EDLEUN GROUP, INC. 
By EDLEUN GROUP, INC.
June 20, 2011
NEWS RELEASE
EDLEUN REPORTS POSITIVE CASH FLOW FOR THE FIRST TIME AND SUBSTANTIAL FINANCIAL CAPACITY FOR CONTINUING GROWTH
Calgary, Alberta – Edleun Group, Inc. (“Edleun” or the “Company”) (TSX-V: EDU), the leading consolidator and developer of child care facilities across Canada, announced today its operational and financial results for the three month period ended March 31, 2011. All amounts are presented in Canadian dollars unless otherwise specified.
Highlights for the quarter ended March 31, 2011 include:
- Achieving positive Funds From Operations (“FFO”) and Adjusted Funds From Operations (“AFFO”) for the first time in the Company’s short history;
- Solid organic growth in revenue through increases in occupancy and rates;
- Increasing portfolio-wide occupancy levels from 78% at the end of the fourth quarter 2010 to 82% in the first quarter of 2011, and expanded child care centre margin from 32% to 34% across the portfolio in the same period;
- Closing a $25 million credit facility that represents a non-dilutive source of capital to acquire and develop child care centres;
- Acquiring a land site from Melcor Developments Ltd. to develop the Chestermere Learning Centre,Edleun’s first standard setting, newly-developed 247-space child care centre in the Calgary metropolitan area; and
- Definitive agreements to acquire ten child care centres representing 901 licensed spaces.
“We have now substantially validated our business model and confirmed that we can successfully drive organic growth in our child care centre portfolio,” said Leslie Wulf Chief Executive Officer of Edleun. “By prudently deploying capital, delivering superior programming and executing our operational strategy we have been able to improve profitability beyond the level the centres generated prior to their acquisition by the Company.With greater capital and financial liquidity in place, we intend to increase the Company’s pace of acquisitions while also advancing our new child care centre development program, as well as a complementary co-location strategy whereby Edleun will enter into agreements with prominent owners and managers of well-located properties across Canada to open and operate new child care centres.”
Highlights for the period subsequent to quarter end include:
- Strengthening the balance sheet through a $25 million private placement financing of common shares;
- Commencingconstruction of the Chestermere Learning Centre;
- Concluding a long term ground lease agreement with First Capital Realty Inc. and application for a development permit to construct Edleun’s second new child care centre in the McKenzie Towne area of Calgary, representing 247 spaces;
- Beginning its national expansion with the announcement of its initial entry into the province of British Columbia; and
- The purchase of two child care centres (under definitive agreement in the first quarter), one in each of Stony Plain AB and Maple Ridge BC, representing 198 spaces; and a definitive agreement for a centre in the greater Vancouver area representing 114 spaces.
“Looking at our current financial position, we have the proceeds of a $25 million equity offering completed in May, $25 million of availability under our credit facility and we operated at a positive cash flow level in the first quarter,” commented Dale Kearns, Chief Financial Officer of Edleun.“With more than $50 million of growth capital to support investment in our three pronged strategy of child care centre acquisition, development and co-location, we are very well positioned for growth.”
Selected Financial Highlights
In $’000 except loss per share, # of centres and licensed spaces | Q1 2011 | Q4 2010 | Q3 2010 | Q2 2010 (47-day period) | ||||
Revenue | $ | 3,502 | $ | 3,124 | $ | 2,270 | $ | 867 |
Centre margin | 1,194 | 1,005 | 616 | 273 | ||||
Net loss(1) | (249) | (678) | (896) | (1,724) | ||||
Loss per share | (0.003) | (0.007) | (0.009) | (0.033) | ||||
FFO | 71 | (193) | (564) | (1,445) | ||||
AFFO | 136 | (60) | (432) | (206) | ||||
Cash | 7,035 | 8,662 | 12,856 | 22,769 | ||||
# of centres | 20 | 20 | 17 | 11 | ||||
Licensed spaces | 1,833 | 1,815 | 1,527 | 1,061 | ||||
(1)Adjusted to reflect IFRS
At March 31, 2011, the Company operated 20 child care centres representing 1,833 licensed child care spaces.Since March 31, 2011, centres acquired, centres under contract to acquire, or under construction give effect to 3,095 spaces in 32 centres.
