<PAGE>
 
                       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, 1998.

[ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 for the transition period from ______ to _____

                        Commission File Number 000-23273
                                              ----------


                             BRIGHT HORIZONS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


            DELAWARE                                      04-3390321
            --------                                      ----------
(State or other jurisdiction of                (IRS Employer Identification No.)
 incorporation or organization)

                        One Kendall Square, Building 200
                         Cambridge, Massachusetts 02139
                    (Address of principal executive offices)

                                 (617) 577-8020
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes [X] No [ ].

Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date: 5,604,654 shares of common
stock, $.01 par value, at April 30, 1998.
<PAGE>
 
                             BRIGHT HORIZONS, INC.
                                   FORM 10-Q
                                     INDEX

                                                                         Page
                                                                         Number
                                                                         ------
PART I.   FINANCIAL INFORMATION

ITEM 1.   Consolidated Financial Statements
 
         A.   Consolidated Balance Sheet at March 31, 1998      
              (Unaudited) and June 30, 1997                               3
 
         B.   Consolidated Statement of Income for the Three and
              Nine Months ended March 31, 1998 and 1997
              (Unaudited)                                                 4
 
         C.   Consolidated Statement of Cash Flows for the Nine
              Months ended March 31, 1998 and 1997 (Unaudited)            5
 
         D.   Consolidated Statement of Stockholders' Equity
              (Deficit) for the Nine Months ended March 31, 1998
              (Unaudited)                                                 6
 
         E.   Notes to Consolidated Financial Statements                  7
              (Unaudited)
 
ITEM 2.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations                   11
 
PART II. OTHER INFORMATION
 
ITEM 1.  Legal Proceedings                                               16
 
ITEM 2.  Changes in Securities                                           16
 
ITEM 3.  Defaults Upon Senior Securities                                 16
 
ITEM 4.  Submission of Matters to a Vote of Security                     16
         Holders
 
ITEM 5.  Other information                                               16
 
ITEM 6.  Exhibits and Reports on Form 8-K                                16
 
SIGNATURES                                                               16

                                      -2-
<PAGE>
 
                             BRIGHT HORIZONS, INC.
                           CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
                                                        MARCH 31, 1998     JUNE 30, 1997
                                                        --------------     -------------
ASSETS                                                   (Unaudited)
<S>                                                     <C>                <C>
Current assets:
  Cash and cash equivalents                              $15,414,076        $  6,059,349
  Accounts receivable, trade, net                          3,409,884           2,766,997   
  Prepaid and other current assets                         1,637,769           1,253,008
  Deferred income taxes                                    2,753,000           2,753,000
                                                         -----------        ------------
    Total current assets                                  23,214,729          12,832,354
 
Fixed assets, net                                         20,273,065          11,250,311
Deferred charges, net                                        366,308             315,227
Goodwill, net                                              4,136,847           1,321,611
Other intangible assets, net                                 850,401           1,121,649
Other assets                                                 648,365             386,476
Deferred income taxes                                      1,979,000           1,291,000
                                                         -----------        ------------
    Total assets                                         $51,468,715        $ 28,518,628
                                                         ===========        ============
 
LIABILITIES, MANDATORILY REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
 
Current liabilities:
  Current portion of long-term debt and
   obligations under capital leases                      $    80,172        $    834,481
  Accounts payable and accrued expenses                   10,858,749           7,282,694
  Income taxes payable                                     1,138,581              41,214
  Other current  liabilities                                 425,195             490,344
  Deferred revenue                                         5,942,458           4,096,336
                                                         -----------        ------------
    Total current liabilities                             18,445,155          12,745,069
 
Long-term debt and obligations under capital leases          681,948           3,440,132
Accrued rent                                               1,607,111           1,540,886
Other long-term liabilities                                1,349,821           1,005,880
Deferred revenue                                           2,619,344           1,241,666
                                                         -----------        ------------
                                                          24,703,379          19,973,633
                                                         -----------        ------------
Mandatorily redeemable convertible preferred stock, 
 $.01 par value; 1,860,330 shares authorized, issued

 and outstanding at June 30, 1997, at issuance
 cost plus accumulated dividends of $8,830,679                     -          19,704,960
                                                         -----------        ------------
Stockholders' equity (deficit):
 Common stock, $.01 par value, 15,000,000 shares
 authorized, 5,600,738 (unaudited) and 556,732 shares issued
 and outstanding at March 31, 1998 and June 30, 1997,
 respectively                                                 56,007               5,567
Additional paid-in capital                                36,511,956              65,986
Accumulated deficit                                       (9,802,627)        (11,231,518)
                                                         -----------        ------------
  Total stockholders' equity (deficit)                    26,765,336         (11,159,965)
                                                         -----------        ------------
    Total liabilities, mandatorily redeemable
    convertible preferred stock and
    stockholders' equity                                 $51,468,715        $ 28,518,628
                                                         ===========        ============
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

