easyhome Ltd.
TSX : EH

easyhome Ltd.

March 05, 2009 20:29 ET

easyhome Ltd. Reports 2008 Fourth Quarter and Year-End Results

MISSISSAUGA, ONTARIO--(Marketwire - March 5, 2009) - easyhome Ltd. (TSX:EH), Canada's leading merchandise leasing company, today announced its results for the fourth quarter and year ended December 31, 2008.

Revenue for the quarter ended December 31, 2008 was $44.1 million, an increase of $5.3 million or 13.5% compared with the same period a year ago. Operating income decreased to $3.4 million from $5.2 million a year earlier. Net income for the period was $1.8 million, compared to $2.7 million for 2007. Diluted earnings per share were $0.17 versus $0.26 the previous year.

For the full fiscal year, revenue was $162.5 million compared with $143.7 million for fiscal 2007. Diluted earnings per share were $0.84 versus $1.11 for the previous year.

Factors Affecting the Fourth Quarter

The acquisition of Insta-rent Inc. ("Insta-rent") in the third quarter increased revenue by approximately $3.5 million in the quarter. However, the integration process was a significant effort, and was not completed until year-end. It involved transferring more than 8000 Insta-rent accounts, closing 42 kiosk locations, closing redundant storage locations and the disposition of excess vehicles. As a result, the Company incurred $0.7 million in increased operating costs as the integration took longer than expected to complete.

The Company also incurred higher lease amortization in the quarter (31.8% versus 29.4% in Q4/08). Approximately $0.8 million of this increase relates to damaged or missing inventory which arose as result of weaker inventory disciplines at the store level. The Company believes that these items were isolated to this quarter and reduced diluted earnings per share by approximately $0.10 in the quarter.



----------------------------------------------------------------------------
In millions - except
Share Detail Q4 2008 Q4 2007 Change FY2008 FY 2007 Change
----------------------------------------------------------------------------
Revenue $44.1m $38.8m 13.5% $162.5m $143.7m 13.1%
----------------------------------------------------------------------------
Operating Income $3.4m $5.2m (34.6%) $15.9m $20.5m (22.3%)
----------------------------------------------------------------------------
Net Income $1.8m $2.7m (35.2%) $9.0m $11.7m (23.3%)
----------------------------------------------------------------------------
Diluted EPS $0.17 $0.26 (34.6%) $0.84 $1.11 (24.3%)
----------------------------------------------------------------------------


Commenting on the results, David Ingram, President and CEO stated, "Despite the challenges of 2008 we are enthused by the benefits that our new initiatives will provide our growing organization. Our new IT system is more efficient and more adaptable to our different formats, while providing data faster and in more detail than our previous systems. Insta-rent added approximately 10% more customers and expanded our brand in 42 markets where we had co-existed. As we stated in November, 2008, our focus in 2009 will be on rigorous cost controls, improving same store profitability, and keeping the Canadian core business free from new distractions."

Mr. Ingram added, "We anticipate solid sequential improvement to our Q1 results as the operations team execute tighter cost management and improved cash collections which have shown success during the first two months of this quarter. In January, we rolled out a customer benefit program, which will provide unemployment insurance and some peace of mind to customers during this recession. We expect the easyfinancial division to continue growing its operating profit as we add six to eight kiosks in 2009. The US division is targeted to achieve break-even later this year, which will also allow the Company to tax effect its cumulative losses."

easyhome provides an alternative for the cash and credit constrained customer who we believe will benefit from the economic stimulus package proposed in the US and Canada. However, it is impossible to assess the depth and duration of this recession.

In this environment our 2009 targets are:

- Total revenue growth of 13-15%

- Same store revenue growth of 3.5-5.0%.

- New store openings:

-- 8-10 corporate stores

-- 12-15 franchise stores

-- 6-8 easyfinancial kiosks

Mr. Ingram concluded, "The fewer new corporate stores, combined with a reduction in capital spend, has resulted in a targeted reduction of $10 million in net debt. Fiscal 2008 was our first year of earnings decline in eight years, and that is as disappointing to us as it is to shareholders. However, I am very optimistic that in 2009, we will return your Company to a year of solid growth."

