EDU Brightpath Early Learning, Inc.

CALGARY, Aug. 16, 2012 /CNW/ - Edleun Group, Inc. ("Edleun" or the "Company") , the leading provider of quality early childhood education and care in Canada, announced today its operational and financial results for the three and six months ended June 30, 2012. During the quarter, the Company continued to grow its portfolio through strategic acquisitions and development to 45 centres providing 4,368 licensed child care spaces at June 30, 2012. Child care centre operational highlights during the second quarter of 2012 include: -- In June, completion of the redevelopment of the Lawrence Learning Centre in Kelowna with 140 licensed child care spaces with operations commencing in July; -- At the end of the second quarter, completion of the development of the Chestermere Learning Centre, the first new greenfield development with operations commencing in July providing 247 licensed child spaces to this growing suburban Calgary community; -- At the end of June, the Company acquired an operating child care centre in Airdrie, Alberta for $75,000. This facility is situated in leased premises under long term lease, adds 51 licensed child care spaces to the Company's portfolio and will contribute to results beginning in the third quarter 2012; -- At the end of June, the Company acquired established Montessori child care centres in each of Ajax and Markham, Ontario for $1.1 million. These centres are situated in leased premises under long term leases, add 194 licensed child care spaces to the Company's portfolio and will contribute to results beginning in the third quarter of 2012; and -- In April, completion of the redevelopment of the Highland Park Learning Centre in Calgary and commencement of operations. This child care centre adds 75 licensed child care spaces to the Company's portfolio. Financial highlights for the three months ended June 30, 2012: -- Reported a 127% increase in revenue compared to the same period in 2011 (June 30, 2011 - $3.96 million versus June 30, 2012 - $9.0 million) due to the increased number of child care spaces and higher occupancy rates; -- Increased same-centre occupancy levels by five percentage points from 84.6% in the second quarter of 2011 to 89.6% in the second quarter of 2012; -- Increased same centre revenue by 11% and same centre margin (in dollars) by 27% compared to the second quarter period a year earlier; -- More than doubled the number of licensed child care spaces over the same period in 2011 from 2,038 to 4,368, with an additional 806 under development and coming on line beginning in the third quarter of 2012; and -- Closed a private placement of $5 million five year 6.75% debentures convertible into common shares at $1.10 per share. "In the second quarter, we continued to demonstrate the merit and success of Edleun's business model with significant increases in same centre occupancy, revenue and gross margin," said Ms. Mary Ann Curran, CEO of Edleun. "We have successfully acquired centres and improved their performance following the introduction of programming, services and physical renovations. The new "state of the art" Chestermere and McKenzie Towne Learning Centres each comprise approximately 247 licensed child care spaces and provide a significant source of high quality licensed child care spaces to these underserved communities.  We are pleased with the early reception that these centres have received in these communities and the substantial pre-enrollment by parents for the upcoming school year." "In addition to these new developments - which are  approximately triple the size and impact of an acquired centre  - we completed the redevelopment of two child care centres, one in Calgary and one in Kelowna, British Columbia," said Dale Kearns, President and CFO. "The combination of the development, redevelopment and recent acquisitions of centres will add approximately 900 or 22% new licensed child care centres; which begin to impact our operational and financial results in the third quarter 2012. We continue to pursue an active pipeline of acquisitions, co-location centres, and several sites in Alberta for potential development. Our third new development property, located in the Brookfield Properties master-planned community of Seton in South Calgary is in the development permit process and is anticipated to add a further 400 licensed child care spaces to this rapidly growing area of the city on completion of two phases of development. The Company secured $5 million of highly accretive debt capital to enable the funding of the expansion and execution of our growth plans. The Company's solid financial position and low level of financial leverage enabled us to secure this financing on attractive terms. We are well positioned to execute on our near term plans without dilution to our shareholders." Financial Review ($000's except where otherwise noted and per share