easyhome Ltd.
TSX : EH

easyhome Ltd.

May 07, 2009 18:32 ET

easyhome Ltd. Reports First Quarter 2009 Results

MISSISSAUGA, ONTARIO--(Marketwire - May 7, 2009) - easyhome Ltd. (TSX:EH), Canada's leading merchandise leasing company, today announced its results for the first quarter ended March 31, 2009.

Revenue for the quarter increased 10.2% to $43.9 million compared with $39.8 million in the first quarter of 2008. Operating income was $4.4 million, down from $5.7 million for the first three months of 2008. Net income for the first quarter of the year was $2.4 million compared with $3.5 million for the same period last year. Net income was adversely affected by a non-cash future income tax charge of $0.3 million as a result of timing changes in the expected utilization of our future tax assets. Net income adjusted for the future tax charge was $2.7 million. Diluted earnings per share were $0.23. Adjusted diluted earnings per share were $0.26 compared with $0.33 in 2008.

Commenting on the results, David Ingram, President and CEO, stated, "While I am pleased to report that our commitment to earnings growth has resulted in sequential improvement for the last two quarters, we remain absolute in our resolve to manage further reduction to our cost ratios. Overall, operating margin improved from 7.7% in the fourth quarter to 10.0% in the first quarter. These efficiency improvements were a result of targeted operations execution, minimal distraction of new initiatives, reduction in capital outlays, and improved staff retention. Cash flow from operating activity was $5 million, which allowed debt repayment of $3.4 million in the quarter, which positions the Company to meet its 2009 target of $10 million in debt repayment."

Mr. Ingram added, "Revenue performance was mixed across our major business units during the quarter, with Canadian stores positive 5.5%, while the US leasing business more than quadrupled, and easyfinancial more than doubled. Our communication objective in 2009 is to build awareness of the leasing alternative, emphasizing the benefits that this affords, particularly "No credit needed" and "No debt". Although this is a difficult operating environment for most retailers, we believe it is the right time to increase our marketing spend, to promote our access model, and continue to expand each business segment. To this end, we remain optimistic for continued improvement in revenue and earnings for the balance of the year."

Factors Affecting Performance

Our 35.9% improvement in earnings over the fourth quarter of 2008 was driven primarily by a reduction in charge-offs and increased margins on our lease agreements.

Despite the earnings improvement over the fourth quarter, the Company's adjusted net income in the quarter was down $0.8 million or 26.4% from the first quarter of 2008, which was the Company's most profitable on record. The shortfall was attributable to two factors.

First, expense management was not as efficient as in the first quarter of 2008, which caused approximately $0.6 million of the shortfall. We believe the Company will realize cost efficiencies in the ensuing quarters due to the relatively low number of corporate store openings in the quarter (which will reduce the related short-term earnings drag), and continued operational focus in the areas of labour, store costs, and charge-offs.

Second, weaker than planned revenue performance in the quarter reduced earnings by approximately $0.2 million. This was caused by a 1.7% reduction in same-store revenues and higher than expected pick-ups and pay-offs from the Insta-rent acquisition. Subsequent to the end of the quarter, the Company made a series of operational adjustments, which have resulted in the Company growing its customer base faster in April 2009 than April 2008. The combination of these factors is expected to result in increased same-store sales of 0-3% in the second quarter.

During the first quarter easyfinancial earned just under $0.2 million, more than it earned during the entirety of fiscal 2008. The improved earnings was attributable to i) the increased size of the loan portfolio, which grew to $4.3 million and ii) a reduction in bad debts expense, as a percentage of revenues, due to stricter lending criteria. In addition, the Company's franchise operations continue to make progress. By quarter end we had entered into franchise agreements to develop 38 stores across five states. Shortly after quarter end, two of these stores were opened, one in Austin, Texas and the other in Geyer Springs, Arkansas.

