BPE

CALGARY, March 27, 2014 /CNW/ - BrightPath Early Learning Inc. ("BrightPath" or the "Company") (TSX-V: BPE), the leading Canadian provider of quality early childhood education and care announced today its operational and financial results for the three and twelve month periods ended December 31, 2013.

Portfolio performance highlights for the year ended December 31, 2013 and the fourth quarter therein include (all amounts in thousands of dollars unless otherwise indicated):

Year-ended December 31, 2013

• Overall occupancy levels improving year over year from 82.1% to 84.2% led by Alberta centres that recorded  90.1% average annual occupancy;
• Portfolio wide revenue of $46.8 million increased by 29% compared to the prior year;
• Centre margin of $12.2 million increased 21% over the previous year, with  centre margin on revenue of 26%;
• Adjusted EBITDA increased 69% to $3.0 million;
• Adjusted EBITDA prior to non-recurring items increased 41% to $3.6 million; and
• Funds from Operations ("FFO") increased 123% to $1.9 million or $0.016 per share basic versus $0.007 in 2012, and AFFO rose 67% to $2.0 million or $0.017 per share basic versus $0.01 in 2012.

Fourth Quarter

• Revenue growth of 15% to $12.2 million compared to the fourth quarter of 2012;
• Adjusted EBITDA of $926, a 57% increase compared with the same period in the prior year;
• Adjusted EBITDA prior to non-recurring items increased 32% to $1.1 million compared to the same period in the prior year;
• Non-recurring restructuring costs of $827 to relocate Calgary-based functions to Toronto, the Toronto office from a downtown location to a suburban location and provision for the Calgary office to relocate to smaller premises that should both reduce costs and improve efficiencies in the future; and
• FFO of $688, a threefold increase compared to the same period a year earlier, and AFFO of $728, an increase of two and one half times.

"The performance of the Company's Alberta operations is strong and the market opportunity is significant," said Mary Ann Curran, Chief Executive Officer of BrightPath.  "Our centres in Alberta averaged occupancy levels in excess of 90%, generating 72% of our company wide centre margin during the year.  The significant success of the Company's newly-developed centres, supported by strong economic and market indicators has given us confidence to pursue further growth opportunities in this region.  These market factors are supported by our significant market presence and economies of scale available, resulting in enhanced profitability state-of-the-art facilities."

Significant events for the twelve months ended December 31, 2013:

• Management successfully arranged an increase of $17 million to its credit facility; the new limit being $42 million.  These funds are designated to develop additional greenfield centres in Alberta similar to the Company's highly successful developments in the McKenzie Towne and Chestermere areas of Calgary.  Including cash on hand, the Company now has more than $26.7 million of capital available to pursue its growth strategy;
  
  
• Recent announcements in Alberta, in particular the province's strong population and employment growth, the recent announcements of further expansion of oil sands production and a positive outlook for transportation of gas, oil and bitumen, lends support to the Company's intention that near term growth will be focused in western Canada.  The support of the Company's bank has enabled BrightPath to advance its pipeline of greenfield and other new centre locations in the Calgary and Edmonton markets which it anticipates commencing over the next two quarters;
  
  
• The Company announced a long term lease agreement for a newly-developed child care centre in Surrey, British Columbia.  This brand new facility will provide the community with 207 additional child care spaces in a 18,200 square foot child care centre which is anticipated to open in the fourth quarter of 2014;
  
  
• Newly-developed and redeveloped centres continued to show strength during their first year of operation demonstrating the unmet demand for quality child care which underpins the Company's growth strategy.  As noted in the table below, occupancies range from 73.4% to 95.6% even though these properties have been open for only 15 to 20 months;
  
  

• The Company completed implementation of the principal modules of its Enterprise Resource Planning Systems ("ERP"), which allow greater efficiencies  in utilization of personnel and billing;
  
