easyhome Ltd.
TSX : EH

easyhome Ltd.

November 03, 2005 18:42 ET

easyhome Ltd. Announces 16.4% Revenue Growth and 8.8% Same Store Revenue Growth for the Third Quarter; Operating Income and EPS Continue to Increase

EDMONTON, ALBERTA--(CCNMatthews - Nov. 3, 2005) - easyhome Ltd. (TSX:EH), Canada's leading merchandise rental company, today announced its results for the third quarter ending September 30, 2005.

Revenue for the third quarter increased to $25.7 million, an increase of $3.6 million, or 16.4%, from $22.1 million a year ago. Same store revenue growth (revenue from stores open for the entirety of the comparable periods) was 8.8% for the quarter, building on the 8.7% increase in the comparable period last year. An increased customer base accounted for all of the growth in the rental agreement portfolio.

During the quarter, the Company reversed $500,000 of the class action settlement provision that was recorded in the second quarter of 2005. Because of the declining rate of redemption of the credit vouchers, management is of the view that the remaining provision of $511,000 will be adequate to cover any costs and credit voucher redemptions to December 31, 2005 when the vouchers expire.

Excluding this $500,000 reversal, operating income (income before interest and income taxes) for the quarter was $3.3 million, an increase of $400,000 over last year, or 12.1%. Net income would have been $2.0 million. Diluted earnings per share would have been $0.20.

In the third quarter of 2004, a future tax asset valuation reserve of $2.3 million was reversed through income tax expense. Excluding this reversal, third quarter net income in 2004 would have been $1.8 million and diluted earnings per share would have been $0.18.

Including the $500,000 class action provision recovery in 2005 and the $2.3 million future tax asset valuation reserve reversal in 2004, operating income was $3.8 million in 2005 compared with operating income of $2.9 million during the same quarter last year. Net income decreased $1.8 million, from $4.1 million in 2004 to $2.3 million in 2005 and diluted earnings per share decreased from $0.41 to $0.23.

Revenue for the nine months ended September 30, 2005 was $75.5 million compared with $64.6 million for the same period last year, an increase of $10.9 million, or 16.9%. Same store revenue growth (revenue from stores open for the entirety of the comparable periods) for the nine months was 8.5% compared with 9.3% last year. The growth in revenue is entirely attributable to an increase in the Company's customer base.

Excluding the class action provision, operating income for the nine months ended September 30, 2005 was $9.5 million, an increase of $1.9 million over last year, or 24.5%. Net income would have been $5.9 million, an increase of $1.1 million over last year, or 23.3%. Diluted earnings per share would have been $0.57 compared with $0.47 last year. Net income and diluted earnings per share for the nine months ended September 30, 2004 exclude the effect of the future tax asset valuation reserve reversal of $2.3 million.

Including the $3.1 million class action provision in 2005 and the $2.3 million future tax asset valuation reserve reversal in 2004, operating income for the nine months ended September 30, 2005 decreased to $6.4 million from $7.6 million a year ago. Net income was $3.9 million compared with $7 million last year and diluted earnings per share were $0.38 compared with $0.70 in the 2004 comparable period.

Commenting on the results, David Ingram, President and CEO said, "easyhome has continued to focus its efforts on carefully planned and controlled growth. For the 48th consecutive month, our revenue has shown comparable increases and at a pace which is consistent with the last 4 years. The improvements have come from a 16% increase in deliveries which has resulted in a 26% customer growth increase experienced in the third quarter compared to the same period in 2004. At the end of September, units on rent were 22% higher and our potential monthly rental revenue had increased $1 million or 16% from 1 year ago."

In the third quarter, easyhome continued to execute its new store expansion program, opening 6 new stores and preparing to open 3 more at the beginning of October. A total of 19 stores have opened in 2005 and the Company expects to complete the year with a total of 24 new stores. In addition to this, 4 new Leon's kiosk locations are expected to open in November bringing the total store count at year-end to 166 stores and 5 kiosks.

