Edleun's continuing strong growth highlighted by 16% increase in child care spaces

CALGARY, Nov. 18, 2012 /CNW/ - Edleun Group, Inc. ("Edleun" or the "Company") (TSX-V: EDU), the leading provider of quality early childhood education and care in Canada, announced today its operational and financial results for the three and nine months ended September 30, 2012.

Child care centre operational highlights during the third quarter of 2012 include (all dollar amounts expressed in thousands unless otherwise noted):

  • Opening of the Chestermere Learning Centre, the Company's first new greenfield development,  providing 247 licensed child spaces to this growing suburban Calgary community;

  • Substantial completion of the McKenzie Towne Learning Centre in Calgary, with official opening on October 15, 2012, representing the Company's second greenfield development - both of the Chestermere and McKenzie Towne centres were completed under budget;

  • Operations commenced at a new child care centre in Kelowna, British Columbia, following complete retrofit and re-purposing of a strategically located building, creating 140 licensed child care spaces;

  • Operations commenced at two centres located in Markham and Ajax, Ontario and a child care centre in Airdrie, Alberta, adding a total of 194 licensed spaces in the Greater Toronto Area and 51 spaces in the Calgary Region;

  • An agreement to acquire four child care centres in Ottawa, Ontario for $2.3 million, comprising a total of 195 licensed child care spaces. All of the centres are located in leased premises under long term leases at market rental rates. The acquisition of three of the four centres closed subsequent to quarter-end with the fourth centre expected to close by April 30, 2013;

  • Receipt of an Early Childhood Environment Rating Scale - Revised ("ECERS-R") quality assurance audit spanning 17 individual child care centres in Alberta that benefitted from the implementation of Edleun programming following acquisition. This process, conducted by a qualified independent third party, utilizing the internationally recognized ECERS-R standard, is a significant validation that Edleun's quality improvement program is on track and that the Company is providing a high quality early learning environment.  Edleun's centres achieved a weighted average score of 81%, which compares very favourably to both the total weighted average of all Alberta commercial child care centres of 66% as well as the total weighted average for all commercial and not-for-profit centres of 73%;

  • Ms. Mary Ann Curran was appointed the Chief Executive Officer in July; and

  • Mr. Dean Michaels was appointed Senior Vice President, Acquisitions and Development in August.

Financial highlights for the three months ended September 30, 2012:

  • Reported an 81% increase in revenue compared to the same period in 2011 (September 30, 2012 - $8.8 million versus September 30, 2011 - $4.9 million) due to the increased number of child care spaces in the Company's expanding portfolio;

  • Overall portfolio occupancy was 74.3% during the summer season, reflecting several factors that include:
    • Lower occupancy rates, generally, during the summer months;
    • Tendency for lower occupancy levels during the summer months in Montessori centres as these centres generally operate for ten months of the year; and
    • New centre openings during the summer in Alberta and British Columbia at initial occupancy levels ranging from 40 to 60%, these levels being in line with management's expectation for seasonal levels of enrollment.
  • Generated higher same-centre occupancy levels of 6.5 percentage points from 78.6% in the third quarter of 2011 to 85.1% in the third quarter of 2012;

  • Increased same-centre revenue by 8% though related centre margin as a percentage of revenue fell by (1.5)% compared to the third quarter period a year earlier;

  • Centre margin as a percentage of revenue was 24% compared to 29% a year earlier, reflecting the impact of low summer occupancy levels and a short term temporary impact in the quarter from pre-opening operating costs for new centre openings prior to generating any revenue;

  • Achieved corporate Adjusted EBITDA of negative $60 compared to negative $294 in the third quarter of 2011; and

  • Reported a net loss of $1.53 million ($0.01 per share) compared with a net loss of $957 ($0.01 per share) a year earlier.

