easyhome Ltd.
TSX : EH

easyhome Ltd.

August 11, 2005 20:32 ET

easyhome Ltd. Announces 50% Increase in Diluted Earnings Per Share 'Before the Class Action Settlement Costs' and Record Same Store Revenue Growth of 11.9% for the Second Quarter

EDMONTON, ALBERTA--(CCNMatthews - Aug. 11, 2005) - easyhome Ltd. (TSX:EH), Canada's leading merchandise rental company, today announced record quarterly revenue and same store revenue growth for its 2005 second quarter.

easyhome increased revenue for the second quarter to $25.8 million, the eighth consecutive quarterly record for the Company and an increase of $4.2 million, or 19.5%, from $21.6 million a year ago. Same store revenue growth (revenue from stores open for the entirety of the comparable periods) was 11.9% for the quarter, building on the 10.4% 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, and as publicly announced on June 15, 2005, the Company settled a class action lawsuit and recorded a pre-tax provision of $3.6 million to cover the estimated costs of the settlement, including legal fees awarded under the settlement.

Excluding this pre-tax provision of $3.6 million, operating income (income before interest and income taxes) was $3.5 million, an increase of $1.3 million over last year, or 56.8%. Net income would have been $2.1 million, an increase of $700,000 over last year's net income of $1.4 million, or 56%. Diluted earnings per share would have been $0.21 compared with $0.14 last year, a 50% increase.

After the $3.6 million provision referred to above, operating income decreased to an operating loss of $137,000 compared with operating income of $2.2 million during the same quarter last year. Net income decreased from $1.4 million in 2004 to a loss of $96,000 in 2005 and diluted earnings per share decreased from $0.14 to a loss of $0.01.

Revenue for the six months ended June 30, 2005 was $49.8 million compared with $42.5 million for the same period last year, an increase of $7.3 million, or 17.2%. Same store revenue growth (revenue from stores open for the entirety of the comparable periods) for the six months was 8.9% compared with 9.6% 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 six months ended June 30, 2005 was $6.2 million, an increase of $1.5 million over last year, or 32.2%. Net income would have been $3.8 million, an increase of $900,000 over last year, or 31.5%. Diluted earnings per share would have been $0.37 compared with $0.29 last year, an increase of 27.6%.

After the $3.6 million provision referred to above, operating income for the six months ended June 30, 2005 decreased to $2.6 million from $4.7 million a year ago. Net income was $1.6 million compared to $2.9 million last year and diluted earnings per share were $0.15 compared with $0.29 in the 2004 comparable period.

Commenting on the results, David Ingram, President and CEO said, "We have now completed 45 consecutive months of comparable revenue growth, with 15 quarters of same store revenue improvement. Excluding the fourth quarter of 2004, the customer base increased at its fastest rate ever, contributing to an 18% increase since June 2004. The investment in our brand transition and new store build program has generated 8 sequential quarters of record revenue and a monthly rental revenue portfolio of $7.4 million which is $1.0 million higher than 12 months ago-an increase of 16%. Customers seeking an alternative access model to household consumer goods are making easyhome the store of choice as Canada's only national rental merchandise retailer."

Mr. Ingram continued, "We are particularly pleased with our new stores which have continued to exceed our financial model in revenues and store operating income. To date, 27 have opened since November 2003 and have averaged break-even in month 6 compared to month 10 in our model. We are, therefore, moving our 2005 new store openings to 24 from 21 with 6 and 8 openings in the third and fourth quarters respectively."

Concluding, Mr. Ingram stated, "Despite an increased investment in new stores, record rental asset purchases and class action settlement costs, we remain in excellent financial condition with a debt to equity ratio of less than 5%. With a strong balance sheet, coupled with consumer demand, we expect to achieve balance of year revenue growth consistent with the first 6 months of the year."

Donald K. Johnson, Chairman of the Board, commented, "easyhome's second quarter results demonstrate that our business model is one of the most successful in the North American merchandise rental industry. Excluding the provision for the class action settlement costs, our revenue growth, same store revenue growth, operating margin and percentage growth in earnings per share for Q2 exceeded that of our North American peer group. The management and employees of easyhome are to be congratulated by all stakeholders."

