field. We've been pleased to continue to watch our new investments and new initiatives in areas such as back-up child care, expansion into new markets abroad, and elementary education provide us with new opportunities to extend our model in logical ways that will help insure our long term growth potential. We remain acutely aware of the challenges that the current economy places on us and have been pleased with the overall response and execution of our team.

This month, we received the results of out annual parent satisfaction survey. This survey is sent to parents we serve around the world and over 12,000 of them provided us with the feedback on how they think we're dong in terms of quality and consistency of care that their children receive at our centers. We're extremely proud to report that our centers achieved a 98.8% overall satisfaction rate from the families they serve, up from 98.3 last year. While we're proud of this accomplishment, we recognize there's still much to be done to improve ourselves and to continue to elevate the importance of quality early childhood education around the world. Now let me get Elizabeth to take you through the numbers in a little more detail.

Thanks, Dave, and hi to everyone who is joining us on the call today. As I reiterate a few things that David mentioned - - net income of $3.8 million for the quarter is a 35% increase over last year while earnings per share of 29 cents is up 32% from the 22 cents we reported in 2001. Revenues for the quarter of $105.4 million are up 21% over 2001 levels while weighted averages shares of 13 million are 2% higher in 2002. Lastly, as mentioned in the press release, EPS in 2002 is up approximately 2 cents a quarter due to the change in goodwill accounting rules this year. Top line growth this quarter of 21% is driven principally by new center openings with additional enrollment in ramping center centers and tuition increases at an annual rate of 4 to 5%. In mid-June, we completed the acquisition of KinderQuest which managed 48 worksite centers in England and Scotland and its results were therefore included for the full three months this quarter. Although we don’t expect to segregate this transaction or our European operations in our financial statements and footnotes due to their relatively small contribution to our consolidated results, the order of magnitude of this acquisition was to add approximately $4 million per quarter to our consolidated revenues.

Operating income margin as a percentage of revenue increased to 6 % for the quarter, compared to 5.5% in 2001 mainly due to the elimination of goodwill amortization, which added 50 basis points to the margin. Center gross margins are essentially flat at 14.2% and overhead as a percentage of revenue also remains steady at 8.1% this quarter compared to last year. At the center level, we continued to manage labor and other controllable operating costs in concert with price increases. This decline in margin this quarter - - a slight decline of about 5 basis points - -compared to the first half - - the decline this quarter compared to the first half of the year is consistent with the school year seasonality that we experience. It is associated with the usual fall enrollment transition when older pre-schoolers leave our program and we continue process the fact filling enrollment through the fall. In the fourth quarter, we therefore expect to see the margin rebound as in prior year trends. Net interest income for the quarter was negligible as we experienced low levels of investable cash as well as low rates of interest in ‘02. We ended the quarter with approximately $8 million in cash and had $400,000 outstanding on our working capital line of credit at the quarter end which has now subsequently been repaid.

Year to date EBITDA, which is a proxy for operating cash flow, approximates $27 million through the 9 months of the year, which is up 23% from last year’s $22 million level. We are projecting over $34 million in EBITDA for the full year ‘02. Our tax rate is slightly lower this quarter, reflecting the lower effective rate in the U.K. and the effect of eliminating non-deductible goodwill from our book taxable income. Lastly, shares outstanding this quarter totaled $13.0 million, which includes the effect of acquiring about 22,000 treasury shares this quarter. We ended the quarter with 462 centers as we added 11 and closed 5. Total capacity at quarter end was 53,500 with average center capacity of 116. This decrease from our historical average of 125 per center is attributable to the significantly smaller centers in the U.K. added this year which average only 40 per center. So to just translate that, previously our typical was 125. Therefore by adding renters with a 40 capacity, they are about a third the size, so it’s sort of a three to one ratio.