First quarter revenues were 12% higher than revenues for the three months ended December 31, 2010 (“fourth quarter”) on a sequential quarter basis due primarily to organic growth within the centre portfolio and a full quarter of revenue recognition from three centres acquired in the fourth quarter.
Portfolio centre margin as a percentage of revenue for the first quarter was 34% compared with 32% in the fourth quarter.The net increase in portfolio centre margin in the first quarter was influenced by higher occupancy levels and rates.
AFFO for the first quarter was positive $136,000 compared to negative $60,000 in the fourth quarter.AFFO has steadily improved each quarter since commencement of the Company’s operations as a result of: (i) growth in the portfolio of centres; (ii) higher occupancies and modestly higher rates; and, (iii) operating efficiencies, offset, in part, by the cost to expand and enhance Edleun’s program delivery. (See non-IFRS Performance Measures below for FFO and AFFO definitions).
FFO and AFFO per share for the first quarter were each $0.001.Basic and diluted loss per share for the first quarter was $(0.003) based on 92,438,815 weighted average number of shares outstanding.
FFO and AFFO
Three months ended March 31, | Three months ended December 31, 2010(1) | |||||
2011 | 2010 | |||||
Net loss for the period | $ | (249,302) | $ | (50,500) | $ | (677,849) |
Depreciation | 205,175 | - | 178,295 | |||
Property acquisition costs | 114,735 | - | 307,003 | |||
FFO | $ | 70,608 | $ | (50,500) | $ | (192,551) |
Stock Based Compensation- Option Grants | 95,721 | - | 132,190 | |||
Maintenance capital expenditures | (30,443) | - | - | |||
AFFO | $ | 135,886 | $ | (50,500) | $ | (60,361) |
At March 31, 2011, the Company had working capital of $7.4 million (December 31, 2010 - $8.3 million) which included cash and cash equivalents of $7.0 million (December 31, 2010 - $8.7 million).The Company has secured a five year $25 million credit facility agreement with a Canadian bank, under which there are no borrowings, and subsequent to the first quarter completed a private placement of common shares for gross proceeds of $25 million.
Non IFRS Performance Measures
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 property 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 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-IFRS supplemental 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 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.
Results are impacted by, among other items, accounting guidelines that require property 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 do not affect FFO and AFFO.
Conference Call
Edleun Group Inc. will hold a conference call on Tuesday, June 21 at 4:15p.m. Eastern Time, to discuss the results of the first quarter of fiscal 2011. 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 June 28, 2011 at midnight. To access the archived conference call, dial (416) 849-0833 or 1-800-642-1687 and enter the reservation number: 77307951 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=3579400
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, 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.
For further information, please contact either Leslie Wulf, Chief Executive Officer, or Dale Kearns, Chief Financial Officer of Edleun Group, Inc. at (403) 705-0362, or Nick Hurst of the Equicom Group, Inc. at (403) 218-2835.
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)
March 31, 2011 | December 31, 2010 | January 1, 2010 | ||||||||
Assets | ||||||||||
Non-current assets | ||||||||||
Property and equipment | $ | 19,622,800 | $ | 18,716,969 | $ | - | ||||
Goodwill | 9,182,598 | 9,182,598 | - | |||||||
28,805,398 | 27,899,567 | - | ||||||||
Current assets | ||||||||||
Cash and cash equivalents | 7,035,129 | 8,662,254 | - | |||||||
Accounts receivable | 587,820 | 603,058 | 110 | |||||||
Prepaid expenses | 241,013 | 242,593 | - | |||||||
Deferred financing costs | 258,786 | - | - | |||||||
Short term investments | 203,976 | 203,976 | - | |||||||
8,326,724 | 9,711,881 | 110 | ||||||||
Total Assets | $ | 37,132,122 | $ | 37,611,448 | $ | 110 | ||||
Liabilities | ||||||||||
Non-current liabilities | ||||||||||
Deferred tax liability | $ | 34,053 | $ | 34,053 | $ | - | ||||
34,053 | 34,053 | - | ||||||||
Current liabilities | ||||||||||
Accounts payable and accrued liabilities | 799,727 | 1,368,521 | 75,000 | |||||||
Deferred revenue | 108,451 | 80,432 | - | |||||||
908,178 | 1,448,953 | 75,000 | ||||||||
Total Liabilities | 942,231 | 1,483,006 | 75,000 | |||||||
Shareholders’ Equity | ||||||||||
Share capital | 38,714,049 | 38,463,083 | 110 | |||||||
Contributed surplus | 1,148,531 | 1,088,746 | - | |||||||
Accumulated deficit | (3,672,689) | (3,423,387) | (75,000) | |||||||
Total Shareholders’ Equity | 36,189,891 | 36,128,442 | (74,890) | |||||||
Total Liabilities and Shareholders’ Equity | $ | 37,132,122 | $ | 37,611,448 | $ | 110 | ||||
Edleun Group, Inc.