                                      -3-
<PAGE>
 
                             BRIGHT HORIZONS, INC.
                  CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
                                   Three months ended                 Nine months ended
                                        March 31,                         March 31,
                                   1998          1997                 1998          1997
                               ------------  ------------         ------------  ------------
<S>                            <C>           <C>                  <C>           <C>
Net revenues                   $27,619,840   $21,856,754          $77,359,888   $61,765,170
Cost of services                23,229,043    18,287,289           65,719,480    53,032,847
                               -----------   -----------          -----------   -----------
 
Gross profit                     4,390,797     3,569,465           11,640,408     8,732,323
 
Selling, general and
 administrative expenses         2,973,417     2,377,555            8,504,664     6,429,027
Amortization of non-compete
 agreements                         70,001       140,001              210,002       420,003
                               -----------   -----------          -----------   -----------
  Income from operations         1,347,379     1,051,909            2,925,742     1,883,293
 
Interest income                    130,862        16,136              253,909        56,189
Interest expense                   (22,662)      (98,511)            (167,468)     (281,900)
                               -----------   -----------          -----------   -----------
  Income before
   income taxes                  1,455,579       969,534            3,012,183     1,657,582
 
Income tax provision              (595,000)     (396,539)          (1,235,000)     (677,950)
                               -----------   -----------          -----------   -----------
Net income before
 preferred  dividends and
 accretion on redeemable
 common stock                      860,579       572,995            1,777,183       979,632
Preferred stock cumulative
 dividends and accretion on
 redeemable common stock                 -      (274,557)            (348,292)     (823,670)
                               -----------   -----------          -----------   -----------
Net income applicable
 to common stockholders        $   860,579   $   298,438          $ 1,428,891   $   155,962
                               ===========   ===========          ===========   ===========
Net income per share-basic           $0.15         $0.54                $0.45   $      0.28
                               ===========   ===========          ===========   ===========
Weighted average number of
 common shares                   5,564,000       556,000            3,196,000       554,000
                                ==========   ===========          ===========   ===========
Net income per share - diluted       $0.14         $0.13                $0.34   $      0.23
                                ==========   ===========          ===========   ===========
Weighted average number of
 common and common
 equivalent shares               6,119,000     4,316,000            5,293,000     4,314,000
                                ==========   ===========          ===========   ===========
 
</TABLE>

The accompanying notes are an integral part of the consolidated financial 
statements.

                                      -4-
<PAGE>
 
                             BRIGHT HORIZONS, INC.
                CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
                                                                         Nine months ended March 31,
                                                                      ---------------------------------
                                                                          1998                 1997
                                                                      ------------          -----------
<S>                                                                   <C>                   <C>
Cash flows from operating activities:
Net income                                                            $  1,777,183          $   979,632
 Adjustments to reconcile net income to net cash
 provided by operating activities, net of acquired amounts:
  Depreciation and amortization                                          1,818,778            1,593,420
  Loss on disposal of fixed assets                                          53,347                8,642
  Deferred income taxes                                                   (600,000)              96,972
 Changes in assets and liabilities:
  Accounts receivable, trade                                              (631,595)             313,151
  Prepaid expenses and other current assets                               (144,595)          (1,273,690)
  Accounts payable and accrued expenses                                  2,841,259            2,532,002
  Income taxes payable                                                   1,097,367               14,827
  Deferred revenue                                                       3,092,169            1,402,812
  Accrued rent                                                               9,580             (104,603)
  Other current and long-term liabilities                                  278,792               (1,689)
                                                                      ------------          -----------
   Total adjustments                                                     7,815,102            4,581,844
                                                                      ------------          -----------
    Net cash provided by operating activities                            9,592,285            5,561,476
                                                                      ------------          -----------
Cash flows from investing activities:
 Additions to fixed assets, net of acquired amounts                    (10,241,520)          (2,801,413)
 Proceeds from disposal of fixed assets                                    148,401               39,800
 Increase in deferred charges                                              (88,871)                   -
 Increase in other assets                                                 (194,129)            (254,258)
 Payment for acquisition                                                (1,671,948)                   -
                                                                      ------------          -----------
  Net cash used in investing activities                                (12,048,067)          (3,015,871)
                                                                      ------------          -----------
Cash flows from financing activities:                        
 Proceeds from issuance of common stock                                 15,874,408                5,713
 Payments on line of credit                                                      -             (500,000)
 Principal payments of  long-term debt and
  obligations under capital leases                                      (4,605,630)            (331,983)
 Borrowings of long-term debt                                              541,731               82,516
                                                                      ------------          -----------
  Net cash provided by (used in) financing activities                   11,810,509             (743,754)
                                                                      ------------          -----------
Net increase in cash and cash equivalents                                9,354,727            1,801,851
Cash and cash equivalents, beginning of period                           6,059,349            4,583,257
                                                                      ------------          -----------