Donald K. Johnson, Chairman of the Board, commented, "The management team is delivering on the commitments it made to the Board at the end of 2008. They have improved operating margins, minimized store openings to better focus on execution, and strengthened the balance sheet by reducing the company's debt. We are confident that the Company is on track to meet its targets in 2009, and to generate long-term value for shareholders."

The Board of Directors has approved a dividend payment of $0.085 per share payable on July 3, 2009 to the holders of common shares of record as at the close of business on June 16, 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 operation's 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:

March 31, December 31,
(in 000's) 2009 2008
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$ $
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ASSETS

Amounts receivable 5,450 5,169
Income taxes recoverable 1,241 1,117
Consumer loans receivable 4,330 4,064
Prepaid expenses 2,807 2,790
Lease assets 80,861 82,443
Property and equipment 16,359 16,846
Future tax assets 5,829 6,609
Intangible assets 1,823 1,823
Goodwill 17,325 17,325
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136,025 138,186
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LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
Bank revolving credit facility 23,612 26,139
Trade accounts payable 5,345 6,248
Accrued liabilities 2,996 2,759
Accrued employee costs 2,556 2,478
Dividends payable 893 893
Deferred lease inducements 2,492 2,540
Unearned revenue 836 734
Term loan 8,828 9,750
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47,558 51,541
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Commitments and contingencies

Shareholders' equity

Common shares 49,285 49,285
Contributed surplus 2,977 2,665
Retained earnings 36,205 34,695
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88,467 86,645
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136,025 138,186
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CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(unaudited)

Three months ended
March 31,
(in 000's, except earnings per share) 2009 2008
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$ $
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REVENUE
Lease 34,902 32,701
Other 8,972 7,105
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43,874 39,806
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EXPENSES
Salaries and benefits 12,759 11,350
Selling, general and administrative 4,723 3,323
Occupancy 6,079 5,386
Automotive and travel 1,766 1,609
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25,327 21,668
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Amortization
Amortization of lease assets 13,071 11,624
Amortization of property and equipment and
intangible assets 1,108 764
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14,179 12,388
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Total operating expenses and amortization 39,506 34,056
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Operating income 4,368 5,750
Interest expense 267 232
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Income before income taxes 4,101 5,518
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Income taxes
Current 918 1,757
Future 780 294
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1,698 2,051
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Net income and comprehensive income for the
period 2,403 3,467
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Earnings per share

Basic 0.23 0.33
Diluted 0.23 0.33
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CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(unaudited)

Three months ended
March 31,
(in 000's) 2009 2008
----------------------------------------------------------------------------
$ $
----------------------------------------------------------------------------

Retained earnings, beginning of period 34,695 29,441
Transitional adjustment on the adoption of
new accounting policies - (141)
----------------------------------------------------------------------------
Retained earnings, beginning of period as
restated 34,695 29,300
Net income for the period as restated 2,403 3,467
Common share dividends (893) (902)
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Retained earnings, end of period 36,205 31,865
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

Three months ended
March 31,
(in 000's) 2009 2008
----------------------------------------------------------------------------
$ $
----------------------------------------------------------------------------
CASH PROVIDED BY (USED IN)

OPERATING ACTIVITIES
Net income for the period 2,403 3,467
Add (deduct) items not affecting cash:
Recognition of stock based compensation 312 211
Amortization of lease assets 13,071 11,624
Amortization of property and equipment and
intangible assets 1,108 764
Future income taxes 780 294
Net change in non-cash operating items -
Lease assets (11,489) (10,471)
Other (1,222) (11,024)
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4,963 (5,135)
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INVESTING ACTIVITIES
Purchase of property and equipment (702) (1,677)
Proceeds on disposition of property and
equipment 80 6
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(622) (1,671)
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FINANCING ACTIVITIES
Advances (repayment) of bank revolving credit
facility (2,527) 7,082
Repayment of term loan (921) -
Issuance of common shares on exercise of
options - 450
Common share dividend payments (893) (726)
----------------------------------------------------------------------------
(4,341) 6,806
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Net change in cash for the period - -
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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