Donald K. Johnson, the Chairman of the Board, commented, "2008 was a very challenging and disappointing year for our Company. It was the first time in eight years that our management team has not met or exceeded plan. However, with the distractions associated with the IT conversion and the Insta-rent acquisition now behind us, and management focused on execution of our business plan, we look forward to easyhome returning to its track record of consistent growth in revenues, profits and dividends."

The Board of Directors has approved a dividend payment of $0.085 per share payable on April 10, 2009 to the holders of common shares of record as at the close of business on March 31, 2009.

About easyhome

As at December 31, 2008, easyhome Ltd. had 229 stores, including 209 Canadian corporate stores, eleven U.S. corporate stores, three U.S. franchised stores, five Canadian franchised stores and one licensed Canadian store. easyhome Ltd. is Canada's largest merchandise leasing company and the third largest in North America, offering top quality, brand-name household furnishings, appliances and home electronic products to consumers under weekly or monthly leasing agreements. easyhome Ltd. is listed on the TSX under the symbol 'EH'.

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.

Forward-Looking Statements

This news release includes forward-looking information about easyhome including its business operations, strategy. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as 'expects', 'anticipates', 'intends', 'plans', 'believes' or negative versions thereof and similar expressions. In addition, any statements that may be made concerning future financial performance (including revenues, earnings or growth rates), ongoing business strategies or prospects about future events is also a forward-looking statement. Forward-looking statements are based on certain factors and assumptions, including expected growth, results of operations and business prospects and are inherently subject to among other things, risks, uncertainties and assumptions about our operations economic factors and the industry generally. They are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied by forward-looking statements, due to, but not limited to important factors such as the integration of the Insta-Rent operations with easyhome's. The reader is cautioned to consider these and other factors carefully and not place undue reliance on easyhome's forward-looking statements. Management of easyhome is under no obligation (and expressly disclaim any such obligation) to update or alter the forward-looking statements whether as a result of new information, future events or otherwise, unless otherwise required by law.



CONSOLIDATED BALANCE SHEETS
(unaudited)

As at:

December 31, December 31,
(in 000's) 2008 2007
----------------------------------------------------------------------------
$ $
----------------------------------------------------------------------------

ASSETS

Amounts receivable 5,169 4,057
Consumer loans 4,064 1,919
Income taxes receivable 1,118 -
Prepaid expenses 2,790 1,740
Lease assets 82,443 77,072
Property and equipment 16,846 12,799
Future tax assets 6,609 5,947
Intangible assets and deferred costs 1,953 1,946
Goodwill 17,324 10,779
----------------------------------------------------------------------------
138,316 116,259
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
Bank revolving term loan 26,139 13,770
Trade accounts payable 6,248 12,615
Accrued liabilities 2,759 1,410
Accrued payables, bonuses and other employee costs 2,478 3,078
Dividends payable 893 726
Deferred lease inducements 2,540 2,591
Unearned revenue 734 498
Income taxes payable - 1,624
Term debt 9,750 -
----------------------------------------------------------------------------
51,541 36,312
----------------------------------------------------------------------------

Shareholders' equity

Common shares 49,285 48,521
Contributed surplus 2,665 1,985
Retained earnings 34,825 29,441
----------------------------------------------------------------------------
86,775 79,947
----------------------------------------------------------------------------
138,316 116,259
----------------------------------------------------------------------------
----------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(unaudited)
Three months ended Twelve months ended
(in 000's, except earnings per December 31, December 31,
share) 2008 2007 2008 2007
----------------------------------------------------------------------------
$ $ $ $
----------------------------------------------------------------------------

REVENUE
Lease 35,342 31,422 130,603 116,805
Other 8,710 7,379 31,890 26,870
----------------------------------------------------------------------------
44,052 38,801 162,493 143,675
----------------------------------------------------------------------------