At the end of the quarter approximately 60% of our centers are profit and loss and 40% are cost plus consistent with historical numbers. Let me now walk through our financial projections for the next couple of quarters and for 2003. As Dave said, we estimate that we will add 90 to 92 new centers this year and consistent with prior years, we’ll close 12 to 13 centers. This will result in an increase in our total center capacity of about 6400 or 13+% to nearly 55,000. With the visibility we now have into the fourth quarter, we expect the full year revenue growth for 2002 will approximate 18 to 19%. As we noted earlier, we continue to feel the lingering effects of the economy and while overall enrollment in our network of centers has remained solid, certain centers have been affected by layoffs and have experienced slight enrollment declines. We expect to continue to backfill that enrollment over time and with continued strong operations oversight, would project center margins for the fourth quarter and the full year in 2002 to be consistent with 2001 levels at 14.7%. We’ll continue to closely manage our overhead spending and expect it approximate 8.2% for the full year. In the fourth quarter, we expect some increased spending associated with the integration of KinderQuest operations which will bring the fourth quarter rate in line with 2001 levels at 8.3%. Amortization of other intangible assets will continue to approximate $100,000 per quarter. The change in accounting for goodwill amortization, as we mentioned, is adding approximately 2 cents per share per quarter, although it is 7 cents so far year to date due to rounding.

We project capital spending to approximate 16 to 18 million in 2002 and would not project a meaningful change in net interest for the quarter, although we may periodically borrow under our line of credit to fund spikes in working capital needs. With a tax rate just over 41% in the fourth quarter and the year, net income is projected to increase over 30% for the full year. For the fourth quarter of ‘02, we are projecting EPS of 29 to 30 cents a share which will result in annual EPS of $1.17 to $1.18 per share on 13.1 million weighted average shares. We’re currently completing our detailed annual budget process for 2003 and will give you quarterly specifics when we report fourth quarter results next February. However, by way of preview, we project revenue growth next year in the range of 17 to 20% which considers our pipeline of new centers scheduled to open in ‘03 and the inclusion of KinderQuest for the full year. This growth level presumes a continuation of current economic conditions and are viewed as we would be conservative in projecting tuition increases and enrollment growth in our existing base of business. Our forecast includes capacity growth of 10 to 12%, tuition increases in the range of 4 to 5%, and enrollment growth in ramping centers of 1 to 3%.

I also want to highlight that revenue increases in ‘03 will be higher in the first and second quarter as we are comparing against 2002 quarters that did not include KinderQuest and the converse will be true for the second half of ‘03. At this stage, we expect center margins in 2003 to approximate 14.7%, consistent with this year, overhead spending to decrease to 8.1% of revenue, and operating income to increase to 6.5%. With an estimated 13.4 million shares outstanding for the year, we project EPS to increase by approximately 20% in 2003 to $1.39 to $1.42. For purposes of your modeling, our current first quarter estimates are for EPS to range from 33 cents to 35 cents a share and, as I mentioned previously, we would expect that the seasonality in both margins and earnings trends will follow historical patterns.

Looking beyond ‘03, we continue to see strong opportunities for growth, particularly when an economic recovery takes hold. Over time, we project that annual center margins may approach 15% given the mix of profit and loss and cost plus contracts and that we will continue to leverage overhead down to a target of 7.5%. With long term top line growth in the high teens and improved operating margins from both centers and overhead, we project EPS growth in the same range. With that, we’ll open the call for questions. Holly?

Thank you. The floor is now open for questions. (Caller instructions). Bob Craig, Lee Mason.

This is to start off with kind of a pain in the neck question but it hasn’t been asked for a couple of quarter. Would you be so kind as to break out your center pipelines, if you could, by industry and geography on a rough basis?

We can break it out by industry. In terms of geography, do you mean U.S. / U.K.?

Yes, exactly.

I was going to say - - if we went through each of the states I’d be here for a long time. Let me just give you the figures by industry first. Banking and financial is about 10%; technology is about 10%; healthcare and pharmaceutical is 10 to 15%; consumer is 10%; industrial manufacturing 20%; higher education and other 15%; and consortium models 20%.