"We have now opened 32 new stores since November 2003 of which 22 have been open 6 months or longer. They continue to perform above plan with the average location achieving profit in months 6-7," said Mr. Ingram

"From a financial perspective, the third quarter had modest earnings growth and was affected by 3 specific areas of our operation. Firstly, we had a higher drag from new stores due to more openings that created losses of $435,000 compared with $75,000 in the third quarter of 2004. Secondly, the impact of fuel price increases placed a burden of $100,000 on distribution expense. Lastly, our rental asset amortization run rate increased by 1.3%, mainly due to a weaker performance with collections during the summer months, which resulted in an impact of approximately $300,000. Combined, these expenses were equivalent to $0.05 in EPS."

Concluding, Mr. Ingram stated, "We remain optimistic for the fourth quarter and see continued demand from customers for our rental proposition. Our collections performance has returned to normal run rates, and our merchandise and marketing team have built an exciting schedule for the Holiday Season."

Donald K. Johnson, Chairman of the Board, commented, "We continue to be pleased with the Company's progress especially in relation to the expansion of the store base with 22 net new store openings in the last twelve months entirely funded out of internal cash flow."

Today, the Board of Directors approved a dividend payment of $0.04 per share payable on January 4, 2006 to the holders of common shares of record on the close of business on November 30, 2005.

The above analysis refers to certain financial measures that are not determined in accordance with generally accepted accounting principles ("GAAP") in Canada. These measures do not have standardized meanings and may not be comparable to similar measures presented by other companies. Although measures such as operating income and same store revenue growth do not have standardized meanings prescribed by GAAP, these measures are defined herein or can be determined by reference to our financial statements. We discuss these measures because we believe that they facilitate the understanding of the results of our operations and financial position.

easyhome Ltd., with 161 stores, is Canada's largest merchandise rental company and the fourth largest in North America, offering top quality, brand-name household furnishings, appliances and home electronic products to consumers under weekly or monthly rental agreements. easyhome Ltd. is listed on the TSX under the symbol 'EH'.

Certain information included in this news release may constitute forward-looking statements. Forward-looking statements are based on current expectations and entail various risks and uncertainties. These risks and uncertainties could cause or contribute to actual results that are materially different from those expressed or implied. The Company disclaims any obligation or intention to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.



CONSOLIDATED BALANCE SHEETS
(unaudited)
As at:

September 30, December 31,
(in 000's) 2005 2004
------------------------------------------------------------------------
$ $
ASSETS

Amounts receivable 1,216 1,454
Prepaid expenses 1,042 796
Rental assets 46,006 41,485
Capital assets 5,752 5,435
Future tax assets 6,937 9,058
Intangible assets 202 267
Deferred costs 9 12
Goodwill 10,779 10,779
------------------------------------------------------------------------
71,943 69,286
------------------------------------------------------------------------
------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
Bank revolving term loan 1,817 2,237
Trade accounts payable 5,770 6,776
Accrued liabilities 816 1,053
Accrued bonuses and other employee costs 2,084 3,105
Dividends payable 390 245
Deferred lease inducements 471 279
Provision for class action settlement costs 511 -
Unearned revenue 350 363
Income taxes payable 473 244
------------------------------------------------------------------------
12,682 14,302
------------------------------------------------------------------------

Contingencies
Shareholders' equity
Common shares, without par value 45,818 44,632
9,740,209 shares issued and outstanding
(December 31, 2004 - 9,187,484)
Contributed surplus 582 240
Retained earnings 12,861 10,112
------------------------------------------------------------------------
59,261 54,984
------------------------------------------------------------------------
71,943 69,286
------------------------------------------------------------------------
------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(unaudited)
Three months Nine months
ended ended
September 30, September 30,
(in 000's, except earnings per share) 2005 2004 2005 2004
--------------------------------------------------------- --------------
$ $ $ $

REVENUE
Rental 21,411 18,429 63,090 54,320
Other 4,245 3,607 12,383 10,216
--------------------------------------------------------- --------------
25,656 22,036 75,473 64,536
--------------------------------------------------------- --------------

