/R E P E A T -- EDLEUN ANNOUNCES FOURTH QUARTER AND 2010 RESULTS - ACQUISITION AND ORGANIC GROWTH ACCOMPLISHMENTS/

CALGARY, April 8 /CNW/ - Edleun Group, Inc. ("Edleun" or the "Company") (TSX-V: EDU), the leading consolidator and developer of child care facilities across Canada, today announced its operational and  financial results for the three month and one year periods ended December 31, 2010. All amounts are presented in Canadian dollars unless otherwise specified.

Highlights for the quarter and year ended December 31, 2010 include:

  • As part of a Qualifying Transaction, the Company raised gross proceeds of $40.7 million through the sale of subscription receipts at $0.50 each, which were converted to common shares;

  • The Company initially acquired 11 child care centres (including two real estate properties) in Alberta for $8.8 million; consideration included $7.8 million in cash and $1 million in common stock;

  • Of these 11 centres noted previously, Edleun purchased six real estate properties used in their operation for $5.7 million in cash;

  • The Company acquired six additional child care centres in Alberta for cash consideration of $7.1 million;

  • Edleun announced its nutritional certification program in conjunction with a leading dietician;

  • The Company acquired three more centres in Calgary for cash consideration of $2.2 million;

  • Subsequent to the acquisition of these centres, the Company completed over $3.7 million in renovations, upgrades and expansions which began to positively impact occupancies and increase revenues;

  • On a sequential quarter basis, fourth quarter revenues were 37% higher, or $0.8 million, than revenue for the three months ended September 30, 2010 due primarily to acquisitions brought on stream in each of the third and fourth quarters, and organic growth;

  • Overall occupancy rate of 78% at December 31, 2010, partially reflecting the following highlights:

    • The 11 centres acquired in the Company's Initial Transaction in May 2010 showed an increase in occupancy rate of 13 percent to date;

    • Three centres acquired in October 2010 at 53% occupancy rate have achieved an  increase in occupancy rate of 12 percent to date, despite the fact that the planned renovation program, a key element of the acquisition plan to increase occupancy in these centres, had not commenced due to the early onset of winter weather;

  • The Company identified and negotiated  a significant pipeline of additional acquisitions and new development opportunities to be executed upon in 2011 and thereafter; and

  • The Company concluded the fiscal year with 1,815 child care spaces.

Highlights subsequent to December 31, 2010 include:

  • The Company announced that it entered into a five year $25 million credit facility agreement with a Canadian bank to fund its growth strategy. This credit facility will enable funding of additional acquisitions as well as provide construction and longer term take-out financing for the development of new child care centres;

  • Edleun entered into a definitive agreement to purchase land for $775,000 to construct the Chestermere Learning Centre located in a Calgary suburb east of the city. This is Edleun's first "state of the art", newly constructed child care facility, which will add 247 licensed child care spaces to its portfolio. The Company anticipates that this centre will serve as a template for its planned development of additional child care centres bringing a new and higher quality option to families in underserved communities in Canada;

  • Edleun announced it entered into definitive agreements to acquire two buildings in Calgary for conversion into child care centres for a total purchase price of $1.5 million, which will add new 170 licensed child care spaces to its portfolio;

  • The Company announced it entered into definitive agreements to acquire five existing child care centres and one redevelopment property in the province of British Columbia, for a total purchase price of $5.1 million adding 533 licensed child care spaces to its portfolio, and commencing its expansion into a new region of Canada; and

  • Edleun announced it entered into a definitive agreement to acquire a Vancouver area operating child care centre business for $300,000 adding 90 licensed child care spaces to its portfolio.

"In 2010, we acquired our initial centres and built a solid foundation on which we can pursue future growth," said Mr. Leslie Wulf, Chief Executive Officer of Edleun. "In the first part of 2011 we continued to execute on our growth strategy, acquiring both existing child care businesses as well as property for new "state of the art" developments and redevelopments, which will introduce new licensed spaces and bring high quality child care options to key underserved markets."