"In the third quarter alone, we added or completed 632 new child care spaces, a 16% increase," said Ms. Mary Ann Curran, CEO of Edleun. "We are pleased to report that the Company's growth continues and we look forward to future quarters when the benefits of these additions, of which 634 spaces are in the "fill up" stage, reflect in positive cash flow.  As well, we continue to focus on acquiring centres and new greenfield projects in Alberta and other markets that meet our operational metrics. Of additional importance, we are pleased that we have been able to create and deliver a significant amount of new high quality state of the art licensed child care spaces to three underserved Canadian communities."

Financial Review

($000's except where otherwise noted and per share amounts)

Three and nine months ended September 30, 2012

Selected Quarterly Information

                                 
  Q3
2012
Q2
2012
Q1
2012
Q4
2011
Q3
2011
Q2
2011
Q1
2011
Q4
2010
Revenue $ 8,818 $ 8,984 $ 8,030 $ 5,840 $ 4,877 $ 3,958 $ 3,502 $ 3,124
Centre margin   2,122   2,893   2,537   1,841   1,406   1,286   1,194   1,005
Centre margin %   24   32   31   31   29   32   34   32
Adjusted EBITDA   (60)   800   735   192   (294)   137   144   (59)
FFO   (271)   563   604   119   (314)   (22)   71   (193)
AFFO   (386)   750   789   211   (329)   100   136   (61)
Net loss(1)   (1,529)   (355)   (731)   (811)   (957)   (541)   (249)   (678)
Per share amounts:                                
  Net loss   (0.013)   (0.003)   (0.006)   (0.007)   (0.008)   (0.006)   (0.003)   (0.007)
  FFO   (0.002)   0.005   0.005   0.001   (0.003)   (0.002)   0.001   (0.002)
  AFFO   (0.003)   0.006   0.007   0.002   (0.003)   0.001   0.001   (0.008)
Cash   2,194   3,961   3,803   1,911   18,026   24,270   7,035   8,662
Available under credit facility   14,090   18,394   18,626   22,100   24,800   24,800   24,800   -
# of centres in operation(2)   46   45   40   38   29   22   20   20
# of centres under development or redevelopment(2)   3   4   6   5   3   2   1   -
Total # of centres   49   49   46   43   32   24   21   20
Licensed spaces in operation(2)   4,615   4,368   3,908   3,660   2,539   2,038   1,833   1,815
Spaces under development or redevelopment(2)   559   806   1,031   803   569   494   247   -
Total spaces   5,174   5,174   4,939   4,463   3,108   2,532   2,080   1,815
Notes:
1. 2010 amounts have been restated from Canadian GAAP to IFRS.
2. As at the date of this report, the Company has 50 centres in operation representing 5,010 licensed spaces and three centres for future development or redevelopment representing 517 licensed spaces.

Revenues for the third quarter of 2012 were $3,941 or 81% higher than revenues for the same period in 2011 primarily due to an increase in the number of centres and spaces, with the number of spaces increasing 82% year over year to 4,615.   Same centre revenues for stabilized properties (see Non-IFRS Performance Measures below), which during the period include Alberta centres, increased $316 (8%).

Revenues for the nine months ended September 30, 2012 were $25,832 and increased $13,495 year over year.  The year over year increase is attributed to acquisitions and newly opened development centres. Portfolio centre margin for the nine months ended September 30, 2012 was $3,667 or 94% higher than the same period of 2011.  Portfolio centre margin as a percentage of revenue was 29.2% in the period, down 2.3 percentage points from 2011.  Reduced levels of centre margin are primarily attributed to the impact of lower occupancy and revenue in the Company's British Columbia centres, the 10 month school year in the Company's Montessori schools which were added during the year, low initial occupancy in centres recently acquired, and new development centres recently opened during the summer months.