amounts) Three and six months ended June 30, 2012 For the three months ended June 30, 2012, the Company reported revenue of $9.0 million, an increase of 127% compared with $3.96 million of revenue in the same period of the prior year. This is primarily due to a twofold increase in the number of centres and spaces (23 centres and 2,330 licensed spaces added), combined with occupancy improvements and modest rate increases. Same centre revenue increased 11% in the three month period. For the six months ended June 30, 2012 the Company reported revenue of $17.01 million compared to revenue in the same period in 2011of $7.46 million, an increase of 128% while same centre revenues increased 13%. Portfolio centre margin (see Non-IFRS Performance Measures below for centre margin definition) for the three month period ended June 30, 2012 was $1.61 million, 125% higher than the same period of 2011. As a percentage of revenue, centre margin was 32.2%, down marginally from 32.5% in the second quarter of 2011. For the six month period ended June 30, 2012 centre margin was $2.95 million or 119% higher than the same period of 2011, with a decrease of 1.3 percentage points to 31.9% as a percentage of revenue.  The decrease in margin as a percentage of revenue for the six month period was primarily as a result of smaller centres in British Columbia that carry higher labour costs and a low occupancy centre in Ontario acquired through a receivership proceeding. Overall occupancy excluding this centre was 87.1%, an increase of 0.8 percentage points from the preceding quarter. Same centre margin (in dollars) for the three and six months ended June 30, 2012 increased by 27% and 23%, respectively, compared to the three and six months ended June 30, 2011. $000's Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 (except per 2012 2012 2011 2011 2011 2011 2010 2010 2010 share (47-day amounts) period) Revenue $ 8,984 $ 8,030 $ 5,840 $ 4,877 $ 3,958 $ 3,502 $ 3,124 $ 2,270 $ 867 Centre margin 2,893 2,537 1,841 1,406 1,286 1,194 1,005 616 273 Centre margin 32 31 31 29 32 34 32 27 31 % Net loss(1) (355) (731) (811) (957) (541) (249) (678) (896) (1,724) Adjusted 800 735 192 (294) 137 144 (59) (392) (769) EBITDA FFO 563 604 119 (314) (22) 71 (193) (564) (1,445) AFFO 750 789 211 (329) 100 136 (61) (432) (206) Per share amounts: Net loss (0.003) (0.006) (0.007) (0.008) (0.006) (0.003) (0.007) (0.009) (0.033) FFO 0.005 0.005 0.001 (0.003) (0.002) 0.001 (0.002) (0.006) (0.028) AFFO 0.006 0.007 0.002 (0.003) 0.001 0.001 (0.008) (0.005) (0.004) Cash 3,961 3,803 1,911 18,026 24,270 7,035 8,662 12,856 22,769 Available 18,394 18,626 22,100 24,800 24,800 24,800 - - - under credit facility # of centres 45 40 38 29 22 20 20 17 11 in operation (2) # of centres 4 6 5 3 2 1 - - - under development or redevelopment (2) Total # of 49 46 43 32 24 21 20 17 11 centres Licensed 4,368 3,908 3,660 2,539 2,038 1,833 1,815 1,527 1,061 spaces in operation(2) Spaces under 806 1,031 803 569 494 247 - - - development or redevelopment (2) Total spaces 5,174 4,939 4,463 3,108 2,532 2,080 1,815 1,527 1,061 Notes: 1. 2010 amounts have been restated from Canadian GAAP to IFRS. 2. As at the date of this report, the Company has 46 centres in operation representing 4,615 licensed spaces and three centres under development or redevelopment representing 559 licensed spaces. Adjusted EBITDA was $800 for the second quarter 2012 compared to $137 for the same period a year earlier and $735 on sequential basis from the first quarter. (See Non-IFRS Performance Measures below for Adjusted EBITDA definition). On a sequential quarter basis, revenue increased 12% as a result of two centre acquisitions, fee increases and occupancy increases.  Four centre acquisitions in the second quarter closed at the end of the fiscal period resulting in no revenue contribution for these until the third quarter 2012.  Offsetting Adjusted EBITDA growth was higher general and administrative expense, due principally to the investment in the review and selection of operational and financial information systems to support the Company in its growth objectives and a higher amount of professional fees incurred to prepare the Company's first Annual Information Form filing together with the creation of a deferred share unit plan. As these expenses are either one-time, or above what would be typically incurred, it is anticipated that they should decline or be eliminated hereon. Funds From Operations ("FFO") (see Non-IFRS Performance Measures below for FFO and Adjusted Funds From Operations ("AFFO") definitions) for the second quarter of 2012 was $563 compared to $(22) for the second quarter of 2011, due primarily to portfolio growth, offset by higher finance and stock based compensation expense. FFO per share for the second quarter of 2012 was $0.005, consistent with the first quarter of 2012 and compared to $(0.002) for the second quarter of 2011. AFFO for the second quarter of 2012 was $750 compared to $789 in the first quarter of 2012 and $100 in the second quarter of 2011.  