Okay, and U.K./U.S.?

Let me just troll through my fact sheet and I’ll come back on that and give it out in a minute.

Any recent or pending developments on the legislative front that we should be aware of?

Not really, Bob. Nothing we haven’t discussed in the past between the federal tax law and the Georgia tax credit. There’s really nothing else new on that front.

Dave, you mentioned on the last call that activity level with the early stage of prospects had picked up a bit. Has that been sustained or has that changed any?

I think it’s similar to what we experienced what we said on the last call.

In terms of closing plans looking forward, I take it you’re still in that range of 3 to 5 centers per quarter. Is that reasonable?

This year we expect to close 12 to 13 centers, Bob, and the order of magnitude we’re on, that’s the similar pace for next year.

The characteristics of those that you closed this quarter?

They followed our historical trends which are situations where employers actually relocate from a location or consolidate employees in a fashion to no longer call for the center. Or a couple of them are centers that were long time performers of ours that we chose to exit.

Was that generally one ofs or was there any concentration of - -?

No, it was pretty evenly split through the three elements I just mentioned. And to answer your first question - - approximately, rounding, 90% of the pipeline is in the U.S. and a little under 10% is in Europe.

Great. One last question - - any plans in terms of adding sales reps or business development people and the total number that you have now?

Well, I think - - we’ve added to that over time and I think we’re probably in a position to add another one or two next year if we continue to see the trends be like they are now.

Refresh me on the current base sale number.

On what I’ll call the sales team between the U.S. and Europe, and these are people that are obviously on quota, there’s 20 currently and obviously supported by a whole host of other people who do various sales support functions.

Bob Craig. Okay, great. Thanks a lot.

Howard Block, Bank of America Securities.

Good afternoon and thanks for a solid quarter as well. I have several questions. The first is - - do you have - - Dave, you mentioned the consolidated results from the U.K. and Ireland were, I think, 5%. Does results mean revenues or operating income? What do you mean by results?

Lt me just jump in. Dave can add on. I think principally that figure is a revenue number and that’s the contribution this year. So KinderQuest is in for just over half of the year so that number will pick up slightly next year into the 6 to 7% range. We moved up guidance by a penny reflecting the incremental contribution from the U.K. and at this point, it’s making a modest contribution, but we’re still in the mode of rationalizing overhead abroad.

Okay, so if I tried to reconcile the 5% contribution with the, I guess, about 15 of the centers are U.K. So would that ratio, 5 to 15, somehow be reconciled with sort of the capacity which is sort of sub 50 in the U.K. and 120-ish in the U.S.?

Yes, it’s almost perfectly that math because the centers’ metrics are, on a per child capacity trials, are pretty close to the U.S. metrics.

But then I hear you sound pretty bullish with regards to the footprint in Dublin in terms of that center size. So how big is that center in Dublin and will there be more large centers in the U.K.?

The center in Ireland is about 110 children, Howard, and I think that it’s at least twice the size of what the norm is there if not a little bigger than that. As I said earlier, I think we expect over time that the average center size will pick up. It’s just that in the case of KinderQuest, they have such an installed base of smaller renters, that it takes more time to move the needle. If you look at some of the newer programs, they’re bigger than the 40 capacity that is the average. Our expectation is that both in Dublin and the U.K. over time, that the newer centers will pick up in size.

With regards to the wait list, we have been holding to sort of a number around 20% of each site’s capacity. It sounds like perhaps that’s come in a little bit. Would you say maybe more 15 to 20% now?

Well, I think that it’s really tough to generalize, Howard. This is the time of year when the wait list would be down, certainly any preschool waiting list would be down because we would have backfilled all that for fall enrollment. But I think in general we are seeing that kind of a variability but, yes, some centers wait lists are down in the 10 to 15% range and some are holding at 20%. We don’t compile it on a total system basis because it’s maintained in a variety of ways in the field.