Cash and cash equivalents, end of period                              $ 15,414,076          $ 6,385,108
                                                                      ============          ===========
</TABLE> 
The company purchased child care management companies during the nine months 
ended March 31, 1998. In connection with these acquisitions, liabilities 
were assumed as follows:
<TABLE> 
<S>                                                                   <C> 
Fair value of assets acquired                                         $  3,691,438
Cash paid                                                               (1,671,948)
Redeemable common stock issued                                            (568,750)
                                                                      ------------      
Liabilities assumed, including notes payable                          $  1,450,740
                                                                      ============
</TABLE> 

The accompanying notes are an integral part of the consolidated financial 
statements.

                                      -5-
<PAGE>
 
                             BRIGHT HORIZONS, INC.
      CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                 Common Stock        Additional                     Total
                             ---------------------    Paid-In     Accumulated    Stockholders' 
                              Shares    Par Value     Capital       Deficit     Equity (Deficit)
                             ---------  ----------  -----------  -------------  ----------------
<S>                          <C>        <C>         <C>          <C>            <C>
Balance, June 30, 1997         556,732  $    5,567  $    65,986  ($11,231,518)     ($11,159,965)
 
Exercise of Stock Options      181,237       1,813      102,384                         104,197
 
Exercise of Warrants           303,924       3,039      165,612                         168,651
 
Proceeds from Public
 Stock Offering              1,350,000      13,500   15,588,060                      15,601,560
 
Redemption of Preferred
 Stock for Common Stock      3,100,512      31,005   19,948,063                      19,979,068
 
Expiration of Redemption
 Feature on Redeemable
 Common Stock                  108,333       1,083      641,851                         642,934
 
Accretion of Mandatorily
 Redeemable Preferred
 Stock Dividends                                                     (274,108)         (274,108)
 
Accretion of Redeemable
 Common Stock                                                         (74,184)          (74,184)
 
Net Income                                                          1,777,183         1,777,183
                             ---------  ----------  -----------  -------------  ----------------
Balance, March 31, 1998      5,600,738  $   56,007  $36,511,956   ($9,802,627)    $  26,765,336
                             =========  ==========  ===========  =============  ================
 </TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

                                      -6-
<PAGE>
 
                             BRIGHT HORIZONS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.   The Company and Basis of Presentation
     -------------------------------------

     The consolidated balance sheet as of March 31, 1998, consolidated statement
of income for the three months and nine months ended March 31, 1998 and 1997,
the consolidated statements of changes in stockholders' equity (deficit) for the
nine months ended March 31, 1998 and the consolidated statement of cash flows
for the nine months ended March 31, 1998 and 1997 have been prepared by the
Company in accordance with the accounting policies described in its annual
financial statements for the year ended June 30, 1997, included in the Company's
Registration Statement on Form S-1, as amended (Registration Statement No. 333-
14981), and should be read in conjunction with the notes thereto.

     In the opinion of the management of Bright Horizons, Inc. (the "Company" or
"Bright Horizons"), the accompanying unaudited consolidated financial statements
contain all adjustments (consisting of only normal, recurring accruals) which
are necessary to present fairly its financial position as of March 31, 1998 and
the results of its operations and cash flows for the three month and nine month
periods ended March 31, 1998 and 1997. The results of operations for interim
periods are not necessarily indicative of the operating results to be expected
for the full year.