Today, the Board of Directors approved a dividend payment of $0.04 per share payable on October 4, 2005 to the holders of common shares of record on the close of business on September 20, 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 153 locations, 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:

June 30, December 31,
(in 000's) 2005 2004
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$ $

ASSETS

Amounts receivable 941 1,454
Prepaid expenses 1,177 796
Rental assets 44,176 41,485
Capital assets 5,612 5,435
Future tax assets 8,082 9,058
Intangible assets 224 267
Deferred costs 10 12
Goodwill 10,779 10,779
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71,001 69,286
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LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
Bank revolving term loan 1,596 2,237
Trade accounts payable 5,938 6,776
Accrued liabilities 829 1,053
Accrued bonuses and other employee costs 1,727 3,105
Dividends payable 388 245
Deferred lease inducements 437 279
Provision for class action
settlement costs 2,412 -
Unearned revenue 325 363
Income taxes payable 185 244
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13,837 14,302
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Contingencies

Shareholders' equity

Common shares, without par value
9,735,229 shares issued and outstanding
(December 31, 2004 - 9,187,484) 45,798 44,632
Contributed surplus 448 240
Retained earnings 10,918 10,112
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57,164 54,984
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71,001 69,286
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CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(unaudited)

Three months ended Six months ended
(in 000's, except June 30, June 30,
earnings per share) 2005 2004 2005 2004
---------------------------------------------------------------------
$ $ $ $

REVENUE

Rental 21,612 18,265 41,679 35,891
Other 4,214 3,353 8,138 6,609
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25,826 21,618 49,817 42,500
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EXPENSES

Salaries and benefits 7,127 6,396 14,272 12,457
Selling, general
and administrative 3,037 2,608 5,477 4,736
Occupancy costs 3,070 2,822 6,172 5,732
Automotive and travel 1,093 860 2,055 1,708
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14,327 12,686 27,976 24,633
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Amortization

Amortization of rental assets 7,638 6,350 14,829 12,409
Amortization of capital assets,
intangible assets and deferred
costs 398 373 791 753
---------------------------------------------------------------------
8,036 6,723 15,620 13,162
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Total operating expenses and
amortization before class
action settlement provision 22,363 19,409 43,596 37,795
---------------------------------------------------------------------
Operating income before
class action settlement
provision 3,463 2,209 6,221 4,705
Class action settlement provision 3,600 - 3,600 -
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Operating income (loss) (137) 2,209 2,621 4,705
Interest expense 18 71 52 162
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Income (loss) before income taxes (155) 2,138 2,569 4,543
---------------------------------------------------------------------
Income tax expense (recovery) (59) 769 976 1,635
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Net income (loss) for the period (96) 1,369 1,593 2,908
---------------------------------------------------------------------
Retained earnings, beginning
of period 11,407 3,629 10,112 2,090
Common share dividends (393) (242) (787) (242)
---------------------------------------------------------------------
Retained earnings, end of period 10,918 4,756 10,918 4,756
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Earnings (loss) per share

Basic (0.01) 0.15 0.17 0.32
Diluted (0.01) 0.14 0.15 0.29
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

Three months ended Six months ended
June 30, June 30,
(in 000's) 2005 2004 2005 2004
---------------------------------------------------------------------
$ $ $ $

OPERATING ACTIVITIES

Net income (loss) for the period (96) 1,369 1,593 2,908
Items not affecting cash:
Recognition of stock based
compensation 107 47 197 70
Amortization of rental assets 7,638 6,350 14,829 12,409
Amortization of capital assets,
intangible assets and deferred
costs 398 396 791 798
Future income taxes (59) 769 976 1,635
Net change in non-cash
operating items -
Rental assets (9,439) (7,844)(17,520) (15,252)
Class action settlement
provision 3,600 - 3,600 -
Other (873) 215 (3,436) (1,307)
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Cash flow from operating
activities 1,276 1,302 1,030 1,261
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INVESTING ACTIVITIES

Purchase of capital assets (710) (471) (1,113) (805)
Proceeds on disposition of
capital assets 149 21 190 26
Repayment of note payable
related to acquisition - (48) - (94)
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Cash flow from investing activities (561) (498) (923) (873)
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FINANCING ACTIVITIES

Repayment of bank revolving
term loan (440) (813) (641) (449)
Issuance of common shares on
exercise of options and warrants 112 9 1,166 61
Common share dividend payments (387) - (632) -
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Cash flow from financing activities (715) (804) (107) (388)
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Net change in cash - - - -
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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
    or
    easyhome Ltd.
    10239 178th Street - Edmonton, Alberta
    Canada T5S 1M3
    (780) 930-3000
    (780) 481-7426 (FAX)