Then the 55-ish centers in the pipeline - what percent would be U.K./Ireland versus U.S.?

A little under 10% are in Europe and a little over 90% are in the U.S.

Okay, actually you said Europe, so that means something outside of the U.K./Ireland?

No, I apologize.

We just like to say Europe.

I don’t mean to take liberty with the word or the geography, I should say.

On Bob’s questions - - I noticed - - again, our notes could be old, but it seemed like the financial services piece came in significantly from the last number that I had. Is that accurate? Did it come down from sort of a 20ish% piece to maybe closer to 10 or are my numbers old?

I think the actuals are in the 20% range, Howard, but the pipeline of new facilities in the financial services - -

It’s increased a little bit. I don’t have the exact number, Howard, so part of what’s happened is we’ve just opened our 16th dedicated center for JP Morgan Chase and they’ve been in the pipeline for some time. So part of that is has skewed the percentages in financial services.

So I just want to clarify - - so was Bob’s question about existing centers or the pipeline terms of the composition?

We responded to Bob’s question on the pipeline.

Do you have similar metrics or composition with regard to existing centers? It it’s too tedious to pull together, we can do it later.

No, I have it here because people want it right next to their pipeline numbers. Banking and other financial is about 17%; technology is 10%; healthcare and pharmaceutical is at 15%; consumer is 10%; industrial manufacturing is 8%; higher education and other is 15%; and consortium models is 25%.

Okay, so that’s pretty consistent. Did you offer any cash flow from operations numbers in the quarter?

I had mentioned them for the year. For the year to date, our cash flow is about $27 million, but for the quarter it’s just about $9 million.

With regards to the pipeline, do you know at this stage, even though something is in the pipeline, whether it would be a for profit or a contract model? And if so, what’s the composition of the pipeline?

The pipeline - - the breakdown - - you mean between cost plus and bottom line centers? It’s about 50/50.

So it looks like in the pipeline maybe you’re pushing more business toward the cost plus?

We tend to have commitments for cost plus centers heavier in the pipeline than our overall mix in any event because they tend to be clients that are either looking at a larger network or have committed a little bit earlier on in the pipeline. So we do tend to have, when we’re looking out, commitments for cost plus centers both in the pipeline for longer and more of them in the pipeline. So a transition of management from a client who wants us to take over the management of a center may not be in the pipeline very long but with a bottom line center - - we don’t see those frequently pushing up the pipeline number.

Trace Erden, Bank Equity Partner.

Good afternoon. I just wanted to push a little bit on the notion of improvement when we do see the economy turn and wondered if you have some kind of qualitative evidence from talking to clients and folks who are interested or willing or would like to plan for this but don’t have the resources currently - -what that would feel like and how quickly we might see an increase in interest once the economy does turn around?

Well, let me comment on it, Trace, sort of more anecdotally than on some of the things we’re seeing in the field, and that is that we continue to backfill the pipeline currently as we open new centers although the pipeline has remained steady in the 50s. So we are, as I said earlier, seeing the current sales cycle slow down. I think it’s safe to say that a good deal of the reason for the slowdown is due to the cautions nature of decision makers around the economy. And so I would only hope that once we see the economy rebound and there’s strong evidence that it actually takes hold, that we’ll see that sales cycle kick back to what we saw over prior to the past two years or past 8 months. So we can only hope that would accelerate the level of commitments and also push more into the pipeline. I think, through discussions with clients, I stay pretty close to clients and do quite a bit of traveling, and I think there is a degree of prospects that have been in our prospect base but not yet in our pipeline or committed centers we’ve worked with for some time, that tell us just that. Once there is a better feeling of more stability and their companies have a couple of quarters of solid performance and things are back on track, that they view this as being part of what they want to do in the long term but the current economy and current situations causes them some pause and may put it off a little bit longer.