2.   Initial Public Offering of Common Stock
     ---------------------------------------

     On November 13, 1997, the Company completed an initial public offering of
2,970,000 shares of its common stock, of which 1,350,000 shares were issued and
sold by the Company and 1,620,000 of which were sold by the Selling
Shareholders, at an offering price of $13.00 per share (the "Offering"). On
November 24, 1997, Selling Shareholders sold an additional 445,500 shares to
satisfy the underwriters' over allotment option.  The Company received net
proceeds of approximately $15.6 million (after deducting underwriting discounts
and expenses). Approximately $4.0 million was used to repay outstanding debt.
The Company intends to use the balance of the net proceeds for working capital
and general corporate purposes, including the financing of potential
acquisitions and new centers currently under development.

     In connection with the Offering, all outstanding shares of the Company's
Series A Mandatorily Redeemable Convertible Preferred Stock, Series B
Mandatorily Redeemable Convertible Preferred Stock, and Series C Mandatorily
Redeemable Convertible Preferred Stock (collectively, the "Convertible Preferred
Stock") were converted into an aggregate of 3,100,512 shares of Common Stock,
and outstanding warrants which otherwise would have expired upon the closing of
the offering were converted into 303,924 shares of Common Stock.  The
mandatorily redeemable preferred stock was initially recorded at fair value.
From the date of issuance to the date of the mandatory redemption for common
stock, $9.1 million in accretion and dividends were recorded as charges to
retained earnings and as increases to the carrying value of preferred stock.
Upon the redemption of these securities for common stock, the carrying value of
the preferred stock was recorded as a credit to common stock and paid-in
capital.  Redeemable Common Stock issued in connection with an acquisition (see
Note 3) was also converted to Common Stock in connection with the Offering.

                                      -7-
<PAGE>
 
                             BRIGHT HORIZONS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED

2.   Initial Public Offering of Common Stock (Continued)
     ---------------------------------------            

     Also in anticipation of the Offering,  the Board of Directors authorized a
1-for-3 reverse stock split of the Company's common stock.  Accordingly, all
shares of common stock, common stock options and warrants, preferred stock
conversion ratios and per share amounts included  in the accompanying financial
statements  have been adjusted  to give retroactive effect to the reverse split
for all periods presented.

3.   Acquisition
     -----------

     On July 1, 1997, the Company acquired the business and substantially all
the assets and liabilities of Pacific Preschools, Inc. d.b.a. The Learning
Garden, a child care management company operating four child development centers
in Seattle, Washington, for approximately $1.6 million in cash and 108,333
shares of redeemable common stock. The redemption feature of these shares
terminated upon the completion of the Company's initial public offering (see
Note 2). The purchase price has been allocated based on the estimated fair value
of the assets and liabilities acquired at the date of acquisition resulting in
goodwill of approximately $2.7 million which is being amortized over 25 years.
The acquisition was accounted for by the purchase method and, accordingly, the
operating results of the acquired company have been included from the date of
acquisition.

4.   Net Income Per Share
     --------------------

     The Company adopted the provisions of Statement of Financial Accounting
Standard No. 128, "Earnings Per Share" (SFAS 128) for the quarter ended December
31, 1997.  SFAS 128 replaces Accounting Principles Board Opinion No. 15 (APB
15), "Earnings Per Share" and requires the presentation of basic earnings per
share (EPS) and diluted EPS.  Basic EPS is computed by dividing net income
applicable to common stockholders by the weighted-average number of common
shares outstanding for the period.  Diluted EPS reflects the potential dilution
of securities that could share in the earnings of an entity using the treasury
stock method.

     In February 1998, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 98 (SAB 98) which sets forth additional guidance
concerning the calculation of earnings per share prior to and immediately
following an initial public offering.  During the quarter ended March 31, 1998,
the Company adopted the provisions of SAB 98 which resulted in a restatement of
earnings per share for prior year and current year to date earnings per share
data. Earnings per share data presented for the three and nine months ended
March 31, 1998 and 1997 have been calculated in accordance with SFAS 128 and SAB
98.