EXPENSES
Salaries and benefits 7,352 6,488 21,624 18,945
Selling, general and administrative 2,409 2,079 7,886 6,815
Occupancy costs 3,302 2,870 9,474 8,602
Automotive and travel 1,163 908 3,218 2,616
--------------------------------------------------------- --------------
14,226 12,345 42,202 36,978
--------------------------------------------------------- --------------
Amortization
Amortization of rental assets 7,751 6,371 22,580 18,780
Amortization of capital assets,
intangible assets and deferred
costs 388 383 1,179 1,136
--------------------------------------------------------- --------------
8,139 6,754 23,759 19,916
--------------------------------------------------------- --------------
Total operating expenses and
amortization before class action
settlement provision (recovery) 22,365 19,099 65,961 56,894
--------------------------------------------------------- --------------
Operating income before class
action settlement provision 3,291 2,937 9,512 7,642
Class action settlement provision
(recovery) (500) - 3,100 -
--------------------------------------------------------- --------------
Operating income 3,791 2,937 6,412 7,642
Interest expense 21 61 73 223
--------------------------------------------------------- --------------
Income before income taxes 3,770 2,876 6,339 7,419
Income taxes
Current 288 - 288 -
Future 1,145 (1,240) 2,121 395
--------------------------------------------------------- --------------
Net income for the period 2,337 4,116 3,930 7,024
--------------------------------------------------------- --------------
Retained earnings, beginning
of period 10,918 4,756 10,112 2,090
Common share dividends (394) (243) (1,181) (485)
--------------------------------------------------------- --------------
Retained earnings, end of period 12,861 8,629 12,861 8,629
--------------------------------------------------------- --------------
--------------------------------------------------------- --------------
Earnings per share
Basic 0.24 0.45 0.41 0.77
Diluted 0.23 0.41 0.38 0.70
--------------------------------------------------------- --------------
--------------------------------------------------------- --------------


CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three months Nine months
ended ended
September 30, September 30,
(in 000's) 2005 2004 2005 2004
--------------------------------------------------------- --------------
$ $ $ $
OPERATING ACTIVITIES
Net income for the period 2,337 4,116 3,930 7,024
Items not affecting cash:
Recognition of stock based
compensation 129 88 326 158
Amortization of rental assets 7,751 6,371 22,580 18,780
Amortization of capital assets,
intangible assets and deferred
costs 388 405 1,179 1,203
Future income taxes 1,145 (1,240) 2,121 395
Net change in non-cash operating
items -
Rental assets (9,581) (8,800)(27,101)(24,052)
Class action settlement provision
(recovery) (500) - 3,100 -
Other (1,017) 1,496 (4,453) 189
--------------------------------------------------------- --------------
Cash flow from operating activities 652 2,436 1,682 3,697
--------------------------------------------------------- --------------

INVESTING ACTIVITIES
Purchase of capital assets (669) (541) (1,781) (1,346)
Proceeds on disposition of capital
assets 164 6 353 32
Repayment of note payable related
to acquisition - (49) - (143)
--------------------------------------------------------- --------------
Cash flow from investing activities (505) (584) (1,428) (1,457)
--------------------------------------------------------- --------------

FINANCING ACTIVITIES
Advance (repayment) of bank revolving
term loan 221 (1,687) (420) (2,136)
Issuance of common shares on exercise
of options and warrants 20 77 1,186 138
Common share dividend payments (388) (242) (1,020) (242)
--------------------------------------------------------- --------------
Cash flow from financing activities (147)(1,852) (254) (2,240)
--------------------------------------------------------- --------------

Net change in cash - - - -
--------------------------------------------------------- --------------
--------------------------------------------------------- --------------


Contact Information

  • easyhome Ltd.
    David Ingram
    President & Chief Executive Officer
    (905) 272-2788
    or
    easyhome Ltd.
    Bill Johnson
    Executive Vice President & Chief Financial Officer
    (780) 930-3000
    or
    easyhome Ltd.
    Donald K. Johnson
    Chairman of the Board
    (416) 359-4119