easyhome Ltd.
TSX : EH

easyhome Ltd.

August 03, 2011 18:31 ET

easyhome Ltd. Reports 2011 Second Quarter Results

MISSISSAUGA, ONTARIO--(Marketwire - Aug. 3, 2011) - easyhome Ltd. (TSX:EH), Canada's largest merchandise leasing Company and a growing provider of financial services, today announced its results for the second quarter and six months ended June 30, 2011.

easyhome Ltd. ("easyhome") continued to show strong revenue increases during the second quarter of 2011. Revenue for the quarter increased 8.0% to $46.3 million, driven primarily by the expansion of the easyfinancial Services business and the growth of its consumer loans receivable portfolio. Reported net income for the quarter was $2.7 million, an increase of 36.0% over the second quarter of 2010. The Company reported diluted earnings per share of $0.23, compared to $0.19 for the second quarter of 2010. On a year-to-date basis, revenues have increased 7.7% and diluted earnings per share have increased from $0.38 in 2010 to $0.43 in 2011. The 2011 diluted earnings per share reflect the impact of the equity offering completed in December 2010.

Other highlights for the second quarter of 2011 include:


--  Corporate same store revenue growth of 6.4% compared with an increase of
    1.3% in 2010 
--  18.2% growth during the quarter of the consumer loans receivable
    portfolio representing a year-over-year increase of 104% and an ending
    gross consumer loans receivable portfolio of $35.3 million 
--  Return on equity of 11.5% 
--  Cash flow from operating activities of $12.2 million 

Commenting on the results, David Ingram, easyhome's President and Chief Executive Officer stated "Our results for the second quarter maintain the trend of revenue and earnings growth. The continuing investment to improve both our internal processes and infrastructure are providing a platform for positive sustainable growth. These enhancements, coupled with the increased capital secured through our recent bank refinancing and the December 2010 equity offering, will support the growth of all business units, in particular easyfinancial Services."

Second Quarter Results

For the second quarter ended June 30, 2011, easyhome generated revenues of $46.3 million, an increase from $42.9 million in the second quarter of 2010. At the store level, including easyfinancial, same store revenue growth for the quarter was 6.4% compared with a growth of 1.3% for the second quarter of 2010.

On a segmented basis, the Company's leasing operations recorded revenues of $40.3 million, unchanged from same period last year. Franchising contributed revenues of $0.3 million, also unchanged from the same period last year. easyfinancial Services revenues increased to $5.6 million from $2.3 million for the same period last year. The improvement is a result of the increase in the consumer loans receivable portfolio from $17.3 million to $35.3 million.

Operating income, which is income before interest expense and income taxes, increased 25.3% to $3.9 million from $3.1 million in the second quarter of 2010. Quarterly revenue increases were offset by additional costs resulting from additional stores and kiosks, higher bad debt expenses arising from a larger consumer loans receivable portfolio and a greater level of corporate costs to support sustainable growth. Operating income was also increased by a reduction in depreciation and amortization. As a percentage of revenue, operating income improved from 7.2% to 8.4%.

Net income increased 36% to $2.7 million for the second quarter of 2011, compared with $2.0 million for the second quarter of 2010. On a per share basis, earnings were $0.23 compared with $0.19. Adjusted for the restructuring charges and bad debt expenses related to the employee fraud in the prior year, earnings were $2.5 million, or $0.23 per share, a year ago.

Six Months Results

For the first half of the year, easyhome recorded revenues of $92.5 million, up 7.7% compared with $85.9 million in the first six months of 2010. Operating income for the period was $7.7 million, an increase of 16.3% compared with $6.6 million in the first six months of 2010. Diluted earnings per share increased from $0.38 to $0.43. Net income, adjusted for unusual items, was $5.1 million compared with $4.8 million for the same period last year. On a per share basis and excluding unusual items, diluted earnings per share was $0.43 compared with $0.46 a year ago.

Cash flow provided by operating activities for the six months ended June, 2011 was $15.8 million. Included in these cash flows was a net investment in the easyfinancial Services consumer loans receivable portfolio of $14.2 million. If this net investment in the loan portfolio was treated as cash flow from investing activities, cash flow from operating activities would be $30.0 million. This cash flow enabled the Company to invest in the portfolios to drive future revenue growth of all business units, strengthen the management and infrastructure to support sustainable growth and maintain its total dividend payments for the quarter. Subsequent to June 30, 2011, and as previously announced, the Company increased its bank revolving credit facility by $10 million which will provide additional funding to further the growth of the easyfinancial Services business.