Adjusted EBITDA (see Non-IFRS Performance Measures below for Adjusted EBITDA definition) for the third quarter of 2012 was $(60) compared to $(294) in the third quarter of 2011. The year over year improvement in Adjusted EBITDA largely reflected the growth in the number of operating centres and child care spaces. However, the Company's increased presence in Montessori centres which operate for 10 months of the year from September to June exacerbated the seasonal tendency for the summer months to contribute to a relatively weak third quarter, and this, in part, explains the decline in EBITDA on a sequential basis from the second quarter of 2012.   The Company's quarterly results reflect stronger Montessori centre margins in the first, second and fourth quarters.

The Company has invested approximately $14.5 million in child care centre acquisitions and new developments during the nine months ended September 30, 2012.   Included in these investing activities are three new child care centre developments representing 634 available child care spaces that opened during the summer months or shortly thereafter.  While the pace of enrollment exceeds the Company's pro forma ramp-up assumptions, as these centres only recently opened (and opened in the typically slower summer period), the initial occupancies are well below capacity. Initially, the three centres operated at a breakeven level.  Using the Company's computed average monthly fee of $857 and average centre margin of 30%, as indicated in the Company's financial statements, approximately $1.9 million of incremental pro forma Adjusted EBITDA would occur annually were these centres operated at 95% capacity.

Funds From Operations ("FFO") (see Non-IFRS Performance Measures below for FFO and Adjusted Funds From Operations ("AFFO") definitions) for the third quarter of 2012 was $(271) compared to $(314) for the third quarter of 2011, due primarily to portfolio growth, offset by higher finance and stock based compensation expense. FFO per share for the third quarter of 2012 was $(0.002), compared to $(0.003) for the third quarter of 2011.

AFFO for the third quarter of 2012 was $(386) compared to $(329) in the third quarter of 2011. As noted in the Adjusted EBITDA discussion above, the inclusion of Montessori centres in the portfolio mix gives effect to more pronounced seasonality. As well, as higher year over year maintenance capital expenditures with particular emphasis on child interfacing materials were undertaken, AFFO per share for the third quarter of 2012 was $(0.003) compared to $(0.003) for the third quarter of 2011.

                         
Adjusted EBITDA Q3 2012 Q2 2012 Q1 2012 Q4 2011 Q3 2011 Q2 2011
                         
Centre margin for the period $ 2,122 $ 2,893 $ 2,537 $ 1,841 $ 1,406 $ 1,286
General and administrative expense   (1,501)   (1,495)   (1,344)   (1,212)   (1,432)   (988)
Taxes, other than income taxes   (47)   (59)   (14)   (88)   (1)   (1)
Operating lease expense   (634)   (539)   (444)   (349)   (267)   (160)
Adjusted EBITDA $ (60) $ 800 $ 735 $ 192 $ (294) $ 137
FFO and AFFO Q3 2012 Q2 2012 Q1 2012 Q4 2011 Q3 2011 Q2 2011
                         
Net loss for the period $ (1,529) $ (355) $ (731) $ (810) $ (957) $ (541)
Depreciation and certain other non cash items   761   478   459   324   313   238
Acquisition costs   497   440   876   605   330   281
FFO $ (271) $ 563 $ 604 $ 119 $ (314) $ (22)
Stock based compensation   170   237   196   104   69   166
Maintenance capital expenditure   (285)   (50)   (11)   (12)   (84)   (44)
AFFO $ (386) $ 750 $ 789 $ 211 $ (329) $ 100

Net loss for the three months ended September 30, 2012 was $1,529 ($0.01 per share) compared to $957 ($0.01 per share) in the same period a year earlier.  The wider loss in spite of a greater number of child care spaces year over year is due to the reasons cited in the Adjusted EBITDA discussion.

In determining per share amounts the Company calculated the weighted average number of shares outstanding in accordance with the guidelines established by IFRS 3 Business Combinations and IAS 33 Earnings per Share.  The basic and diluted weighted average number of shares outstanding for the three and nine months ended September 30, 2012 was 121,629,519 and 119,838,602, respectively (three and nine months ended September 30, 2011 - 116,005,319 and 104,919,792, respectively).  Basic and diluted net loss per share for the three and nine months ended September 30, 2012 was $0.013 and $0.022, respectively (three and nine months ended September 30, 2011 - net loss of $0.008 and $0.017, respectively).