One last questions, and I apologize for not knowing this already, but is there any kind of seasonality as to when clients are willing to step up and make commitments? Does it happen to coincide more along annual budget cycles or do the commitments come sort of evenly throughout the year)

Typically, there isn’t, Trace, particularly seasonality around commitments from clients unlike for example, healthcare where people’s contracts are up in a certain time so that industry is really driven off of January 1 renewal dates and what happens. Our industry is pretty all over the map in terms of when clients will make the decisions and ultimately when centers open. As you know, as we’ve talked about over time, it’s not a perfect science in predicting when centers are opened due to variations in construction and things that happen and we’ve become used to it over time.

(Caller instructions). Richard Close, Sun Trust.

More On the charter school - - in the press release you talk about the Palm Beach, Florida school with JFK Medical - - what are you looking at in terms of maybe supplementing your traditional childcare learning center position with maybe other avenues of growth over the next couple of years?

Richard, I think right now we’ve been focused on three primary areas of extending the model. I talked a little bit about this in the opening. The first has been the commitment and the investment in the back-up childcare area where we now operate 35 dedicated centers and think that area in a number of creative ways continues to make logical sense in extending what we do and I think it’s an important service for employers. I think that will continue to gain momentum. Secondly, our investments abroad - - we view the U.K., Ireland and Canada as new avenues of growth and ones that we’re investing in currently to insure that we can secure the leadership position in the market and operate in those places as we do here in the U.S. Each country is in various stages of that happening but that’s been a big part of it. And thirdly, as you just noted, we do view elementary education as a logical extension. But we don’t have an expensive growth plan for that, per se, other than to tell you that, as I said earlier, where we can find opportunities with clients like JFK who want to extend what we do for them by creating an economic model, and whether that’s through Charter or that’s through private school or in some other way creating a model where we feel like we can run a quality program and make a reasonable return and not get into the political crosshairs of what can happen in that industry, that we’re interested in being part of that. That may also happen in areas like what we did in Washington where, because there was demand for Microsoft parents who used our childcare centers in that area, it made sense to do the Chestnut Hill Academy which is a couple of yeas old now. So I think we’ll continue to look for new opportunities in elementary education as we go forward, albeit not any kind of extensive rollout.

So with that being said, do you feel comfortable with still being able to achieve the 20% earnings growth going forward over the next several years?

I think as we expressed earlier, we feel confident in the goals we set out and in being able to, between the new areas that I just talked about and the continued growth of our core business, and with a lot of operating discipline and not a material worsening of the economy, I think we foresee a continuation of that.

Richard Close; One final question. Maybe on the sales cycle -- you mentioned it on Trace’s couple of questions there - - in a good economy, what is your sales cycle? Just remind me there and what are we running about like now?

Our sales cycle, Richard, ranges from 3 months to 2 years. I hate to give you such a wide range but it’s just the way it is. Back 2 or 3 years ago it was more to the beginning of that range and we’re seeing it now - - two years is an outlier, admittedly, but it’s definitely skewing further in the range than what we saw a few years ago.

Anything else on the UAW Ford / Visceon relationship that you guys had a couple of years ago? Is there any need to expand any that type of relationship?

We’re hopeful that we can leverage the relationship we have with the UAW Ford. We opened, obviously, 3 more centers this quarter and have a total of 8 open now. But the hope there is that we’re gaining an experience in that environment that we can leverage to the other big 3 auto makers and have, for some time now, been in that process of trying to build those other relationships. We’ve invested in an operating team for this grouping of centers that we think gives us some real knowledge on how to operate in shift work environments and in unionized environments and really be able to hopefully leverage that to the other car makers if and when the time comes when they’re ready for it.

Mr. Lissy, I’ll turn the call back over to you for any additional or closing remarks.

Thanks to everybody on the call today. As usual, Elizabeth and I will be here in Watertown tonight and tomorrow if there are any further questions. Thanks again for joining us. We’ll talk to you soon.

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time and have a great day.