 

                                      -8-
<PAGE>
 
                             BRIGHT HORIZONS, INC.
         Note 4.  Unaudited Pro Forma Net Income Per Share (continued)
         -------------------------------------------------------------
                    (in thousands except per share amounts)
<TABLE>
<CAPTION>
                                                                      March 31, 1998                               March 31, 1997
                                                         ----------------------------------------                -------------------

                            For the Three Months Ended For the Nine Months Ended For the Three Months Ended For the Nine Month Ended

                            -------------------------- ------------------------- -------------------------- ------------------------

                               Income         Shares      Income        Shares      Income        Shares      Income         Shares
                            ------------  ------------ ------------  ----------- -----------  ------------- -----------  -----------

<S>                         <C>      <C>  <C>          <C>       <C> <C>         <C>        <C> <C>           <C>     <C> <C>
Net Income                    $ 861                       $1,777                    $  573                    $  980
 
Preferred Stock Dividends     $   0                         (348)                   $ (275)                   $ (824)
 
BASIC EPS:
 
Income available to common
 stockholders                 $ 861          5,564        $1,429        3,196       $  298           556       $ 156         554
 
Net Income Per Share                  $0.15                      $0.45                       $0.54                   $0.28
 
EFFECT OF DILUTIVE SECURITIES:
 
Convertible Preferred Stock                      -                      1,542                      3,107                   3,107 


 
Employee Stock Options                         555                        555                        653                     653
 
DILUTED EPS:
 
Net Income before preferred
dividends and accretion on
redeemable stock              $ 861          6,119        $1,777        5,293       $ 573          4,316       $ 980       4,314
 
Net Income Per Share                  $0.14                      $0.34                       $0.13                   $0.23
 
</TABLE>

                                      -9-
<PAGE>
 
BRIGHT HORIZONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED (Continued)

5.   Debt
     ----

     In December 1997, the Company increased its unsecured line of credit with a
bank to $10,000,000.  This line of credit bears interest at either (i) the
bank's prime rate, or (ii) LIBOR plus a spread based on the Company's funded
debt levels, as defined.  The line of credit expires on October 31, 1999.  The
agreement requires the Company to comply with certain covenants which include,
among other things, the maintenance of specific financial ratios.


6.   Subsequent Events
     -----------------

     On April 26, 1998,  the Company and CorporateFamily Solutions, Inc., a
Tennessee corporation ("CorporateFamily"), entered into an Agreement and Plan of
Merger (the "Merger Agreement").  In accordance with the terms of the Merger
Agreement,  Bright Horizons and CorporateFamily will form Bright Horizons Family
Solutions, Inc. a Delaware corporation ("BHFS").  Each issued and outstanding
share of common stock of Bright Horizons will be converted into the right to
receive 1.15022 shares of common stock of BHFS ("BHFS Common Stock") and each
issued and outstanding share of common stock of CorporateFamily will be
converted into the right to receive one share of BHFS Common Stock.  Each
outstanding option of Bright Horizons and CorporateFamily will be converted into
an option to purchase shares of BHFS Common Stock at the same conversion ratios
referenced above. The Merger Agreement also provides for the payment of a break-
up fee equal to $4.0 million under certain circumstances. Concurrently with the
execution of the Merger Agreement, Bright Horizons and CorporateFamily entered
into reciprocal Stock Option Agreements, granting each other the right to
purchase ten percent (10%) of the issued and outstanding shares of Common Stock
of the other entity upon the occurrence of certain events.

     The Company expects to complete the merger, subject to regulatory review
and shareholder approval, by August 1998.  The transaction will be accounted for
as a pooling of interests and tax free reorganization.

                                      -10-
<PAGE>
 
                             BRIGHT HORIZONS, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

     When used in this discussion, the words "believes," "anticipated" and
similar expressions are intended to identify forward-looking statements.
Although the Company believes that the assumptions underlying the forward-
looking statements contained herein are reasonable, any of the assumptions could
be inaccurate and therefore, such statements are subject to certain risks and
uncertainties which could cause actual results in the future to differ
materially from those projected.  See "Risk Factors" included in the Prospectus
for the Company's initial public offering and incorporated herein by reference
for a description of a number of risks and uncertainties which could affect
actual results.  Readers 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 the result of any revisions to
these forward-looking statements which may be made to reflect certain events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