The Company continues to maintain a solid financial position. At September 30, 2012, the Company had working capital of $1,933. This excluded the $6,874 of construction facility debt which is classified as a current liability in accordance with IFRS due to the demand nature of the facility, but which the Company does not expect to become repayable in the next 12 months because of permanent financing arrangements that are in place.  The Company has a five year $25 million credit facility agreement with a Canadian bank, under which the Company has cash advances of $10,910 as at September 30, 2012 (December 31, 2011 - $2,500).  At September 30, 2012 the Company had $16.3 million of available capital through funds on hand and its bank credit facility for its operating, acquisition and development programs.

Non IFRS Performance Measures

The Company uses "centre margin" as a performance indicator of child care centre operating results.  Centre margin does not have a standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures by other entities.  Centre margin is determined by deducting centre expenses from revenue. Centre expenses exclude net rents due under leases for leasehold properties and mortgage interest, if any, on those properties owned by the Company.

The Company uses "same centre" results to measure the performance of centres that were operating in the Company's portfolio for the entirety of the current period and comparative three month reporting period in the preceding fiscal year and have been classified as "stabilized". Acquired centres in Alberta are deemed to be stabilized 12 months following their acquisition.  Acquired centres in Ontario and British Columbia and new development centres in all provinces are deemed to be stabilized after 24 months.

Adjusted EBITDA is calculated by deducting from centre margin general and administrative expenses, operating lease expense and taxes other than income taxes. FFO is calculated by adjusting the net loss to add back acquisition costs expensed as incurred, depreciation and certain other non cash items.

The Company's business, which is oriented toward the acquisition and development of child care centres and includes the ownership of a significant portfolio of real estate, reports net income that includes deduction for acquisition costs and non-cash charges such as depreciation and stock based compensation expense. Reflecting these factors and consistent with the practice of the Canadian real estate industry, the Company focuses on FFO and AFFO as key financial metrics to measure and compare operating performance. FFO and AFFO do not have standardized meanings prescribed by IFRS.  The Company's method of calculating FFO and AFFO may be different from other entities and, accordingly, may not be comparable to such other entities. FFO and AFFO: (i) do not represent cash flow from operating activities as defined by IFRS; (ii) are not indicative of cash available to fund all liquidity requirements, including capital for growth; and (iii) are not to be considered as alternatives to IFRS based net income for the purpose of evaluating operating performance.

Net income / loss is impacted by, among other items, accounting standards that require child care centre acquisition and transaction costs to be expensed as incurred.  As the Company executes its consolidation and development strategy in the Canadian child care market, it will routinely incur such expenses which will negatively impact the Company's reported net income / loss, but not FFO and AFFO.

Conference Call

Edleun Group Inc. will hold a conference call Monday, November 19, 2012 at 10:00 am ET (8:00 am MT), to discuss the results of the third quarter of fiscal 2012. The Company's full Financial Statements and Management's Discussion and Analysis will be available on SEDAR at www.sedar.com.

To access the conference call by telephone, dial (647) 427-7450 or 1-888-231-8191. Please connect approximately 10 minutes prior to the beginning of the call. The conference call will be archived for replay until Monday, November 26, 2012, at midnight. To access the archived conference call, dial (416) 849-0833 or 1-855-859-2056 and enter the reservation number 70479650 followed by the number sign.

A live audio webcast of the conference call will be available at: http://www.newswire.ca/en/webcast/detail/1068571/1162255. Please connect at least 10 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above website for 90 days.

About Edleun Group Inc.

Edleun is the leading provider of high-quality, community-based Early Learning & Care child care centres in Canada offering early education and child care services to children ages six weeks to 13 years. Edleun is committed to preparing children for the next step in their education and life, offering families and employers access to and choice of quality early childhood education programs, as well as enhanced opportunities and career advancement for Early Childhood Educators.