Offsetting the modest increase in Adjusted EBITDA on a sequential basis was a higher level of maintenance capital expenditures.  AFFO per share for the second quarter of 2012 was $0.006 compared to $0.007 for the first quarter of 2012 and $0.001 for the second quarter of 2011. Adjusted EBITDA, FFO & AFFO Q2 2012 Q1 2012 Q4 2011 Q3 2011 Q2 2011 Adjusted EBITDA $ 800 $ 735 $ 192 $ (294) $ 137 Net loss for the period $ (355) $ (731) $ (810) $ (957) $ (541) Depreciation and certain other 478 459 325 313 238 non cash items Acquisition costs 440 876 605 330 281 FFO $ 563 $ 604 $ 119 $ (314) $ (22) Stock based compensation 237 196 104 69 166 Maintenance capital expenditure (50) (11) (12) (84) (44) AFFO $ 750 $ 789 $ 211 $ (329) $ 100 Net loss decreased for the three month period ended June 30, 2012 from $541 in 2011 to $355 in 2012. For the six month period ended June 30, 2012 net loss was $1,086 compared with $790 for the six months ended June 30, 2011.  Included in net loss are acquisition costs that are expensed as incurred which for the three and six months ended June 30, 2012 were $440 and $1,316, respectively, compared with $281 and $396, respectively, in the same periods of 2011.  During the six months ended June 30, 2012 the Company incurred $478 of cost associated with the restructuring of its internal acquisitions group. Under IFRS, acquisition costs are not deferred or capitalized and must be expensed in the period in which they are incurred. The one-time, and above typical level of general and administration expense noted regarding the second quarter Adjusted EBIDTA, also impacted the Company's net income, FFO and AFFO in the quarter. The Company's investment in its corporate and operational infrastructure is anticipated to benefit the Company going forward and enable lower general and administration expenses and increased profitability in future quarters. The Company continues to be in a solid financial position. At June 30, 2012, the Company had cash equivalents and available credit totalling $22.3 million.  Capital allocated to the completion of development projects is $4.0 million. As such, the Company has sufficient capacity to fund the remaining construction costs on its development projects and in-place non-dilutive capital to fund its acquisition pipeline for the balance of the year. Outlook According to various government sources, there remains a significant shortage of child care availability in Canada.  The Company believes that the opportunities to acquire, develop and co-locate child care centres in the near and medium term are abundant.  The early signs of success in its first two newly developed centres at Chestermere and McKenzie Towne have bolstered the confidence of the Company in advancing its pipeline of new developments. The Company has access to sufficient capital resources to undertake these activities in subsequent quarters of 2012. Operationally in the third quarter, the Company expects to see a more pronounced impact than in prior years from summer seasonality as a result of its initial acquisitions of Montessori schools. The Company utilizes these periods of lower occupancy to address maintenance activities in order to have a minimal impact on the centres during peak operations. The third quarter of 2012 will be transitional, if not transformational, for the Company in its evolution and strategic development. The Company announced significant enhancements to the management team with the hiring of Ms. Mary Ann Curran as CEO and Mr. Dean Michaels as Senior Vice President of Acquisitions and Development. The senior management team is well positioned to continue and expand its growth opportunities while providing the leadership and systems to enable this growth to be achieved effectively for its customers and profitably for its shareholders. The addition of the 900 licensed child spaces from the newly opened Chestermere Learning Centre, the scheduled opening of the McKenzie Towne Early Learning Centre and other recent redevelopments and acquisitions during the third quarter, are expected to deliver increased profitability beginning in the fourth quarter of 2012 and continuing in 2013. 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. 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 Friday, August 17, 2012 at 10:00 am ET (8:00 am MT), to discuss the results of the second 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 Friday, August 24, 2012, at midnight. To access the archived conference call, dial (416) 849-0833 or 1-855-859-2056 and enter the reservation number 20949906 followed by the number sign. A live audio webcast of the conference call will be available at: http://www.newswire.ca/en/webcast/detail/1020089/1102805. 