Condensed Consolidated Statements of Operations, Comprehensive Loss and Deficit
Three months ended March 31, 2011 and 2010
(unaudited)
March 31, 2011 | March 31, 2010 | ||||
Revenue | $ | 3,501,973 | $ | - | |
Centre expenses | |||||
Salaries, wages and benefits | 1,708,830 | - | |||
Other operating expenses | 599,604 | - | |||
1,193,539 | - | ||||
Lease expense | 130,444 | - | |||
General and administrative | 933,556 | 50,500 | |||
Property acquisition costs | 114,735 | - | |||
Stock-based compensation | 95,721 | - | |||
Depreciation | 205,175 | - | |||
1,479,631 | 50,500 | ||||
Loss before the undernoted items | (286,092) | (50,500) | |||
Other income | 36,790 | - | |||
Net Loss and Comprehensive Loss | $ | (249,302) | $ | (50,500) | |
Net loss per share | |||||
Basic and diluted | $ | (0.003) | $ | - | |
Weighted average number of common shares | |||||
Basic and diluted | 92,438,815 | - | |||
Edleun Group, Inc.
Condensed Consolidated Statements of Changes in Shareholders’ Equity
Three months ended March 31, 2011 and 2010
(unaudited)
Share Capital | Contributed Surplus | Accumulated Deficit | Shareholders’ Equity | |||||||||
Balance, January 1, 2010 | $ | 110 | $ | - | $ | (75,000) | $ | (74,890) | ||||
Net loss and comprehensive loss | - | - | (50,500) | (50,500) | ||||||||
Balance, March 31, 2010 | $ | 110 | $ | - | $ | (125,500) | $ | (125,390) | ||||
Balance, January 1, 2011 | $ | 38,463,083 | $ | 1,088,746 | $ | (3,423,387) | $ | 36,128,442 | ||||
Stock-based compensation | - | 95,721 | - | 95,721 | ||||||||
Warrants exercised | 231,886 | (35,936) | - | 195,950 | ||||||||
Stock options exercised | 19,080 | - | - | 19,080 | ||||||||
Net loss and comprehensive loss | - | - | (249,302) | (249,302) | ||||||||
Balance, March 31, 2011 | $ | 38,714,049 | $ | 1,148,531 | $ | (3,672,689) | $ | 36,189,891 | ||||
Edleun Group, Inc.
Condensed Consolidated Statements of Cash Flow
Three months ended March 31, 2011 and 2010
(unaudited)
March 31, 2011 | March 31, 2010 | ||||
Cash provided by (used in): | |||||
Operating Activities: | |||||
Net loss | $ | (249,302) | $ | (50,500) | |
Items not affecting cash: | |||||
Depreciation | 205,175 | - | |||
Amortization of deferred financing costs | 13,620 | - | |||
Stock-based compensation | 95,721 | - | |||
Change in non-cash working capital | (796,363) | 50,500 | |||
(731,149) | - | ||||
Investing Activities | |||||
Property and equipment | (1,111,006) | - | |||
(1,111,006) | - | ||||
Financing Activities | |||||
Exercise of warrants | 195,950 | - | |||
Exercise of options | 19,080 | - | |||
215,030 | - | ||||
Change in Cash and Cash Equivalents | (1,627,125) | - | |||
Cash and cash equivalents, beginning of period | 8,662,254 | - | |||
Cash and cash equivalents, end of period | $ | 7,035,129 | $ | - | |
Cash and cash equivalents comprised of: | |||||
Cash | $ | 6,432,783 | $ | - | |
Cash equivalents | 602,346 | - | |||
$ | 7,035,129 | $ | - | ||