Publicly traded on the Toronto Stock Exchange (TSX-V:EDU), the Company's objectives include the acquisition and subsequent improvement of existing child care centres and developing new state-of-the-art Early Learning and Care Centres in underserved Canadian communities.

The Company currently has a total of 50 operating centres in its portfolio and three in various stages of development or redevelopment representing approximately 5,500 licensed child care spaces.

Forward-Looking Statements

Certain statements in this Release which are not historical facts may constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Any statements related to Edleun's projected revenues, earnings, growth rates, revenue mix, staffing and resources, and product plans are forward looking statements as are any statements relating to future events, conditions or circumstances. The use of terms such as "believes", "anticipated", "expected", "projected", "targeting", "estimate", "intend" and similar terms are intended to assist in identification of these forward-looking statements. Readers are cautioned not to place undue reliance upon any such forward-looking statements. Such forward-looking statements are not promises or guarantees of future performance and involve both known and unknown risks and uncertainties that may cause the actual results, performance, achievements or developments of Edleun to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions. Except as required by law, Edleun does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change.

The Company undertakes no obligation, except as required by law, to update publicly or otherwise any forward-looking information, whether as a result of new information, future events or otherwise, or the above list of factors affecting this information. Many factors could cause the actual results of Edleun to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Edleun Group, Inc.    
Condensed Consolidated Statements of Financial Position    
(Unaudited)    
           
           
(CDN $000's)   September 30, 2012 December 31, 2011
Assets          
           
Non-current assets          
  Property and equipment   $ 45,984 $ 33,434
  Goodwill     25,985   22,940
  Definite life intangible assets     605   340
      72,574   56,714
Current assets          
  Cash and cash equivalents     2,194   1,911
  Accounts receivable     2,599   1,589
  Prepaid and other expenses     4,122   3,606
  Short term investments     39   39
      8,954   7,145
           
Total Assets   $ 81,528 $ 63,859
           
           
Liabilities          
           
Non-current liabilities          
  Long term debt and financing leases   $ 4,010 $ 2,151
  Deferred tax liability     42   42
  Convertible debentures - liability component     4,420   -
      8,472   2,193
Current liabilities          
  Accounts payable and accrued liabilities     4,847   2,877
  Deferred revenue     1,569   399
  Current portion of debt and financing leases     7,479   109
      13,895   3,385
           
Total Liabilities     22,367   5,578
           
Shareholders' Equity          
  Share capital     65,987   62,931
  Convertible debentures - equity component     342   -
  Equity settled share based compensation     1,427   1,330
  Accumulated deficit     (8,595)   (5,980)
Total Shareholders' Equity     59,161   58,281
           
Total Liabilities and Shareholders' Equity   $ 81,528 $ 63,859

 

Edleun Group, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
Three and nine months ended September 30, 2012 and 2011
(Unaudited)
                   
                   
      Three months
ended September 30,
  Nine months
ended September 30,
    2012 2011 2012 2011
           
Revenue   $ 8,818 $ 4,877 $ 25,832 $ 12,337
                   
Centre expenses                  
  Salaries, wages and benefits     4,776   2,518   13,293   6,225
  Other operating expenses     1,920   953   4,987   2,227
Centre margin     2,122   1,406   7,552   3,885
                   
Lease     634   267   1,617   557
Finance     185   -   313   -
General and administrative     1,501   1,478   4,340   3,452
Taxes, other than income taxes     47   1   120   2
Acquisition costs     497   330   1,813   725
Stock-based compensation     170   69   603   331
Depreciation and amortization     621   313   1,424   756
      3,655   2,458   10,230   5,823
                   
Loss before other income     (1,533)   (1,052)   (2,678)   (1,938)
                   
Other income     4   95   63   191
Net Loss and Total Comprehensive Loss   $ (1,529) $ (957) $ (2,615) $ (1,747)
                   
