Accounting scandals not only can lose you bunches of money and prestige, but
the legal fees can really hurt, too. That’s just what’s happening to
scandal-plagued Homestore.com Inc., reporting a 2001 loss of almost $1.5
billion and warning about the bills from its lawyers.
Westlake Village, Calif.-based Homestore said that for
all of 2001, revenue came in at $325.1 million, a 79 percent increase from
revenue of $181.3 million for 2000.
However, including all charges, the net loss was $1.466 billion, or $13.64
per share, the company said.The
irregularities included accounting for bartered ads on a cash basis.
For the fourth quarter, Homestore posted a net loss of $1.1 billion, or $9.51
per share, compared with a loss in the year-ago quarter of $53.6 million, or
65 cents per share.
The results included charges of $960 million for acquisitions, restructuring
and impairment of certain assets. Excluding the charges, the company said it
lost $146.6 million, or $1.26 per share.
“These filings resolve our historical accounting issues,” said Lew Belote,
Homestore’s chief financial officer. “They involve significant one-time
charges that make comparative analysis difficult. These results are not
indicative of current or future trends.”
“We are pleased to have completed all restatements and brought our historical
financial results up to date,” said CEO Mike Long, who
replaced the former top exec, Stuart Wolff, who “resigned to pursue a new
technology venture” after the troubles began.
“We appreciate the continued support and patience of our customers and
investors while our employees have completed an extraordinary effort to
correct two years of financial reporting in less than 90 days,” Long said.
The company said it has determined that in the first nine months of 2001,
certain transactions resulting in the recognition of $81.6 million in
revenue, had been improperly recorded as cash transactions. The company also
determined that in the same period, revenue from software products and
services of $37.4 million did not meet all revenue recognition requirements.
As a result, reported revenue for the nine months was reduced from $350.9
million to $227.9 million, the reported net loss increased from $245.8
million to $359 million and the reported net loss per share increased from
$2.35 to $3.44.
Earlier, the
company had said that for the year 2000 $36.4 million in ad revenue had
been improperly recorded as independent cash transactions.
Going forward, Homestore warned that it may incur heavy legal costs as a
result of the accounting errors. In a Securities and Exchange Commission
filing, the company disclosed that it faces 23 lawsuits.
Investors began suing shortly after the scandal came to light.
Homestore’s network of Web sites includes the flagship Realtor.com;
HomeBuilder.com; Homestore Apartments & Rentals; and Homestore.com, a home
information resource. Its stock closed Wednesday at $2.30; its 52-week high
is $37.16.
The company also announced the sale of its consumer credit division,
ConsumerInfo.com, for $130 million; $58 million of that amount is set aside
for potential legal claims.