RECENT DEVELOPMENTS

     On April 26, 1998,  the Company and CorporateFamily Solutions, Inc., a
Tennessee corporation ("CorporateFamily"), entered into an Agreement and Plan of
Merger (the "Merger Agreement").  In accordance with the terms of the Merger
Agreement,  Bright Horizons and CorporateFamily will form Bright Horizons Family
Solutions, Inc. a Delaware corporation ("BHFS").  Each issued and outstanding
share of common stock of Bright Horizons will be converted into the right to
receive 1.15022 shares of common stock of BHFS ("BHFS Common Stock") and each
issued and outstanding share of common stock of CorporateFamily will be
converted into the right to receive one share of BHFS Common Stock.  Each
outstanding option of Bright Horizons and CorporateFamily will be converted into
an option to purchase shares of BHFS Common Stock at the same conversion ratios
referenced above. The Merger Agreement also provides for the payment of a break-
up fee equal to $4.0 million under certain circumstances. Concurrently with the
execution of the Merger Agreement, Bright Horizons and CorporateFamily entered
into reciprocal Stock Option Agreements, granting each other the right to
purchase ten percent (10%) of the issued and outstanding shares of Common Stock
of the other entity upon the occurrence of certain events.

     The Company expects to complete the merger, subject to regulatory review
and shareholder approval, by August 1998.  The transaction will be accounted for
as a pooling of interests and tax free reorganization.
 
OVERVIEW

     Bright Horizons is the nations's largest provider of early education and
family support services for the corporate market, operating 155 child
development centers at March 31, 1998. The Company serves more than 14,000
children and their families in 29 states and the District of Columbia. The
Company partners with corporate sponsors to provide early childhood education,
full and part-time child care, emergency backup care, before and after school
care for school age children, summer camps, vacation care, elementary school and
other family support services. Bright Horizons serves many of the nation's
leading corporations, including Allstate Insurance Company, Bayer
Pharmaceutical, Glaxo Wellcome, IBM (through the American Business
Collaborative), Merck & Co., Inc., Motorola and Time Warner Inc., and operates
multiple centers

                                      -11-
<PAGE>
 
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)


and services for 13 of its clients.  The Company's historical revenue growth has
been primarily due to the addition of new child development centers as well as
increased enrollment at existing centers.  The Company reports its operating
results on a June 30 fiscal year-end basis.

<TABLE>
<CAPTION>
                                           Third Quarter Ended    Nine Months Ended
                                          ---------------------  -------------------
                                                March 31,             March 31,
                                          ---------------------  -------------------
                                             1998       1997      1998       1997
                                          ----------  ---------  -------  ----------
<S>                                       <C>         <C>        <C>      <C>
Net revenues                               100.0%      100.0%     100.0%   100.0%
Cost of services                            84.1        83.7       84.9     85.9
                                          ----------  ---------  -------  ----------
     Gross profit                           15.9        16.3       15.1     14.1
Selling, general and administrative         10.8        10.9       11.0     10.4
Amortization of non-compete agreements        .2          .6         .3       .6
                                          ----------  ---------  -------  ----------
     Income from operations                  4.9         4.8        3.8      3.1
Interest income (expense), net                .4         (.4)        .1      (.4)
                                          ----------  ---------  -------  ----------
     Income before income taxes              5.3         4.4        3.9      2.7
Income tax provision                         2.2         1.8        1.6      1.1
                                          ----------  ---------  -------  ----------
     Net income                              3.1%        2.6%       2.3%     1.6%
                                          ==========  =========  =======  =========
 
</TABLE>


RESULTS OF OPERATIONS

Three and Nine Months Ended March 31, 1998 Compared to the Three and Nine Months
--------------------------------------------------------------------------------
Ended March 31, 1997
--------------------

     Net Revenues.  Net revenues increased $5.8 million, or 26.4%, to $27.6
million for the three months ended March 31, 1998 from $21.8 million for the
three months ended March 31, 1997. Net revenues increased $15.6 million, or
25.2%, to $77.4 million for the nine months ended March 31, 1998 from $61.8
million for the nine months ended March 31, 1997. The growth in revenues is
primarily attributable to the net addition of 21 child development centers since
March 31, 1997 and tuition increases at our existing centers of approximately 3%
to 4%.