Donald K. Johnson, Chairman of the Board, commented, "The Board is pleased with the continued progress and improved profitability of the Company. We are confident that management is taking the necessary steps to support the Company's strategy for sustainable growth and look forward to the resulting improved value for easyhome's shareholders."

About easyhome

The Board of Directors has approved a quarterly dividend payment of $0.085 per share payable on October 5, 2011 to common shareholders of record as at the close of business on September 27, 2011.

As at June 30, 2011, easyhome Ltd. had 258 stores, including 41 franchised/licensed locations. The Company also operated 72 easyfinancial kiosks within existing easyhome stores, one stand- alone easyfinancial location and one national loan office.

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 through both corporate and franchise stores. In addition, the Company offers a variety of financial services, including loans, prepaid cards and cheque cashing through its easyfinancial services business. easyhome Ltd. is listed on the TSX under the symbol 'EH'. For more information, visit www.easyhome.ca.

The above analysis refers to certain financial measures that are not determined in accordance with international financial reporting standards ("IFRS"). 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 IFRS, these measures are defined in our management discussion and analysis which is available on SEDAR or on the Company's website at www.easyhome.ca 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 statements about easyhome Ltd. including its business operations, strategy and expected financial performance and condition. 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 statement that may be made concerning future financial performance (including revenue, 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 made by us, due to, but not limited to important factors such as our ability to enter into new lease and/or financing agreements, collect on existing lease and/or financing agreements, open new locations on favourable terms, secure new franchised locations, purchase products which appeal to our customers at a competitive rate, cope with changes in legislation, raise capital under favourable terms, manage the impact of litigation, control costs at all levels of the organization and maintain and enhance our system of internal controls. We caution that the foregoing list is not exhaustive. The reader is cautioned to consider these and other factors carefully and not place undue reliance on forward-looking statements, which may not be appropriate for other purposes. We are 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.

(tables follow)

easyhome Ltd.

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited)

(expressed in thousands of Canadian dollars)


                                                     As at            As at 
                                                   June 30,     December 31,
                                                      2011             2010 
----------------------------------------------------------------------------
ASSETS                                                                      
Current assets                                                              
Cash                                                   778              731 
Amounts receivable                                   4,815            4,809 
Income taxes recoverable                             1,240                - 
Consumer loans receivable (note 4)                  27,332           18,162 
Prepaid expenses                                     1,011            1,296 
----------------------------------------------------------------------------
Total current assets                                35,176           24,998 
----------------------------------------------------------------------------
Amounts receivable                                   1,066            1,062 
Consumer loans receivable (note 4)                   6,165            3,667 
Lease assets                                        66,041           68,622 
Property and equipment (note 5)                     12,180           12,953 
Deferred tax assets (note 9)                         5,605            8,047 
Intangible assets                                    3,040            3,093 
Goodwill                                            17,325           17,325 
----------------------------------------------------------------------------
TOTAL ASSETS                                       146,598          139,767 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY                                        
Current liabilities                                                         
Bank revolving credit facility (note 6)             25,808           15,649 
Accounts payable and accrued liabilities            15,653           19,322 
Income taxes payable                                     -               65 
Dividends payable                                    1,007              892 
Deferred lease inducements                             558              578 
Unearned revenue                                     4,590            5,310 
Term loan (note 6)                                     867            2,602 
Provisions                                             143              421 
----------------------------------------------------------------------------
Total current liabilities                           48,626           44,839 
----------------------------------------------------------------------------
Accounts payable and accrued liabilities               753              450 
Deferred lease inducements                           1,766            1,881 
Provisions                                             380              407 
----------------------------------------------------------------------------
Total liabilities                                   51,525           47,577 
----------------------------------------------------------------------------
Shareholders' equity                                                        
Share capital (note 7)                              60,207           60,074 
Contributed surplus                                  3,077            3,061 
Accumulated comprehensive loss                        (604)            (257)
Retained earnings                                   32,393           29,312 
----------------------------------------------------------------------------
Total shareholders' equity                          95,073           92,190 
----------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY         146,598          139,767 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the interim condensed consolidated financial statements

easyhome Ltd.