  
• The Company, after conducting  a thorough business review  of  centre operations and overhead costs,  has begun to relocate its  accounting function from Calgary to Toronto,   relocated the Toronto office from the downtown core to a more cost-effective suburban location,  and is pursuing the  relocation of  its  Calgary office to smaller and less costly premises;
  
  
• The Company was able to increase the number of licensed spaces at McKenzie Towne by 39 within the existing building envelope with almost no capital cost bringing the total capacity to 286. This space has since been essentially filled with the full financial impact only being realized in fiscal 2014;
  
  
• The Company completed the acquisition of a child care centre in Ottawa, Ontario, adding an additional 47 licensed spaces to the Company's portfolio;
  
  
• The Company completed the strategic acquisition of a child care centre in Calgary, Alberta, adding an additional 129 licensed spaces to the Company's portfolio.  This centre offers a successful template for BrightPath to grow its ancillary revenue streams. This centre had 1,400 registrations for ancillary recreational programs during the latest twelve month period at the time of acquisition;
  
  
• The Company launched a pilot program for enhanced recreational programs for children enrolled at the centres and from the broader community. The classes for 2½ to 12 year olds include dance, music, yoga and sports instruction;
  
  
• The Company completed the acquisition of a child care centre in Ottawa, Ontario, adding an additional 77 licensed spaces to the Company's portfolio;
  
  
• The Company announced plans for the expansion of its child care centre in the Calgary suburb of Airdrie, Alberta.  The expansion is expected to cost approximately $0.6 million and will increase the licensed child care spaces by approximately 55, bringing the total to 105.  Work is expected to be completed during 2014;
  
  
• The Company changed its name effective August 7, 2013 from Edleun Group, Inc. to BrightPath Early Learning Inc. and its principal operating subsidiary Edleun, Inc. to BrightPath Kids Corp.  This new name better reflects what the Company does, is more understandable to parents and investors, and, accordingly, provides a superior branding and marketing opportunity; and
  
  
• Three development centres successfully underwent the accreditation process in Alberta.  Under the Alberta accreditation program, child care centres that are awarded this recognition exceed provincial licensing standards and represent a greater attraction to the child care workforce in the province.

In Ontario, during the first half of 2013 overall performance of the Company's centres was strong at 83% occupancy.  During the second half of the year, however,  the third phase of a four-year phased roll out of full day kindergarten ("FDK") caused a reduction in enrollments of children in that age group resulting in lower Adjusted EBITDA in the second half of the year. The Company's licensed child care spaces for this age group currently represents less than 4% of its system wide capacity.  Changes underway to reconfigure the FDK spaces to other age groups are anticipated to meet increasing levels of demand for infant care and out of school care. In addition, repositioning of certain centres between Montessori and traditional child care is under consideration. It is noteworthy that the Company's implementation in 2013 of its new ERP systems noted herein, in conjunction with active operational management, has already delivered significant financial benefits. Specifically, despite the 6.9% drop in Ontario comparable centre enrollment the centre margin amount improved by 8% in the fourth quarter year over year, primarily due to tighter labour cost controls as well as a modest decline in other operating expenses. In addition, since the year end, the average Ontario enrollment levels have increased by approximately 6 percentage points.

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

Selected Quarterly Information

For the three months ended December 31, 2013, the Company reported revenue of $12,182 (December 31, 2012 - $10,594) and centre margin of $3,209 (December 31, 2012 - $2,731). The year over year increase in revenue was due to a higher number of spaces available for enrollment and higher occupancy rates combined with fee increases in certain centres.  Centre margin as a percentage of revenue increased to 26.3% compared with 25.8% a year earlier, with the increase mainly attributable to higher occupancy levels, primarily from three newly-developed centres in Alberta.

