Company Increases 2006 Business Outlook to Diluted EPS of
$0.56-$0.60 From Previous Forecast of Diluted EPS of $0.42-$0.46
Home Solutions of America, Inc. (Amex: HOM); (the "Company" or
"Home Solutions"), a provider of recovery, restoration and
rebuilding/remodeling services, announced record financial results
for its first quarter ended March 31, 2006. The Company reported
record first quarter revenue from continuing operations of $19.3
million, an increase of 106.5% compared to revenue from continuing
operations of $9.3 million in the 2005 fiscal first quarter. Fiscal
2006 first quarter EBITDA from continuing operations increased
158.8% to $4.4 million (including $4.0 million of operating income
and $.4 million of depreciation and amortization), compared to $1.7
million (including $1.5 million of operating income and $.2 million
of depreciation and amortization) in the 2005 first quarter. First
quarter net income was a record $3.1 million, or $0.08 per diluted
share, compared to $1.0 million, or $0.04 per diluted share in the
year earlier period. First quarter net income included a net gain
on discontinued operations of $781,000 (net of tax) resulting from
the Company's decision to sell certain assets and liabilities of
one of the Company's subsidiaries, which the Company first marketed
for sale in the fourth quarter of 2005 and sold in the first
quarter of 2006. 2006 first quarter pre-tax income from continuing
operations before minority interest was $4.0 million, compared to
pre-tax income from continuing operations before minority interest
of $1.3 million in the first quarter of fiscal 2005. First quarter
net income from continuing operations was $2.3 million, or $0.06
per diluted share, compared to net income from continuing
operations of $1.0 million, or $0.04 per diluted share in the
year-earlier period. The Company's effective tax rate for the first
quarter of fiscal 2006 was 37.1% compared to 6.3% in the first
quarter of fiscal 2005. Gross margin for the first quarter was
51.6% compared to 40% in the fourth quarter of fiscal 2005 and
47.8% in the same period in fiscal 2005. Gross margin increased as
a result of higher overall margins in both of the Company's
business segments and a more favorable mix of business than in the
fourth quarter and throughout 2005. The Recovery/Restoration
Services segment generated a 67.8% increase in revenue and 146.1%
increase in operating income compared to the first quarter of
fiscal 2005 while the Rebuilding/Remodeling business grew revenue
by 153.8% and increased operating income by 122.9%. The Company
ended the first quarter of 2006 with cash and cash equivalents of
approximately $7.2 million, and long-term debt of $1 million. "We
were pleased that in a seasonally slow period, the Company was able
to generate another strong quarter of growth," said Frank J.
Fradella, Chairman and CEO of Home Solutions. "The first quarter
was yet another period of expanded operating margins for the
Company, driven by efficiencies across both of our business units.
In contrast to fiscal 2005, when Recovery/Restoration services
represented 55% of the Company's revenue, during the first quarter
Rebuilding and Remodeling business comprised 55% of our revenue,
driven by our growing relationship with customers such as the Home
Depot and Centex as well as the long-term rebuilding process, which
has recently begun in areas affected by hurricanes Katrina, Rita
and Wilma. Despite these gains, we faced challenges, particularly
in New Orleans and surrounding areas, as funding for rebuilding
activity continued to experience delays. Recently, as demonstrated
by several large contracts we have received, activity has
significantly increased, and we have begun, in the early stages, to
participate in additional work in the area. We believe that the
conclusion of the Mayoral election this week, as well as the
allocation of incremental funding by FEMA will trigger further
activity. While we do not plan our business expecting hurricanes or
storms, we have significantly invested during the first quarter in
developing the infrastructure to not only be able to handle the
build-back work that we expect over the next three to five years in
the region, but to respond immediately if there is further
storm-related work as Hurricane Season begins in just a few weeks.
We have also invested in positioning the Company to service major
customers in many additional markets. The new locations increase
the number of stores to 150 that Home Solutions provides services
to the leading retailer. We have also invested in increasing our
presence in Louisiana, Mississippi, Florida, and Texas, where we
expect Recovery/Restoration projects to significantly contribute to
our growth for many years." Business Outlook: Due to the recent
increase in activity and backlog, the Company today increased its
full year guidance for the year ending December 31, 2006, to
revenue of $160 million to $165 million and diluted earnings per
share of $0.56 to $0.60. Home Solutions previously had expected
revenue of $130 million to $140 million and diluted earnings per
share of $0.42 to $0.46. The Company reported revenue for fiscal
2005 of $68.1 million and net income of $0.25. The Company expects
an effective tax rate for fiscal 2006 of approximately 36%. In
2005, Home Solutions had an effective tax rate of 4.5%. Due to the
timing of when projects commence, the Company expects that the
majority of the revenue and earnings will be recognized during the
second half of its fiscal year. Conference Call and Webcast The
Company will host a conference at 4:30 p.m. eastern time today to
discuss the results and outlook for 2006. Interested participants
should call (877) 776-4984 for domestic access or (706) 679-7077
for international access. Please reference Conference I.D. Number
8985828. There will be a playback available until midnight, June
15, 2006. To listen to the playback, please call (800) 642-1687 for
domestic access or (706) 645-9291 for international access. Please
use pass code 8985828 for the replay. This call is being webcast
and can be accessed at Home Solutions' web site at www.homcorp.com
until June 15, 2006. Home Solutions is a provider of recovery,
restoration and rebuilding/remodeling services to commercial and
residential areas that are (i) prone to flooding, hurricanes,
tornados, fires or other naturally occurring and repetitive weather
related emergencies; and/or (ii) experiencing robust housing
development. The Company has operations in California, Texas,
Florida, Alabama, Georgia, Louisiana, Mississippi and South
Carolina through its five subsidiaries, Cornerstone Building and
Remodeling, Southern Exposure, P.W. Stephens, Home Solutions
Restoration of Louisiana and Fiber Seal Systems. Cornerstone is a
leading supplier and installer of granite materials for kitchens
and baths to national home centers, as well as national builders
and remodeling companies, in the southeastern United States.