     Gross Profits.  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 $821,000, or 23.0% to $4.4 million for the three months ended
March 31, 1998 from $3.6 million for the three months ended March 31, 1997. As a
percentage of net revenues gross profit decreased to 15.9% for the three months
ended March 31, 1998 compared to 16.3% for the same period in 1997. Gross profit
increased $2.9 million, or 33.3% to $11.6 million for the nine months ended
March 31, 1998 from

                                      -12-
<PAGE>
 
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

RESULTS OF OPERATIONS (Continued)

Three and Nine Months Ended March 31, 1998 Compared to the Three and Nine Months
--------------------------------------------------------------------------------
Ended March 31, 1997 (Continued)
--------------------            

$8.7 million for the nine months ended March 31, 1997. As a percentage of net
revenues gross profit increased to 15.1% for the nine months ended March 31,
1998 compared to 14.1% for the same period in 1997.

     The Company showed a modest decline in average gross profit margins for the
third quarter of fiscal 1998 compared to the third quarter of fiscal 1997 as a
result of higher depreciation associated with renovations at a number of our
older centers.  Overall, the Company achieved higher average gross profit
margins for the nine months ended March 31, 1998 compared to the nine months
ended March 31, 1997 due to the increased proportion of centers that have
reached mature operating levels as well as rapid enrollment at new centers.

     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 $596,000, or 25.1% to $3.0 million for the three months ended
March 31, 1998 from $2.4 million for the three months ended March 31, 1997. As a
percentage of net revenues, selling, general and administrative expenses
decreased to 10.8% for the three months ended March 31, 1998 from 10.9% for the
same 1997 period. Selling, general and administrative expenses increased $2.1
million, or 32.3% to $8.5 million for the nine months ended March 31, 1998 from
$6.4 million for the nine months ended March 31, 1997. As a percentage of net
revenues, selling, general and administrative expenses increased to 11.0% for
the nine months ended March 31, 1998 from 10.4% for the nine months ended March
31, 1997.

     The increase in selling and general administrative expenses during  the
first nine months of this fiscal year is primarily attributable to investments
made in additional regional management and sales personnel to support future
long term growth, the  incremental costs of operating as a publicly traded
company and, to a lesser extent,  incremental administrative costs associated
with the increased number of centers in operation.

     Amortization of Non-Compete Agreements.  Expenses associated with the
amortization of non-compete agreements decreased 50.0% to $70,000 for the three
months ended March 31, 1998 from $140,000 for the three months ended March 31,
1997, and to $210,000 for the nine months ended March 31, 1998 from $420,000 for
the nine months ended March 31, 1997. The decrease is due to the use of an
accelerated method of amortization. The Company will record the remaining
balance of $70,000 in amortization expense associated with these non-compete
agreements in the last quarter of fiscal 1998.

     Income from Operations. Income from operations increased 28.1% or $295,000,
to $1.3 million for the three months ended March 31, 1998 from $1.0 million for
the three months ended March 31, 1997. Excluding the amortization of non-compete
agreements, operating income would have totaled $1.4 million, an increase of
$225,000, or 18.9% for the three months ended March 31, 1998 from $1.2 for the
three months ended March 31, 1997. Income from operations increased 55.4% or
$1.0 million, to $2.9 million for the nine months ended March 31, 1998 from

                                      -13-
<PAGE>
 
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

RESULTS OF OPERATIONS (Continued)

Three and Nine Months Ended March 31, 1998 Compared to the Three and Nine Months
--------------------------------------------------------------------------------
Ended March 31, 1997 (Continued)
--------------------            

$1.9 million for the nine months ended March 31, 1997. Excluding the
amortization of non-compete agreements, operating income would have totaled $3.1
million, an increase of $832,000 or 36.1% for the nine months ended March 31,
1998 from $2.3 million for the nine months ended March 31, 1997.

     Interest Income (Expense), Net. Net interest income of $108,000 for the
three months ended March 31, 1998 increased $190,000 from $82,000 of net
interest expense for the three months ended March 31, 1997.  Net interest income
of $86,000 for the nine months ended March 31, 1998 increased $312,000 from
$226,000 of net interest expense for the nine months ended March 31, 1997. The
increase in interest income and decrease in interest expense is attributable to
the investment of the proceeds received from the initial public offering which
closed  on November 7, 1997 and the repayment of approximately $4.0 million of
debt with the proceeds from the stock offering.

     Income Taxes Benefit (Provision). The company's effective income tax rate
was approximately 41% for the three months and nine months ended March 31, 1998
and March 31, 1997.

