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Press release from Marketwire

easyhome Ltd. Reports Improved 2010 Fourth Quarter and Full Year Results

Monday, March 28, 2011

easyhome Ltd. Reports Improved 2010 Fourth Quarter and Full Year Results20:36 EDT Monday, March 28, 2011MISSISSAUGA, ONTARIO--(Marketwire - March 28, 2011) - easyhome Ltd. (TSX:EH), Canada s largest merchandise leasing company, today announced its results for the fourth quarter and full year ended December 31, 2010."easyhome delivered improved revenues and earnings in 2010," said David Ingram, easyhome's President and Chief Executive Officer. "Normalized earnings for the year were 92 cents compared with 63 cents in 2009. The increase in earnings reflects our commitment to extracting efficiencies from all aspects of our operations, and the growth of our easyfinancial Services business. All business segments are also beginning to benefit from renewed consumer confidence.""The growth of easyfinancial Services was slowed in the fourth quarter by the fraud we discovered in October. Rather than expanding the business, we applied ourselves to reviewing our processes, strengthening our team and enhancing our internal controls. We are encouraged by the growth prospects of our easyfinancial Services business unit."Fourth Quarter ResultsFor the three months ended December 31, 2010, easyhome increased revenues 8.3% to $46.9 million from $43.3 million for the same period last year. Strong revenue growth of $2.9 million from easyfinancial Services and $0.5 million from easyhome s U.S. operations complemented the modest revenue growth in the Company s Canadian leasing operations. Same-store revenue growth, which includes revenue growth from easyfinancial Services, was 10.9%, up from -1.7% in the fourth quarter of 2009.Mr. Ingram continued, "all of easyhome s business units are showing year-over-year improvements. Our potential monthly lease revenue, a key measure of the size of our lease portfolio, increased by $0.6 million during the fourth quarter of 2010 and our consumer loan portfolio increased by $3.4 million over the same period. Both of these increases will lead to improved revenues in the upcoming quarters."Operating income for the quarter was $0.3 million compared with $1.6 million for the fourth quarter of 2009. Operating income for the fourth quarter of 2010, however, was negatively impacted by the costs associated with the forensic investigation of the fraud previously discovered at easyfinancial Services. Excluding non-recurring charges associated with the fraud investigation for 2010 and restructuring and other charges for 2009, operating income was $2.7 million compared with $2.5 million for the same period last year, an increase of 9.5%.The Company recorded net income of $0.5 million for the quarter compared with net income of $0.9 million in the fourth quarter of 2009. On a per share basis, earnings were $0.04 compared with $0.09. Excluding non-recurring charges associated with the fraud investigation for 2010 and the restructuring and other charges for 2009, net income was $2.2 million and earnings per share were $0.20 compared with net income of $1.5 million and earnings per share of $0.14 in the fourth quarter of 2009, an increase of 43%.Fiscal 2010 ResultsFor the full year, easyhome generated revenues of $180.8 million, an increase of 4.3% compared with $173.4 million at the end of fiscal 2009. Canadian leasing contributed $158.6 million to total revenues, down slightly from $161.5 million for the same period last year. U.S. leasing revenues increased to $9.3 million from $7.7 million at the end of 2009. easyfinancial Services generated revenues of $12.9 million compared with $4.1 million in fiscal 2009.Operating income for the year was $10.4 million compared with $9.4 million for the same period last year. Adjusted to exclude non-recurring charges associated with the fraud investigation, restructuring and other charges, operating income was $14.4 million compared with $11.9 million, an increase of 20.9%. Reported net income was $6.9 million, or $0.65 per share, compared with $5.1 million, or $0.48 per share a year earlier.Reported net income and earnings per share for the year were impacted most significantly by:-- the final charges of $0.6 million related to the restructuring announced in the fall of 2009, decreasing earnings per share by $(0.04); -- write-offs and bad debt charges of $0.9 million associated with the employee fraud, decreasing earnings per share by $(0.06); -- fraud investigation costs of $2.4 million, impacting earnings per share by $(0.17); and -- an increase of $0.9 million to the consumer loans receivable provision resulting from the refinement of the methodology used for estimating the provision, decreasing earnings per share by $(0.06). The Company continues to generate strong cash flows. Cash flow provided by operating activities for the year ended December 31, 2010 was $10.2 million compared to $15.5 million in 2009. Included in these cash flows was a net investment in the easyfinancial Services loan portfolio of $12.9 million for 2010 and $4.9 million for 2009. If this net investment in the easyfinancial Services