The ongoing weakness in the North American economy has severely curtailed consumer spending, which is negatively impacting all discretionary retailers.
David Ingram, CEO, easyhome

easyhome, Canada's largest Rent to Own company, today reported results for the second quarter ended June 30, 2009.

Revenue for the quarter increased 9.3% to $43.5 million compared with $39.8 million in the second quarter of 2008. Same store revenue growth was 1.0% in the quarter. Operating income was $3.4 million, compared with $3.9 million for the second quarter of 2008. Net income for the second quarter of the year was $1.9 million compared with $2.2 million for the same period last year. Diluted earnings per share were $0.18 compared with $0.21 in 2008.

easyhome hold its quarterly conference call on Wednesday, August 12, 2009 at 4 pm EST.

The conference call will be broadcast live over the internet.

Related: See video interviews with easyhome executives.

David Ingram, President and CEO of easyhome, stated, "The ongoing weakness in the North American economy has severely curtailed consumer spending, which is negatively impacting all discretionary retailers. Our marketing spend was increased to attract new customers by building awareness for an alternative to debt financed purchasing and to promote value added merchandise offers for current customers. These efforts combined to achieve a gain of 1% in deliveries, however, this was more than offset by an increase of returned agreements and charge-offs as some customers have been unable to meet lease payment requirements. The lower than planned revenue growth combined with increased charge-offs and marketing spend, were the principal contributors to the year over year decline in diluted EPS for our second quarter."

Mr. Ingram added, "Our planned diversification strategy to create two additional strategic business units, with easyfinancial and easyhome franchising, has successfully managed to provide incremental operating income on a year-over-year basis in the second quarter. To this end, we will accelerate the expansion of easyfinancial with the addition of 12 kiosks rather than the planned 6-8 by the end of 2009. The Company's franchise operation, easygates, continues to make solid progress. Deliveries in the stores opened in 2008 were 17% higher as compared to our Canadian stores and are out-performing the new store revenue model. By quarter end, easygates operated 7 stores and has entered into franchise agreements to develop a further 34 stores across five states.

Mr. Ingram concluded, "Notwithstanding the recessionary impact on our revenues and costs, we have achieved solid cash management performance. As planned, we reduced our corporate store openings, lowered capital spend, improved our lease asset utilization, and repaid $4.2 million of debt. We have assumed revenue growth of approximately 10% for the balance of the year and are reducing costs, as we focus on cash management in the months ahead."

Factors Affecting Performance

The reduction in earnings, compared with the second quarter of 2008, was driven by several factors: weaker than planned revenue performance, additional advertising costs, higher salaries, general and administrative costs and higher charge-offs.

The recession has had a dramatic impact on almost all retailers of discretionary goods, and although easyhome has fared better than many retailers, our top line has been impacted as well.

We grew revenues in the second quarter over the comparable period last year in all the major product categories we operate in (furniture, electronics, computing and appliances) versus estimated Canadian retail declines in the low double digit range. We expect the Canadian consumer to remain cautious through 2009 and that will reduce the average transaction value as they remain judicious in all areas of discretionary spending. We have, therefore, planned our cost savings initiatives to align with this anticipated reality.

While we invested additional marketing expense, which impacted diluted EPS by approximately $0.04 in the second quarter, our plan for the seasonally slower third quarter is to reduce our costs by approximately $0.03 per diluted share, which is consistent with our historic spend level.

In addition, diluted earnings per share were reduced by $0.02 due to higher charge-offs in the quarter. The higher charge-offs were a result of a higher portion of past due accounts, which in turn is related to the general economic climate. Collections of past due accounts improved early in the third quarter to lower levels than experienced in recent years. Historically, this is an indicator of lower future charge-offs.

All of the foregoing items were offset in part by earnings from the acquisition of Insta-rent Inc., which added $0.06 per diluted share in the quarter. We successfully balanced our staffing needs and costs with our revenue experience, and improved our staff retention. In addition, this period of high unemployment is being used to upgrade our staffing through new training initiatives and enhanced career opportunities to strengthen our commitment to being an employer of choice. This will also enable improved operational performance, which has been below our historical levels in recent quarters.

Six Month Results

For the first six months of the year, easyhome increased revenues 9.7% to $87.3 million compared with $79.6 million in the first half of 2008. Operating income for the first half of 2009 was $7.8 million, versus $9.7 million for the comparable period in 2008. Net income for the six months ended June 2009 was $4.3 million compared with $5.7 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 tax rate changes which impacted the expected utilization of future tax assets. Net income adjusted for this charge was $4.6 million. Adjusted earnings per share were $0.44 compared with $0.54 in the first half of 2008.

Donald K. Johnson, Chairman of the Board, commented, " Although the economic downturn has challenged all businesses and temporarily slowed easyhome's growth trajectory, management is confident that the Company has the necessary resources and strategies to continue to grow the business and create long-term value for shareholders as the economy starts to recover."

The Board of Directors has approved a dividend payment of $0.085 per share payable on October 6th, 2009 to the holders of common shares of record as at the close of business on September 22nd, 2009.

As at June 30, 2009, easyhome had 235 stores, including 209 Canadian corporate stores, thirteen U.S. corporate stores, seven U.S. franchised stores, five Canadian franchised stores and one licensed Canadian store. easyhome is Canada's largest merchandise leasing company and the third largest in North America.