Financial Review

Three months ended December 31, 2010

For the three months ended December 31, 2010 ("fourth quarter") the Company reported revenue of $3.1 million (December 31, 2009 - $nil), centre margin of $1 million (December 31, 2009 - $nil) and a net loss of $0.6 million (December 31, 2009 - $75,000). On a sequential quarter basis, fourth quarter revenues were 37% higher, or $0.8 million, than revenue for the three months ended September 30, 2010 ("third quarter") due primarily to acquisitions brought on stream in each of the third and fourth quarters, and organic growth.

Portfolio centre margin as a percentage of revenue for the fourth quarter was 32% compared to 27% in the third quarter.  This net increase in portfolio centre margin was achieved through higher occupancy levels on a same-centre basis, the acquisition of three low-occupancy (53% centres in October), and the effect of in-process renovations and traditional summer seasonality during the third quarter.  For the summer 2011 season, the Company anticipates that a broader introduction of summer camp programs will partially mitigate the financial impact of traditional summer seasonality at its child care centres.

The Company's business, which includes the ownership of a significant real estate portfolio, reflects expenses that include non-cash charges such as depreciation, stock based compensation expense, and property acquisition costs. Reflecting these factors, and consistent with the practice of the Canadian real estate industry, the Company focuses on Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO") as key financial metrics to measure and compare operating performance. FFO and AFFO are non-GAAP supplemental financial measures and a complete reconciliation containing adjustments from GAAP net income to FFO and AFFO is included in this news release. See the section below titled "Non-GAAP Supplemental Financial Measures" for more information.

AFFO for the fourth quarter, 2010 was negative $60,361, a significant improvement compared to negative $431,870 in the third quarter. This result had been  anticipated, given the Company began its operations with 11 child care centres, progressively added centres throughout 2010, and has yet to reach a level of portfolio centre margin sufficient to cover General and Administrative Expenses ("G&A") associated with a scalable public company.

AFFO is expected to improve in subsequent quarters in 2011 as the Company deploys its cash on hand and funds available through its $25 million credit facility towards the acquisition and development of additional centres. As well, full quarter results from acquisitions that occurred late in the 2010 year and benefits from the Company's renovation and remodelling capital expenditures are expected to add to AFFO.

Basic and diluted loss per share for the fourth quarter was $(0.007) based on 92,227,801 weighted average number of shares outstanding.

Investing activities for the fourth quarter totalled $4.2 million, which included $2.2 million for the acquisition of three centres and $1.9 million for renovations on acquired centres.   Typically, acquisitions undergo renovation, remodelling and/or re-branding programs to upgrade acquired facilities to the Company's standards.  The Company believes that, once renovated, its physical premises clearly differentiate its centres from other centres that may present competition and when combined with its education programs will provide long-term improvements to both its occupancy and centre-level financial performance.  Renovation costs increased over the amount originally anticipated due to (i) establishing a program to further promote the Company's brand through higher levels of expenditure on playgrounds and premises; (ii) acceleration of certain maintenance capital expenditures, the result of which will be lower costs in future periods; (iii) certain necessary environmental, air quality expenditures; and (iv) expenditures related to expansion of its licensed capacity at several of its centres. These capital expenditures have begun to significantly improve the occupancies at these centres, and increase the Company's revenue and profitability (See Management Discussion and Analysis)

Year ended December 31, 2010

The Company commenced operations following a series of transactions completed on May 14, 2010.

For the year ended December 31, 2010 the Company reported revenue of $6.3 million (December 31, 2009 - $ nil), centre margin of $1.9 million (December 31, 2009 - $nil) and net loss of $3.2 million (December 31, 2009 - $75,000). AFFO for the year ended December 31, 2010 was negative $748,374.

Operations for the year ended December 31, 2010 were impacted by, among other items, start up costs and the adoption of new accounting guidelines as set out in CICA Handbook Section 1582, pursuant to which property pre-acquisition and transaction costs amounting to $790,327 were 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 serve to negatively impact the Company's reported net income / loss during the periods incurred.

G&A expenditures of $2.9 million were incurred for corporate level activities and include executive compensation, centre development and operations management and costs ancillary to the public listing of the Company's shares. G&A for the year ended December 31, 2010 was negatively impacted by relocation expense, set up costs for the corporate office and costs incurred in connection with, and prior to, the closing of the Qualifying Transaction.