loan portfolio is treated as cash flow from investing activities, cash flow from operations grew from $20.4 million in 2009 to $23.1 million in 2010, an increase of 13.4%. When combined with the net $10.7 million raised from an equity offering in December 2010, this available cash flow of $33.8 million allowed easyhome to invest in the future revenue growth of all business units while reducing external debt and continuing its dividend payments.OutlookIn 2011, we anticipate opening 1 to 2 new corporate stores. We will also continue to expand our U.S. presence through franchising. We plan to add a total of 10 to 15 new franchise locations in 2011, including 5 franchise locations that will be entirely financed by the Company and so will be included in our consolidated financial results. Finally, the Company intends to add an additional 20 to 25 new easyfinancial kiosks. We expect easyfinancial Services to continue with its strong growth throughout 2011 and anticipate a gross loan book of approximately $30.0 million at the end of the first quarter. Based on these assumptions, we are targeting total revenue growth of 11-13%. The achievement of these targets by the Company is predicated on a number of factors, including the availability of sufficient capital.Donald K. Johnson, Chairman of the Board, commented, "The Board is pleased with the overall performance of the Company during 2010. Despite the challenges of the Employee Fraud, easyhome increased revenues and earnings during the year.""The Board also wants to recognize the efforts of easyhome s management team throughout the fraud investigation," said Mr. Johnson. "We are confident that the Company has taken the appropriate steps to enhance its management of risk."The Board of Directors has approved a dividend payment of $0.085 per share payable on April 13, 2011 to the holders of common shares of record as at the close of business on April 6, 2011.About easyhomeAs at December 31, 2010, easyhome Ltd. had 256 stores, including 39 franchised/licensed locations. The Company also operated 67 easyfinancial kiosks within existing easyhome stores and one national virtual loan kiosk.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 .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 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 StatementsThis 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.easyhome Ltd. CONSOLIDATED BALANCE SHEETS (Continued under the laws of Ontario) As at As at December 31, December 31, 2010 2009----------------------------------------------------------------------------(in 000's) $ $---------------------------------------------------------------------------- Restated (note 3)ASSETS (note 9) Cash 731 291Amounts receivable (note 4) 5,871 5,284Income taxes recoverable - 2,987Consumer loans receivable (note 5) 21,829 8,941Prepaid expenses 1,861 1,592Lease assets (note 6) 73,046 75,398Property and equipment (note 7) 16,737 15,637Future tax assets (note 13) 5,580 5,603Intangible assets (note 8) 3,272 3,183Goodwill 17,325 17,325---------------------------------------------------------------------------- 146,252 136,241--------------------------------------------------------------------------------------------------------------------------------------------------------LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Bank revolving credit facility (note 9) 15,649 23,764Accounts payable and accrued liabilities (note 14) 16,394 10,645Income taxes payable 65 -Accrued employee costs (note 14) 3,577 2,882Dividends payable (note 11) 892 884Deferred lease inducements 2,459 2,303Unearned revenue 4,366 3,936Term loan (notes 9 and 11) 2,602 6,120---------------------------------------------------------------------------- 46,004 50,534----------------------------------------------------------------------------Commitments and contingencies (notes 10 and 17) Shareholders' equity Common shares (note 11) 60,074 48,880Contributed surplus (note 12) 3,034 2,996Retained earnings 37,140 33,831---------------------------------------------------------------------------- 100,248 85,707---------------------------------------------------------------------------- 146,252 136,241--------------------------------------------------------------------------------------------------------------------------------------------------------See accompanying notes to the consolidated financial statements On behalf of the Board:David Ingram, Director Donald K. Johnson, Director easyhome Ltd. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME Years ended December 31, 2010 2009 ----------------------------------------------------------------------------(in 000's, except earnings per share) $ $ ---------------------------------------------------------------------------- Restated (note 3)REVENUE Lease 132,651 135,005 Interest revenue and other income 48,138 38,341 ---------------------------------------------------------------------------- 180,789 173,346 ----------------------------------------------------------------------------EXPENSES Salaries and benefits (note 12) 53,746 50,092 Selling, general and administrative 24,554 22,243 Occupancy 25,094 24,492 Automotive and travel 6,709 6,898 Restructuring and other charges (note 14) 3,069 1,931 ---------------------------------------------------------------------------- 113,172 105,656 ----------------------------------------------------------------------------AMORTIZATION Amortization of lease assets (note 6) 52,049 53,341 Amortization of property and equipment and intangible assets (notes 7 and 8) 5,123 4,960 ---------------------------------------------------------------------------- 57,172 58,301 ----------------------------------------------------------------------------Total operating expenses 170,344 163,957 ----------------------------------------------------------------------------Operating income 10,445 9,389 Interest expense (note 9) 1,238 1,138 ----------------------------------------------------------------------------Income before income taxes 9,207 8,251 ----------------------------------------------------------------------------Income taxes (note 13) Current 2,105 1,435 Future 231 1,761 ---------------------------------------------------------------------------- 2,336 3,196 ----------------------------------------------------------------------------Net income and comprehensive income for the year 6,871 5,055 --------------------------------------------------------------------------------------------------------------------------------------------------------Earnings per share (note 15) Basic 0.65 0.48 Diluted 0.65 0.48 --------------------------------------------------------------------------------------------------------------------------------------------------------See accompanying notes to the consolidated financial statements easyhome Ltd. CONSOLIDATED STATEMENTS OF RETAINED EARNINGS Years ended December 31,(in 000's) 2010 2009 ---------------------------------------------------------------------------- $ $ ---------------------------------------------------------------------------- Restated (note 3)Retained earnings, beginning of the year as previously stated 33,831 32,827 Transitional adjustment on the adoption of new accounting policies (note 2) - (130)----------------------------------------------------------------------------Retained earnings, beginning of the year as restated 33,831 32,697 Purchase and cancellation of shares in excess of average cost - (360)Net income for the year 6,871 5,055 Common share dividends (note 11) (3,562) (3,561)----------------------------------------------------------------------------Retained earnings, end of the year 37,140 33,831 --------------------------------------------------------------------------------------------------------------------------------------------------------See accompanying notes to the consolidated financial statements easyhome Ltd. CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2010 2009 ----------------------------------------------------------------------------(in 000's) $ $ ---------------------------------------------------------------------------- Restated (note 3)OPERATING ACTIVITIES Net income for the year 6,871 5,055 Add (deduct) items not affecting cash: Stock based compensation (note 12) 621 331 Amortization of lease assets 52,049 53,341 Amortization of property and equipment and intangible assets 5,123 4,720 Future income taxes 231 1,761 (Gain) loss on sale of property and equipment (896) 240 Net change in non-cash operating items : - - Lease assets (49,697) (45,563) Consumer loans receivable (12,888) (4,877) Other operating assets and liabilities (note 16) 8,784 473 ----------------------------------------------------------------------------Cash flow provided by operating activities 10,198 15,481 ----------------------------------------------------------------------------INVESTING ACTIVITIES Purchase of property and equipment (5,777) (4,949)Purchase of intangible assets (449) (525)Proceeds on sale of property and equipment 946 363 ----------------------------------------------------------------------------Cash flow used in investing activities (5,280) (5,111)----------------------------------------------------------------------------FINANCING ACTIVITIES Repayments of bank revolving credit facility (8,115) (2,375)Repayments of term loan (note 9) (3,654) (3,630)Issuance of common shares on exercise of options (note 12) 153 1 Issuance of common shares (note 11) 10,700 - Shares purchased for cancellation (note 11) - (766)Common share dividend payments (note 11) (3,562) (3,561)----------------------------------------------------------------------------Cash flow used in financing activities (4,478) (10,331)----------------------------------------------------------------------------Increase in cash 440 39 Cash, beginning of the year 291 252 ----------------------------------------------------------------------------Cash, end of the year 731 291 --------------------------------------------------------------------------------------------------------------------------------------------------------See accompanying notes to the consolidated financial statements FOR FURTHER INFORMATION PLEASE CONTACT: David Ingrameasyhome Ltd.President & Chief Executive Officer(905) 272-2788ORSteve Goertzeasyhome Ltd.Senior Vice President and Chief Financial Officer(905) 272-2788