Press release from CNW Group
Edleun's continuing strong growth highlighted by 16% increase in child care spaces
Sunday, November 18, 2012
Edleun's continuing strong growth highlighted by 16% increase in child care spaces18:44 EST Sunday, November 18, 2012CALGARY, 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; andMr. 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; andNew 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; andReported 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, 2012Selected Quarterly Information Q32012Q22012Q12012Q42011Q32011Q22011Q12011Q42010Revenue$8,818$8,984$8,030$5,840$4,877$3,958$3,502$3,124Centre margin 2,122 2,893 2,537 1,841 1,406 1,286 1,194 1,005Centre margin % 24 32 31 31 29 32 34 32Adjusted 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 8,662Available 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 20Licensed spaces in operation(2) 4,615 4,368 3,908 3,660 2,539 2,038 1,833 1,815Spaces 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 1,815Notes: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 EBITDAQ3 2012Q2 2012Q1 2012Q4 2011Q3 2011Q2 2011 Centre margin for the period$2,122$2,893$2,537$1,841$1,406$1,286General and administrative expense (1,501) (1,495) (1,344) (1,212) (1,432) (988)Taxes, other than income taxes (47) (59) (14) (88) (1) (1)Operating lease expense (634) (539) (444) (349) (267) (160)Adjusted EBITDA$(60)$800$735$192$(294)$137FFO and AFFOQ3 2012Q2 2012Q1 2012Q4 2011Q3 2011Q2 2011 Net loss for the period$(1,529)$(355)$(731)$(810)$(957)$(541)Depreciation and certain other non cash items 761 478 459 324 313 238Acquisition costs 497 440 876 605 330 281FFO$(271)$563$604$119$(314)$(22)Stock based compensation 170 237 196 104 69 166Maintenance capital expenditure (285) (50) (11) (12) (84) (44)AFFO$(386)$750$789$211$(329)$100Net 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 CallEdleun 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 StatementsCertain 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, 2012December 31, 2011Assets Non-current assets Property and equipment $45,984$33,434 Goodwill 25,985 22,940 Definite life intangible assets 605 340 72,574 56,714Current 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 2,193Current 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 LossThree and nine months ended September 30, 2012 and 2011(Unaudited) Three monthsended September 30, Nine monthsended September 30, 2012201120122011 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 2,227Centre margin 2,122 1,406 7,552 3,885 Lease 634 267 1,617 557Finance 185 - 313 -General and administrative 1,501 1,478 4,340 3,452Taxes, other than income taxes 47 1 120 2Acquisition costs 497 330 1,813 725Stock-based compensation 170 69 603 331Depreciation 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 191Net 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 CapitalConvertible Debentures - Equity ComponentEquity Settled Share Based CompensationAccumulated DeficitShareholders' Equity Balance at January 1, 2011$38,463$-$1,089$(3,423)$36,129 Share issuance 25,003 - - - 25,003Share issuance costs (1,494) - - - (1,494)Stock-based compensation - - 331 - 331Warrants exercised 232 - (36) - 196Stock options exercised 382 - (75) - 307Net 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 - 603Warrants exercised 2,662 - (412) - 2,250Options exercised 394 - (94) - 300Issue of convertible debentures - 342 - - 342Net 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) 2012201120122011 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 331Change 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 - - - 25,003Share issuance costs - (11) - (1,494)Exercise of warrants - - 2,250 196Exercise of options - - 300 307Loan 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 9,364Cash and cash equivalents, beginning of period 3,961 24,270 1,911 8,662Cash and cash equivalents, end of period $2,194$18,026$2,194$18,026 Cash and cash equivalents comprised of: Cash $2,194$18,026Cash equivalents - - $2,194$18,026SOURCE: 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.