Stock-based compensation expense includes $300,000 for finder's fees to parties associated with the Company's predecessor entity, San Anton Capital Inc. in connection with the Qualifying Transaction and is non-recurring in nature.  Stock-based compensation expense related to the fair value of stock options granted to management and board members following the Qualifying Transaction was $528,326 for the year ended December 31, 2010.

The basic and diluted weighted average number of shares outstanding for the year ended December 31, 2010 was 60,430,314.  Basic and diluted loss per share for year ended December 31, 2010 was $(0.054).

As at December 31, 2010, the Company had working capital of $8.3 million and cash and cash equivalents of $ 8.7 million.  On February 16, 2011 the Company announced it completed a five year $25 million credit facility agreement with a Canadian bank.

Edleun believes that it will create long-term value for its stakeholders through management's focus on:

  • Brand and Quality
    • Delivering new standards of child care in Canada, including:
      • Standardized high quality curriculums
      • Nutritious meal programs
      • Standard-setting physical premises
      • Continuous learning and professional development for staff
    • Positioning Edleun as the number one provider of high quality child care in Canada
    • Creating a standard of excellence through which all Edleun stakeholders will benefit
  • Organic Growth
    • Optimizing occupancy rates and margins at each Edleun centre
    • Selective expansion of the licensed capacity at existing child care centres
    • Increasing profitability by expanding the services and revenues with ancillary uses at its existing centres
    • Creating value through sustainable and growing cash flow and capital appreciation
  • Strategic Growth
    • Acquiring centres and undertake new developments in under-served markets
    • Maintaining rapport with existing investors and investment analysts while creating and expanding the Company's exposure to capital markets and investors
    • Optimizing the Company's overall cost of, and access to, capital through a prudent mix of debt and equity securities.

Conference Call

Edleun Group Inc. will hold a conference call on Monday, April 11 at 4:30 p.m. Eastern Time, to discuss the results of the fourth quarter and fiscal year 2010. 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 April 18, at midnight. To access the archived conference call, dial (416) 849-0833 or 1-800-642-1687 and enter the reservation number: 58184071 followed by the number sign.

A live audio webcast of the conference call will be available at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3474460. 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.

Non-GAAP Supplement Financial 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 GAAP and therefore may not be comparable with the calculation of similar measures by other companies. Centre margin is determined by deducting centre expenses from revenue.

The Company also uses Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO") as indicators of financial performance.  FFO and AFFO do not have standardized meanings prescribed by GAAP. FFO and AFFO are presented to assist in the analysis of the Company's performance.  The Company's method of calculating FFO and AFFO may be different from other corporations and, accordingly, may not be comparable to such other corporations. FFO and AFFO: (i) do not represent cash flow from operating activities as defined by GAAP; (ii) are not indicative of cash available to fund all liquidity requirements, including capital for growth; and (iii) are not to be considered alternatives to GAAP net income for the purpose of evaluating operating performance.

Adjusted Funds From Operations ("AFFO") for the three months and year ended December 31, 2010 was calculated by adjusting the net loss for: add back of property acquisition costs expensed as incurred; add back of depreciation and stock-based compensation expense; deduction for maintenance capital expenditures; and add back of expenses incurred in respect of the period prior to the Company's commencement of operations and revenue generation on May 15, 2010.

About Edleun Group Inc.
Edleun is the leading provider of high-quality, educational child care in Canada.  The Company is committed to providing children, families and employers with access to, and choice of, quality early childhood education programs, helping Canadians balance their work and family lives.

The Company's objectives include the acquisition and improvement of existing child care centres and development of new child care centres across Canada.  Edleun is also pursuing the development of new "state of the art" child care centres in a number of Calgary and Edmonton residential communities which are currently underserved.

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.