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 , 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 46 operating centres in its portfolio and three in various stages of development or redevelopment representing approximately 5,200 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) June 30, 2012 December 31, 2011 Assets Non-current assets Property and equipment $ 42,861 $ 33,434 Goodwill 25,985 22,940 Definite life intangible assets 725 340 69,571 56,714 Current assets Cash and cash equivalents 3,961 1,911 Accounts receivable 3,121 1,589 Prepaid and other expenses 1,753 3,606 Short term investments 39 39 8,874 7,145 Total Assets $ 78,445 $ 63,859 Liabilities Non-current liabilities Long term debt and financing leases $ 6,745 $ 2,151 Deferred tax liability 42 42 Convertible debentures - liability 4,264 - component 11,051 2,193 Current liabilities Accounts payable and accrued 5,333 2,877 liabilities Deferred revenue 992 399 Current portion of debt and 463 109 financing leases 6,788 3,385 Total Liabilities 17,839 5,578 Shareholders' Equity Share capital 65,987 62,931 Convertible debentures - equity 428 - component Equity settled share based 1,257 1,330 compensation Accumulated deficit (7,066) (5,980) Total Shareholders' Equity 60,606 58,281 Total Liabilities and Shareholders' $ 78,445 $ 63,859 Equity Edleun Group, Inc. Condensed Consolidated Statements of Operations and Comprehensive Loss Three and six months ended June 30, 2012 and 2011 (Unaudited) Three months ended June 30, Six months ended June 30, 2012 2011 2012 2011 Revenue $ 8,984 $ 3,958 $ 17,014 $ 7,460 Centre expenses Salaries, 4,358 1,946 8,376 3,655 wages and benefits Other 1,733 726 3,208 1,325 operating expenses Centre margin 2,893 1,286 5,430 2,480 Lease 539 160 983 290 Finance 82 - 128 - General and 1,495 1,042 2,839 1,975 administrative Taxes, other 59 - 73 - than income taxes Acquisition 440 281 1,316 396 costs Stock-based 237 166 433 262 compensation Depreciation 411 237 803 443 and amortization 3,263 1,886 6,575 3,366 Loss before (370) (600) (1,145) (886) other income Other income 15 59 59 96 Net Loss and $ (355) $ (541) $ (1,086) $ (790) Total Comprehensive Loss Net loss per share Basic and $ (0.003) $ (0.006) $ (0.009) $ (0.008) diluted Weighted average number of common shares Basic and 121,050,016 96,296,823 117,894,089 99,285,161 diluted Edleun Group, Inc. Condensed Consolidated Statements of Changes in Shareholders' Equity Three and six months ended June 30, 2012 and 2011 (Unaudited) Convertible Debentures Equity (CDN 000's) - Settled Accumulated Share Equity Share Based Deficit Shareholders' Capital Component Compensation Equity Balance at $ 38,463 $ - $ 1,089 $ (3,424) $ 36,128 January 1, 2011 Share 25,003 - - - 25,003 issuance Share (1,483) - - - (1,483) issuance costs Stock-based - - 262 - 262 compensation Warrants 232 - (36) - 196 exercised Stock options 382 - (75) - 307 exercised Net loss and - - - (790) (790) comprehensive loss Balance at June $ 62,597 $ - $ 1,240 $ (4,214) $ 59,623 30, 2011 Balance at $ 62,931 $ - $ 1,330 $ (5,980) $ 58,281 January 1, 2012 Stock-based - - 433 - 433 compensation Warrants 2,662 - (412) - 2,250 exercised Options 394 - (94) - 300 exercised Issue of - 428 - - 428 convertible debentures Net loss and - - - (1,086) (1,086) comprehensive loss Balance at June $ 65,987 $ 428 $ 1,257 $ (7,066) $ 60,606 30, 2012 Edleun Group, Inc. Condensed Consolidated Statements of Cash Flow Three and six months ended June 30, 2012 and 2011 (Unaudited) Three months ended June Six months ended June 30, 30, 2012 2011 2012 2011 Cash provided by (used in): Operating Activities: Net loss $ (355) $ (541) $ (1,086) $ (790) Items not affecting cash: Depreciation and 445 237 837 443 amortization Amortization of 15 16 30 29 deferred financing costs Stock-based 237 166 433 262 compensation Change in non-cash (45) (1,284) 709 (2,081) working capital 297 (1,406) 923 2,137 Investing Activities Acquisitions (948) (4,888) (2,173) (4,888) Property and (4,315) (395) (7,948) (1,506) equipment Restricted cash - 116 - 116 (5,263) (5,167) (10,121) (6,278) Financing Activities Proceeds of share - 25,003 - 25,003 issue Share issuance - (1,483) - (1,483) costs Exercise of - - 2,250 196 warrants Exercise of 300 288 300 307 options Loan proceeds 299 - 4,219 - Loan repayments (67) - (113) - Proceeds of 5,000 - 5,000 - convertible debentures issue Convertible (344) - (344) - debenture issuance costs Finance lease (64) - (64) - repayments 5,124 23,808 11,248 24,023 Change in Cash and 158 17,235 2,050 15,608 Cash Equivalents Cash and cash 3,803 7,035 1,911 8,662 equivalents, beginning of period Cash and cash $ 3,961 $ 24,270 $ 3,961 $ 24,270 equivalents, end of period Cash and cash equivalents comprised of: Cash $ 3,961 $ 24,167 Cash equivalents - 103 $ 3,961 $ 24,270         Edleun Group, Inc. CONTACT: please contact 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.

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