For the year ended December 31, 2013, revenue was $46,818 (December 31, 2012 - $36,426) and centre margin was $12,176 (December 31, 2012 - $10,023).  The year over year revenue increase was due to the increased capacity in centres acquired and expanded during 2013, full year contributions from newly-developed centres opened in 2012 and centres acquired during 2012 as well as higher overall occupancy levels.  Centre margin as a percentage of revenue declined from 27.5% to 26.0%; the difference attributable mainly to accreditation costs at new centres, enrollment decreases associated with FDK in Ontario, minor flood related expense incurred in Alberta during the second quarter of 2013 and the acquisition of two centres during the end of the second quarter.  These centres historically had little or no summer programming.

Adjusted EBITDA for the fourth quarter of 2013 was $926 compared to $590 in the fourth quarter of 2012 primarily due to higher centre margin driven by increased enrollment and fees, as well as Adjusted EBITDA from centres acquired during 2013.  Although Alberta centres generated increased Adjusted EBITDA in the fourth quarter compared to the first and second quarters of 2013, this was offset by a decrease in the Ontario centres, primarily due to lower enrollments in September 2013 due to FDK.  Fourth quarter results were also tempered by $0.3 million of non-recurring items associated with rebranding, business process re-engineering costs and systems conversion related amounts, without which Adjusted EBITDA would have been approximately $1.1 million.

Adjusted EBITDA for the year ended December 31, 2013 was $3,048 compared to $1,805 in 2012 primarily for the same reasons as for the three month period.  Stabilized centres, representing 37 child care centres reported a 6% increase in revenue year over year with centre margin the same in both periods due to higher costs in Alberta and lower FDK related margin in Ontario. Non-stabilized centre margin increased from $437 to $2,653, of which two thirds of the increase, or $1,420, was derived from the successful opening of two greenfields and one redeveloped centre in Alberta.  Annual results were tempered by $0.9 million of non-recurring costs associated with rebranding, business process re-engineering and systems conversion related amounts, without which Adjusted EBITDA would have been approximately $3.6 million for the year.

Adjusted EBITDA, AFFO and FFO -Amounts Amended For Correction

AFFO for the fourth quarter of 2013 was $728 compared to $320 for the fourth quarter of 2012, the difference primarily due to increased centre margin and lower maintenance capital expenditures, partially offset by higher finance costs and operating lease expense.  AFFO per share for the fourth quarter of 2013 was $0.006 compared to $0.003 for the fourth quarter of 2012.

AFFO for the year ended December 31, 2013 was $2,024 compared to $1,213 for the 2012.  AFFO per share for 2013 was $0.017 compared to $0.010 in 2012.

FFO for the fourth quarter of 2013 was $688 compared to $228 for the fourth quarter of 2012, the trends for which were substantially the same as AFFO.  FFO per share for the fourth quarter of 2013 was $0.006 compared to $0.002 for the fourth quarter of 2013.

FFO for the year ended December 31, 2013 was $1,933 compared to $864 for the 2012.  FFO per share for 2013 was $0.016 compared to $0.007 in 2012.

Child Care Centre Portfolio Overview
The Company's child care centre locations, number of licensed spaces and average occupancy rates are as shown in the table that follows.  Average occupancies exhibit lower levels of attendance July through August due to seasonality, the negative effect of which was reduced in 2013 due to improved results from summer programming.

Deferred Share Units ("DSU's")
For the three months ended December 31, 2013, five members of the board of directors of BrightPath elected to receive board fees of $46 in the form of 153,123 DSU's in lieu of cash otherwise payable.  The DSU's were issued on January 31, 2014.

Outlook

The Company enters 2014 with clarity and high expectations.  During 2013, BrightPath invested not only in technology and talent, but also in analysis and planning to optimize efforts in 2014 and 2015.  The Company's deliverables are clear:

• To maximize the return on capital already invested through optimized management of enrollment, fees and all costs - labour, other operating and general and administrative; and
• To layer on substantial, accretive growth through newly developed centres and acquisitions.