Consolidated Balance Sheets
As at December 31, 2010 and 2009


     
  2010 2009
Assets    
     
Current Assets    
  Cash and cash equivalents $ 8,662,254 $ -
  Accounts receivable 603,058 110
  Prepaid expenses 242,593 -
  Short term investments 203,976 -
  9,711,881 110
     
Property and equipment 18,716,969 -
Goodwill 9,182,598 -
     
  $ 37,611,448 $ 110
     
     
Liabilities and Shareholders' Equity    
     
Current Liabilities    
  Accounts payable and accrued liabilities $ 1,368,521 $ 75,000
  Deferred revenue 80,432 -
  1,448,953 75,000
Future income tax liability 34,053 -
  1,483,006 75,000
     
Shareholders' Equity (Deficiency)    
  Share capital 38,463,083 110
  Contributed surplus 976,638 -
  Deficit (3,311,279) (75,000)
  36,128,442 (74,890)
     
  $ 37,611,448 $ 110
     

Consolidated Statements of Operations, Comprehensive Loss and Deficit
For the three months and year ended December 31, 2010 and 2009


         
  Three months
ended
December 31,
2010
Three months
ended
December 31,
2009
Year ended
December 31,
2010
Period ended
December 31,
2009
         
Revenue $ 3,124,247 $ - $ 6,261,248 $ -
         
Centre expenses        
  Salaries, wages and benefits 1,565,609 - 3,316,277 -
  Other operating expenses 553,785 - 1,051,465 -
  1,004,853 - 1,893,506 -
         
Lease expense 148,130 - 296,567 -
General and administrative 915,034 75,000 2,917,465 75,000
Property acquisition costs 307,003 - 790,327 -
Stock-based compensation 86,510 - 828,326 -
Depreciation 178,295 - 306,147 -
  1,634,972 75,000 5,138,832 75,000
         
Loss before the undernoted items (630,119) (75,000) (3,245,326) (75,000)
         
Other income 32,003 - 43,100 -
Loss before income taxes   (598,116) (75,000)   (3,202,226) (75,000)
         
Future income tax expense 34,053 - 34,053 -
Net loss and comprehensive loss $ (632,169) $ (75,000) $ (3,236,279) $ (75,000)
         
Net income loss per share        
  Basic and diluted $ (0.007)   $ (0.054)  
Weighted average number of common shares        
  Basic and diluted 92,227,801   60,430,314  
         
Deficit, beginning of period $ (2,679,110) - $ (409,244) -
Reverse takeover adjustment        
  Legal parent deficit, beginning -   264,942  
  Legal parent net loss, January 1, 2010 to May 14, 2010 -   69,302  
Net loss (632,169) (75,000) (3,236,279) (75,000)
Deficit, end of period $ (3,311,279) (75,000) $ (3,311,279) (75,000)
             

Consolidated Statements of Cash Flows
For the three months and year ended December 31, 2010 and 2009


         
  Three months
ended
December 31,
2010
Three months
ended
December 31,
2009
Year ended
December 31,
2010
Period ended
December 31,
2009
         
Cash provided by (used in):        
         
Operating activities:        
Net loss $ (632,169) $ (75,000) $ (3,236,279) $ (75,000)
Items not affecting cash:        
  Depreciation 178,295 - 306,147 -
  Stock-based compensation 86,510 - 828,326 -
  Future income tax expense 34,053 - 34,053 -
Change in non-cash working capital 355,893 75,000 822,446 75,000
  22,582 - (1,245,307) -
         
Investing activities        
Acquisitions (2,240,000) - (22,692,396) -
Reverse takeover cash acquisition - - 558,418 -
Property and equipment (1,904,745) - (4,575,485) -
Restricted cash (49,024) - (203,976) -
  (4,193,769) - (26,913,439) -
         
Financing activities        
Proceeds of share issue - - 40,742,500 -
Share issuance costs (22,107) - (3,921,500) -
  (22,107) - 36,821,000 -
         
Change in cash and cash equivalents (4,193,294) - 8,662,254 -
Cash and cash equivalents, beginning of period 12,855,548 - - -
Cash and cash equivalents, end of period $ 8,662,254 $ - $ 8,662,254 $ -
             
             
Cash and cash equivalents comprised of:            
Cash       $ 8,160,930  
Cash equivalents         501,324  
        $ 8,662,254  

 

 

 

 

 

 

 

SOURCE Edleun Group, Inc.

For further information:

please contact either Leslie Wulf, Chief Executive Officer or Dale Kearns, Chief Financial Officer, of Edleun Group, Inc. at (403) 800-0890, or Nick Hurst of the Equicom Group, Inc. at (403) 218-2835.

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