INTERIM CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(expressed in thousands of Canadian dollars except earnings per share)


                            Three months ended             Six months ended
                 -----------------------------------------------------------
                        June 30,       June 30,      June 30,       June 30,
                           2011           2010          2011           2010
----------------------------------------------------------------------------
REVENUE                                                                     
Lease revenue            39,376         39,659        80,158         80,366
Interest income           3,469          1,314         6,312          2,193
Other                     3,419          1,878         5,997          3,330
----------------------------------------------------------------------------
                         46,264         42,851        92,467         85,889
----------------------------------------------------------------------------
EXPENSES                                                                    
Salaries and                                                                
 benefits (note                                                             
 8)                      15,135         13,613        29,825         26,550
Advertising and                                                             
 promotion                1,872          1,606         3,466          2,753
Bad debts                 1,390            696         2,514          1,110
Occupancy                 6,217          6,084        12,674         12,145
Distribution and                                                            
 travel                   2,058          1,608         3,939          3,263
Other                     3,376          2,865         6,588          5,542
Restructuring                                                               
 items                        -            328             -            641
----------------------------------------------------------------------------
                         30,048         26,800        59,006         52,004
----------------------------------------------------------------------------
DEPRECIATION AND                                                            
 AMORTIZATION                                                               
Depreciation of                                                             
 lease assets            11,361         11,602        23,812         24,277
Depreciation of                                                             
 property and                                                               
 equipment (note                                                            
 5)                         778            951         1,624          1,923
Amortization of                                                             
 intangible                                                                 
 assets                     171             93           277            187
Impairment (net)                                                            
 (note 5)                    29            311            29            863
----------------------------------------------------------------------------
                         12,339         12,957        25,742         27,250
----------------------------------------------------------------------------
Operating income          3,877          3,094         7,719          6,635

Interest expense                                                            
 (note 11)                  336            266           633            549
----------------------------------------------------------------------------
Income before                                                               
 income taxes             3,541          2,828         7,086          6,086

Income tax                                                                  
 expense (note 9)                                                           
 Current                   (781)          (336)         (449)           456
 Deferred                 1,608          1,168         2,439          1,639
----------------------------------------------------------------------------
                            827            832         1,990          2,095
----------------------------------------------------------------------------
Net income                2,714          1,996         5,096          3,991
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Basic earnings                                                              
 per share (note                                                            
 10)                       0.23           0.19          0.43           0.38
Diluted earnings                                                            
 per share (note                                                            
 10)                       0.23           0.19          0.43           0.38
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to the interim condensed consolidated financial
statements                                 

easyhome Ltd.

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(expressed in thousands of Canadian dollars)


                                    Three months ended     Six months ended
                                  ------------------------------------------
                                    June 30,   June 30,  June 30,   June 30,
                                       2011       2010      2011       2010
----------------------------------------------------------------------------
Net income                            2,714      1,996     5,096      3,991
Other comprehensive income (loss)                                           
 for the period                                                             
Foreign currency translation                                                
 reserve                                (31)       407      (347)       148
----------------------------------------------------------------------------
Comprehensive income                  2,683      2,403     4,749      4,139
----------------------------------------------------------------------------
See accompanying notes to the interim condensed consolidated financial
statements                                

easyhome Ltd.

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

(expressed in thousands of Canadian dollars)