Southern Exposure and related companies is a provider of cabinet
and countertop installation services in the Florida marketplace.
P.W. Stephens provides mold and asbestos remediation services, and
fire and water restoration services in California, Florida and
Louisiana. Home Solutions Restoration of Louisiana provides
Recovery Restoration Services in Florida, Louisiana, Mississippi
and Texas and Fiber Seal Systems is a national licensor of cleaning
and fabric protection businesses. For more information on Home
Solutions, please see the Company's website at
http://www.homcorp.com/ Statements included in this update that are
not historical in nature are intended to be, and are hereby
identified as, "forward-looking statements" for purposes of the
safe harbor provided by Section 21E of the Securities Exchange Act
of 1934, as amended by Public Law 104-67. Forward-looking
statements may be identified by words including "anticipate,"
"believe," "intends," "estimates," "expect," and similar
expressions. The Company cautions readers that forward-looking
statements including, without limitation, those relating to the
Company's future business prospects are subject to certain risks
and uncertainties that could cause actual results to differ
materially from those indicated in the forward-looking statements,
due to factors such as those relating to economic, governmental,
technological, and other risks and factors identified from time to
time in the Company's reports filed with the SEC. -0- *T Home
Solutions of America, Inc. Income statement from continuing
operations For the three months ended March 31 2006 and 2005 ($ in
thousands, except per share data) ------------------------ 2006
2005 1st 1st Quarter Quarter ------------------------- Net Sales
19,280 9,337 Costs and expenses: Cost of sales 9,332 4,871 Selling,
general and administrative expenses 5,949 2,927
------------------------ 15,281 7,798 Operating income 3,999 1,539
Other income (expense): Gain (loss) on sale of assets (2) 1
Interest income 51 17 Interest expense (60) (279) Other Income 25
18 ------------------------ Total other (expense) 14 (243) Income
before income taxes and minority interest 4,013 1,296 Income taxes
(1,413) (82) Minority interest in income of consolidated subsidiary
(258) (193) ------------------------ Net income from continuing
operations 2,342 1,021 Gain on Discontinued operation (net of tax)
781 - ------------------------ Net income $ 3,123 $ 1,021 =========
========= Net income available to common stockholders $ 3,123 $ 680
========= ========= EPS Basic Income from continuing operations $
0.07 $ 0.05 Gain from discontinued operations $ 0.02 $ -
------------------------ Net Income $ 0.09 ========================
Diluted Income from continuing operations $ 0.06 $ 0.04 Gain from
discontinued operations $ 0.02 $ - ------------------------ Net
Income $ 0.08 $ 0.04 ======================== Weighted average
number of common shares outstanding: Basic 35,898 16,968 Diluted
40,702 18,990 HOME SOLUTIONS OF AMERICA, INC. CONSOLIDATED BALANCE
SHEETS (In Thousands, Except Per Share Data) (Unaudited) March 31,
December 31, 2006 2005 --------- ----------- ASSETS Current assets:
Cash $ 7,186 $ 8,225 Accounts receivable, net 20,857 20,585 Current
portion of notes receivable 1,375 361 Inventories 1,669 1,026
Current assets of discontinued operations held for sale - 767
Prepaid expenses and other current assets 1,231 1,041 Assets held
for sale 840 840 --------------------- Total current assets 33,158
32,845 Property and equipment, net of accumulated depreciation
2,624 2,466 Intangibles, net of accumulated amortization 9,275
9,501 Goodwill 42,802 41,882 Notes receivable, net of current
portion 2,375 525 Non-current assets of discontinued operations
held for sale - 391 Deferred tax asset - 793 Other assets 336 264
--------------------- $ 90,570 $ 88,667 ---------------------
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts
payable and accrued expenses $ 6,060 $ 6,267 Current portion debt
1,562 3,382 Deferred gain on disposal of discontinued operation
assets, current 478 - Current portion of capital lease obligations
66 76 Current liabilities of discontinued operations held for sale
- 1,216 --------------------- Total current liabilities 8,166
10,941 Long-term liabilities: Debt, net of current portion 1,041
1,363 Non-Current liabilities of discontinued operations held for
sale - 158 Non-current portion on deferred gain on disposal of
discontinued operation assets 955 - Minority interest 254 483
Capital lease obligations, net of current portion 120 117
--------------------- Total liabilities 10,536 13,062 Commitments
and contingencies Stockholders' equity: Common stock, $0.001 per
value, 50,000 shares authorized; 36,125 and 35,510 shares issued
and outstanding, respectively 36 36 Additional paid-in capital
91,428 90,122 Accumulated deficit (11,430) (14,553)
--------------------- Total stockholders' equity 80,034 75,605
--------------------- $ 90,570 $ 88,667 --------------------- *T
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