The Real Results

April 4, 2002

Homestore Lost $1.47 Billion In 2001, Including $925 Million In Fourth-Quarter Write-Offs

Inman News Features

Homestore (Nasdaq: HOMSE) today announced revenues of $325 million last year and a net loss of $1.47 billion, or $13.64 per share, including the effects of restating its financial results for the first three quarters of the year and taking $975 million in one-time charge-offs related to prior acquisitions, devaluation of long-lived assets and a company restructuring.

Homestore CFO Lew Belote said the results "involve significant one-time charges that make comparative analysis difficult (and) are not indicative of current or future trends."

The company reported revenue of $181 million and a net loss of $146 million, or $1.83 per share, in 2000.

The net loss for 2001 excluding the one-time charges was $490 million, or $4.56 per share.

Today?s announcement included an update on the company?s cash position. At year-end 2001, Homestore had approximately $52.2 million in cash and cash equivalents available to fund operations, plus $98.5 million of restricted cash.

Those figures at March 31, 2002, were estimated to have been $28 million in cash and cash equivalents. But today's closed sale of is expected to increase those balances to $85 million in unrestricted cash and $160 million in restricted cash. The company said the restricted cash amount could increase further as a result of customary escrow items and resolution of a $58 million court-ordered set-aside in connection with the sale of

The company also announced its financial results for the fourth quarter of last year. Revenue increased to $97.2 million in the fourth quarter compared with $52.6 million for the fourth quarter of 2000. The net loss for the 2001 fourth quarter was $1.1 billion, or $9.51 per share, including the effect of a $925 million write-off. Excluding those charges, the company had a net loss of $146.6 million, or $1.26 per share, in the fourth quarter of 2001 compared with a net loss of $53.6 million, or 65 cents per share, for the fourth quarter of 2000.

The company took the huge write-off in the recent fourth quarter after assessing the current fair market value of certain long-lived assets, primarily goodwill and other acquired intangible assets.

The company also reversed $81.6 million in revenue for the first nine months of 2001 after an internal audit of its financial practices found certain transactions had been improperly recorded as independent cash transactions, but in fact were reciprocal exchanges that should have been evaluated as barter transactions. The audit determined there was insufficient basis to establish the fair value of those exchanges.

The company also determined that $37.4 million in revenue from software products and services in the nine-month period didn?t meet all revenue recognition requirements. That revenue now has been recorded as deferred revenue on September 30, 2001, and will be recognized as revenue over the next one to two years as the services are delivered.

Homestore?s early adoption of an accounting board standard that requires companies to report certain consideration given by a vendor to a customer as a reduction in revenue resulted in a $4 million reduction in reported revenue and expenses, with no effect on net loss or net loss per share, in the same nine-month period, the company reported.

As a result of these adjustments, reported revenue for the nine months was reduced from $351 million to $228 million, the reported net loss increased from $245 million to $359 million and the reported net loss per share increased from $2.35 to $3.44.

Homestore today filed its full-year audited financial results on Form 10-K with the Securities and Exchange Commission. The company?s restated quarterly results for the quarters ended March 31, June 30 and September 30, 2001, were filed with the SEC on Forms 10-Q/A on Friday. Belote said the new SEC filings have resolved Homestore?s accounting issues.

Copyright: Inman News Service

Contact ALTA at 202-296-3671 or [email protected].