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 source of liquidity has been proceeds from
the initial public offering and cash flow from operations, supplemented by
borrowing under its $10 million revolving line of credit with Fleet National
Bank.

     Cash provided from operations increased to $9.6 million for the nine months
ended March 31, 1998, from $5.6 million for the nine months ended March 31,
1997. This increase was principally due to the $3.1 million increase in deferred
revenue associated with (i) fees paid in advance during the nine months ended
March 31, 1998 for long term priority enrollment rights in certain centers and
(ii) for parent tuition paid in advance.  Such advances increased $1.4 million
in the same period of fiscal 1997.

     Cash used in investing activities increased to $12.0 million for the nine
months ended March 31, 1998, from $3.0 million for the nine months ended March
31, 1997. This increase relates to the cash payment of $1.7 million for the
acquisition of the four Learning Garden centers on July 1, 1997 and to $10.2
million of fixed asset additions and leasehold improvements in new and existing
centers.  Of this $10.2 million, approximately $4.1 million represents
expenditures for new centers and to refurbish existing centers. The remaining
balance of $6.1 million relates to the costs associated with the acquisition of
land and construction of four centers which the Company owns and operates, and
for which the related sponsors pay fees either in advance or during the contract
period for long-term priority enrollment rights in the center and for other
guarantees.

     Cash provided by (used in) financing activities increased to $11.8 million
for the nine months ended March 31, 1998, from $(744,000) for the nine months
ended March 31, 1997. During the nine months ended March 31, 1998, the Company
received $15.6 million in net

                                      -14-
<PAGE>
 
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)


proceeds from the Initial Public Offering, repaid debt and capital lease
obligations totaling $4.6 million and borrowed $542,000 to mortgage a center
previously acquired by the Company. During the nine months ended March 31, 1997
the Company repaid $500,000 under its bank line of credit.

     The Company believes that funds provided by operations, borrowings
available under the revolving line of credit and the net proceeds from the
Initial Public Offering will be adequate to meet planned operating and capital
expenditure needs for at least the next 18 months.  However, if the Company were
to make any significant acquisitions or make significant investments in the
purchase of facilities for new or existing centers for corporate sponsors, it
may be necessary for the Company to obtain additional debt or equity financing.

INITIAL PUBLIC OFFERING

     Pursuant to the Registration Statement on Form S-1, as amended,
(Registration No. 333-14981) which was declared effective November 6, 1997, the
Company completed an initial public offering of 2,970,000 shares of its common
stock, of which 1,350,000 shares were issued and sold by the Company and
1,620,000 were sold by the Selling Stockholders, at an offering price of $13.00
per share (the "Offering"). On November 24, 1997, Selling Shareholders sold an
additional 445,500 shares to satisfy the underwriters' overallotment option. The
Company received total proceeds of approximately $17.7 million and incurred
expenses of approximately $1.2 million for underwriting discounts and
approximately $720,000 in other expenses associated with the Offering. The
Company intends to use the balance of the net proceeds for working capital and
general corporate purposes, including the financing of potential acquisitions
and new centers currently under development. The managing underwriters for the
transaction were BT Alex. Brown and EVEREN Securities, Inc.

                                      -15-
<PAGE>
 
                             BRIGHT HORIZONS, INC.

PART II - OTHER INFORMATION

    ITEM 1.    Legal Proceedings: None

    ITEM 2.    Changes in Securities: None

    ITEM 3.    Defaults Upon Senior Securities: None

    ITEM 4.    Submission of Matters to a Vote of Security Holders: None

    ITEM 5.    Other information: None

    ITEM 6.    Exhibits and Reports on Form 8-K:

               a.  Exhibits:
                     Exhibit 27 (for SEC use only)

               b.  The Company filed a Current Report on Form 8-K on April 29,
                   1998 relating to the execution of the agreement and plan of
                   merger between Bright Horizons, Inc. and Corporate Family
                   Solutions, Inc. on April 26, 1998.


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 on this eighth day of May, 1998.

                              BRIGHT HORIZONS, INC.

                              By: /s/ Elizabeth J. Boland
                                ------------------------------------------------
                                  Elizabeth J. Boland
                                  Chief Financial Officer
                                  (Duly Authorized Officer and
                                  Principal Financial and Accounting Officer)

                                      -16-