Action with respect to both of these priorities is well underway.  With respect to current operations, the Company has initiated the following to improve financial performance in all centres:

• A price increase was implemented effective January 1, 2014 - somewhat higher than inflation to bring fees in line with the Company's position in the market.  This increase was based on detailed centre-level analysis, taking occupancy levels and competitor rates into consideration;
• The food menus and food procurement strategy has been revisited to augment high nutritional standards while managing cost and improving the effectiveness of centre operations.  The Company has consolidated its food purchasing with fewer vendors and is taking advantage of its purchasing power to have food delivered for all in best value;
• Other operating costs are being managed by negotiating volume discounts wherever possible;
• The Company is utilizing the information now available through its new technology to optimize labour efficiency, ensuring ratios as required by legislation are met at all times while optimizing costs; and
• An overhead reduction initiative is well underway with the streamlining of several functions, the transfer of the accounting department to Toronto and the relocation and pending relocation of the Toronto and Calgary offices to lower cost facilities.

These specific initiatives are running parallel with the ongoing efforts to increase enrollment at all centres with available space and position the centres to be destinations of choice for discerning parents.

The corporate and operating name changes support the effort as the Company realizes improved recognition of its brand and broader social marketing.  Further, the vision and mission of the Company is clearer with a more relevant name and the effort put forth in communicating the Company's commitment to being the Canadian leader in child development and care.

BrightPath is very pleased with the progress being made with respect to newly-developed centres. The newest development in Surrey, British Columbia is on track to open in the fourth quarter of 2014, and the early indication of enrollment is robust.  Furthermore, the Company is in the late stages of negotiations with respect to two additional greenfield centres in high growth markets in Alberta.  The western provinces have emerged as those of greatest opportunity in the current market environment, although we remain committed to being a national child care owner and developer.

The Company looks forward to realizing the benefits of these operating and growth initiatives as we proceed into 2014 and to improved financial metrics therefrom.

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.

BrightPath utilizes a number of key measures, such as Adjusted EBITDA, FFO, AFFO, occupancy and centre margin, that in its opinion are critical to measuring the progress of the Company towards its strategic goals. The Company uses "stabilized centre results" to measure performance. 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. AFFO is calculated by adjusting FFO to add back stock based compensation and deduct maintenance capital expenditures.  Maintenance capital expenditures consist of capital expenditures that are capitalized for accounting purposes but are considered to represent recurring costs such as facilities and leasehold maintenance and the replacement of toys, appliances and other equipment.

Adjusted EBITDA, FFO and AFFO do not have standardized meanings prescribed by IFRS.  The Company's method of calculating Adjusted EBITDA, FFO and AFFO may be different from other entities and, accordingly, may not be comparable to such other entities. Adjusted EBITDA, 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 Adjusted EBITDA, FFO and AFFO.

QUARTERLY CONFERENCE CALL

BrightPath's quarterly results conference call is scheduled for Friday, March 28, 2014 at 10:00 am EST.  The call details are as follows:

To access the conference call by telephone, dial +1 (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, April 14, 2014 at midnight. To access the archived conference call, dial +1 (416) 849-0833 or +1 (855) 859-2056 and enter the reservation password 18186621 followed by the number sign.

A live audio webcast of the conference call will be available at: http://www.newswire.ca/en/webcast/detail/1326089/1464825. 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.

For more information on BrightPath visit www.BrightPathKids.com/corporate.  (TSX‐V: BPE). 

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 BrightPath'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", "anticipates", "expects", "projects", "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 and/or developments of BrightPath to differ materially from the results, performance, achievements and/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, BrightPath 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 BrightPath to differ materially from the results, performance, achievements and/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.

BrightPath Early Learning Inc.
Consolidated Statements of Financial Position

BrightPath Early Learning Inc.
Consolidated Statements of Operations and Comprehensive Loss
Years ended December 31, 2013 and 2012

BrightPath Early Learning Inc.
Consolidated Statements of Changes in Shareholders' Equity
Years ended December 31, 2013 and 2012

BrightPath Early Learning Inc.
Consolidated Statements of Cash Flow
Years ended December 31, 2013 and 2012

SOURCE BrightPath Early Learning Inc.