Net loss per share                  
  Basic and diluted   $      (0.013) $       (0.008) $    (0.022) $       (0.017)
Weighted average number of common shares                  
  Basic and diluted     121,629,519   116,005,319   119,838,602       104,919,792

 

Edleun Group, Inc.        
Condensed Consolidated Statements of Changes in Shareholders' Equity        
Nine months ended September 30, 2012 and 2011        
(Unaudited)        
                     
                     
(CDN 000's)   Share Capital Convertible
Debentures -
Equity
Component
Equity Settled
Share Based
Compensation
Accumulated
Deficit
Shareholders'
Equity
                     
Balance at January 1, 2011 $ 38,463 $ - $ 1,089 $ (3,423) $ 36,129
                     
Share issuance   25,003   -   -   -   25,003
Share issuance costs   (1,494)   -   -   -   (1,494)
Stock-based compensation   -   -   331   -   331
Warrants exercised   232   -   (36)   -   196
Stock options exercised   382   -   (75)   -   307
Net loss and comprehensive loss   -   -   -   (1,747)   (1,747)
                       
Balance at  September 30, 2011 $ 62,586 $ - $ 1,309 $ (5,170) $ 58,725
                     
                     
Balance at January 1, 2012 $ 62,931 $ - $ 1,330 $ (5,980) $ 58,281
                       
Stock-based compensation     -   -   603   -   603
Warrants exercised     2,662   -   (412)   -   2,250
Options exercised     394   -   (94)   -   300
Issue of convertible debentures     -   342   -   -   342
Net loss and comprehensive loss     -   -   -   (2,615)   (2,615)
                       
Balance at  September 30, 2012 $ 65,987 $ 342 $ 1,427 $ (8,595) $ 59,161
                     

 

Edleun Group, Inc.      
Condensed Consolidated Statements of Operations and Comprehensive Loss      
Three and nine months ended September 30, 2012 and 2011      
(Unaudited)      
                     
                   
    Three months ended
September 30,
Nine months ended
September 30,
(CDN $000's)   2012 2011 2012 2011
           
Cash provided by (used in):          
           
Operating Activities:          
Net loss   $ (1,529) $ (957) $ (2,615) $ (1,747)
Items not affecting cash:                  
  Depreciation and amortization     635   313   1,472   756
  Amortization of deferred financing costs     38   15   68   44
  Stock-based compensation     170   69   603   331
Change in non-cash working capital     (949)   407   (174)   (1,674)
      (1,635)   (153)   (646)   (2,290)
                   
Investing Activities                  
Acquisitions     -   (1,125)   (2,173)   (6,012)
Property and equipment     (4,385)   (4,955)   (12,333)   (6,462)
Restricted cash     -   -   -   116
      (4,385)   (6,080)   (14,506)   (12,358)
                   
Financing Activities                  
Proceeds of share issue     -   -   -   25,003
Share issuance costs     -   (11)   -   (1,494)
Exercise of warrants     -   -   2,250   196
Exercise of options     -   -   300   307
Loan proceeds     4,370   -   8,589   -
Loan repayments     (67)   -   (180)   -
Proceeds of convertible debentures issue     -   -   5,000   -
Convertible debenture issuance costs     -   -   (380)   -
Finance lease repayments     (50)   -   (144)   -
      4,253   (11)   15,435   24,012
                   
Change in Cash and Cash Equivalents     (1,767)   (6,244)   283   9,364
Cash and cash equivalents, beginning of period     3,961   24,270   1,911   8,662
Cash and cash equivalents, end of period   $ 2,194 $ 18,026 $ 2,194 $ 18,026
                   
                   
Cash and cash equivalents comprised of:                  
Cash           $ 2,194 $ 18,026
Cash equivalents             -   -
            $ 2,194 $ 18,026

SOURCE: Edleun Group, Inc.

For further information:

Dale Kearns, President of Edleun Group, Inc. at (403) 705-0362 ext. 406, or Nick Hurst of the Equicom Group, Inc. at (403) 218-2835.