EXPENSES
Salaries and benefits 12,835 10,916 47,659 40,583
Selling, general and
administrative 5,095 3,699 16,261 13,789
Occupancy 5,819 5,064 22,317 19,368
Automotive and travel 1,783 1,661 7,014 6,162
----------------------------------------------------------------------------
25,532 21,340 93,251 79,902
----------------------------------------------------------------------------
Amortization
Amortization of lease assets 14,001 11,406 49,395 40,429
Amortization of property and
equipment, intangible assets and
deferred costs 1,134 842 3,926 2,846
----------------------------------------------------------------------------
15,135 12,248 53,321 43,275
----------------------------------------------------------------------------
Total operating expenses and
amortization 40,667 33,588 146,572 123,177
----------------------------------------------------------------------------
Operating income 3,385 5,213 15,921 20,498
Interest expense 370 185 1,089 747
----------------------------------------------------------------------------
Income before income taxes 3,015 5,028 14,832 19,751
----------------------------------------------------------------------------
Income taxes
Current (165) 2,510 4,013 7,324
Future 1,412 (211) 1,863 742
----------------------------------------------------------------------------
1,247 2,299 5,876 8,066
----------------------------------------------------------------------------
Net income and comprehensive
income for the period 1,768 2,729 8,956 11,685
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Earnings per share

Basic 0.16 0.26 0.85 1.13
Diluted 0.17 0.26 0.84 1.11
----------------------------------------------------------------------------
----------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(unaudited)
Three months ended Twelve months ended
December 31, December 31,
(in 000's) 2008 2007 2008 2007
----------------------------------------------------------------------------
$ $ $ $
----------------------------------------------------------------------------

Retained earnings, beginning of
period 33,941 27,457 29,441 20,718
Transitional adjustment on the
adoption of new accounting policies - - - (27)
----------------------------------------------------------------------------
Retained earnings, beginning of
period as restated 33,941 27,457 29,441 20,691
Net income for the period 1,768 2,729 8,956 11,685
Common share dividends (884) (745) (3,572) (2,935)
----------------------------------------------------------------------------
Retained earnings, end of period 34,825 29,441 34,825 29,441
----------------------------------------------------------------------------
----------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three months ended Twelve months ended
December 31, December 31,
(in 000's) 2008 2007 2008 2007
----------------------------------------------------------------------------
$ $ $ $
----------------------------------------------------------------------------
CASH PROVIDED BY (USED IN)

OPERATING ACTIVITIES
Net income for the period 1,768 2,729 8,956 11,685
Items not affecting cash:
Recognition of stock based
compensation 313 269 1,060 1,033
Amortization of lease assets 14,001 11,406 49,395 40,429
Amortization of property and
equipment, intangible assets and
deferred costs 1,134 842 3,926 2,846
Future income taxes 1,412 (211) 1,863 742
Net change in non-cash operating
items
Lease assets (13,972) (19,022) (48,262) (53,174)
Other (6,238) 4,181 (18,218) (1,427)
----------------------------------------------------------------------------
(1,582) 194 (1,280) 2,134
----------------------------------------------------------------------------

INVESTING ACTIVITIES
Purchase of property and equipment (214) (1,527) (7,858) (6,312)
Purchase of intangible assets and
deferred costs 37 (4) (4) (1,939)
Business acquisition (1,303) - (10,100) -
Proceeds on disposition of property
and equipment 42 62 119 431
----------------------------------------------------------------------------
(1,438) (1,469) (17,843) (7,820)
----------------------------------------------------------------------------

FINANCING ACTIVITIES
Advance (repayment) of bank
revolving term loan 2,950 1,958 12,400 7,495
Advance of term debt 953 - 9,750 -
Issuance of common shares on
exercise of options - 43 454 963
Shares purchased for cancellation 17 - (69) -
Common share dividend payments (900) (726) (3,412) (2,772)
----------------------------------------------------------------------------
3,020 1,275 19,123 5,686
----------------------------------------------------------------------------

Net change in cash for the period - - - -
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Contact Information

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