                                                     Accumulated            
                                                           Other            
                                                   Comprehensive            
                Issued Contributed   Total Retained       Income      Total 
               Capital     Surplus Capital Earnings        (Loss)    Equity 
----------------------------------------------------------------------------
Balance,                                                                    
 January                                                                    
 1, 2011        60,074       3,061  63,135   29,312         (257)    92,190 
Shares                                                                      
 issued            133        (191)    (58)       -            -        (58)
Stock-                                                                      
 based                                                                      
 compensation                                                              
 (note 8)            -         207     207        -            -        207 
Comprehensive                                                              
 income,                                                                    
 net of                                                                     
 tax                 -           -       -    5,096         (347)     4,749 
Dividends                                                                   
 paid                                                                       
 (note 7)            -           -       -   (2,015)           -     (2,015)
----------------------------------------------------------------------------
Balance,                                                                    
 June 30,                                                                   
 2011           60,207       3,077  63,284   32,393         (604)    95,073 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance,                                                                    
 January                                                                    
 1, 2010        48,880       3,142  52,022   26,801            -     78,823 
Shares                                                                      
 issued            269           -     269        -            -        269 
Stock-                                                                      
 based                                                                      
 compensation                                                              
 (note 8)            -         195     195        -            -        195 
Comprehensive                                                              
 income,                                                                    
 net of                                                                     
 tax                 -           -       -    3,991          148      4,139 
Dividends                                                                   
 paid                                                                       
 (note 7)            -           -       -   (1,775)           -     (1,775)
----------------------------------------------------------------------------
Balance,                                                                    
 June 30,                                                                   
 2010           49,149       3,337  52,486   29,017          148     81,651 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to the interim condensed consolidated financial    
statements                                   

easyhome Ltd.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(expressed in thousands of Canadian dollars)


                                   Three months ended      Six months ended 
                                --------------------------------------------
                                   June 30,   June 30,   June 30,   June 30,
                                      2011       2010       2011       2010 
----------------------------------------------------------------------------

OPERATING ACTIVITIES                                                        
Net income                           2,714      1,996      5,096      3,991 
Add (deduct) items not affecting                                            
 cash                                                                       
 Depreciation of lease assets       11,361     11,602     23,812     24,277 
 Depreciation of property and                                              
  equipment (note 5)                   778        951      1,624      1,923 
 Impairment (net) (note 5)              29        311         29        863 
 Amortization of intangible                                                
  assets                               171         93        277        187 
 Stock-based compensation (note                                            
  8)                                    43        172        206        325 
 Bad debt expense                    1,390        696      2,514      1,110 
 Deferred tax expense                1,608      1,168      2,439      1,639 
 Gain on sale of property and                                              
  equipment                           (385)      (405)      (427)      (405)
----------------------------------------------------------------------------
                                    17,709     16,584     35,570     33,910 
Net change in non-cash working                                              
 capital balances                                                           
 related to operations (note 11)     1,079      4,666     (5,556)     3,970 
Net issuance of consumer loans                                              
 receivable                         (6,558)    (6,170)   (14,182)    (8,865)
----------------------------------------------------------------------------
Cash provided by operating                                                  
 activities                         12,230     15,080     15,832     29,015 
----------------------------------------------------------------------------

INVESTING ACTIVITIES                                                        
Net purchase of lease assets       (10,595)   (10,207)   (21,379)   (20,189)
Purchase of property and                                                    
 equipment                            (826)    (2,875)    (1,425)    (4,139)
Purchase of intangible assets         (202)       (46)      (222)      (147)
Proceeds on sale of property and                                            
 equipment                             505        224        774        224 
----------------------------------------------------------------------------
Cash used in investing                                                      
 activities                        (11,118)   (12,904)   (22,252)   (24,251)
----------------------------------------------------------------------------

FINANCING ACTIVITIES                                                        
Advances (payments) of bank                                                 
 revolving credit facility             472       (595)    10,159     (1,552)
Payments of term loan (note 6)        (862)      (878)    (1,735)    (1,755)
Payment of common share                                                     
 dividends                          (1,007)      (893)    (1,899)    (1,777)
Redemption of deferred share                                                
 units                                   -          -        (58)         - 
Issuance of common shares on                                                
 exercise of options                     -        139          -        139 
----------------------------------------------------------------------------
Cash provided by (used in)                                                  
 financing activities               (1,397)    (2,227)     6,467     (4,945)
----------------------------------------------------------------------------

Net increase (decrease) in cash                                             
 during the period                    (285)       (51)        47       (181)
Cash, beginning of period            1,063        161        731        291 
----------------------------------------------------------------------------
Cash, end of period                    778        110        778        110 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to the interim condensed consolidated financial   
statements                                                                  

Contact Information

  • easyhome Ltd.
    David Ingram
    President & Chief Executive Officer
    (905) 272-2788

    easyhome Ltd.
    Steve Goertz
    Senior Vice President and Chief Financial Officer
    (905) 272-2788
    www.easyhome.ca