SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2003
COMMISSION FILE NUMBER 0-18291
U.S. HOME SYSTEMS, INC.
(Name of Small Business Issuer Specified in Its Charter)
| Delaware |
75-2922239 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 750 State Highway 121 Bypass, Suite 170 Lewisville, Texas |
75067 | |
| (Address of Principal Executive Offices) |
(Zip Code) |
(214) 488-6300
(Issuer’s Telephone Number, Including Area Code)
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, $0.001 Par Value, 6,504,371 shares as of May 10, 2003.
| Page | ||||
| PART I. FINANCIAL INFORMATION | ||||
| Item 1. |
1 | |||
| Consolidated Balance Sheets – March 31, 2003 and December 31, 2002 |
1 | |||
| Consolidated Statements of Operations – Three-month period ended March 31, 2003 and March 31, 2002 |
2 | |||
| Consolidated Statement of Stockholders’ Equity – Three-month period ended March 31, 2003… |
3 | |||
| Consolidated Statements of Cash Flows – Three-month period ended March 31, 2003 and March 31, 2002 |
4 | |||
| 5 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 | ||
| Item 3. |
22 | |||
| Item 4. |
22 | |||
| PART II. OTHER INFORMATION | ||||
| Item 1. |
23 | |||
| Item 2. |
23 | |||
| Item 4. |
23 | |||
| Item 6. |
23 | |||
-i-
U.S. Home Systems, Inc.
| Assets |
March 31, 2003 |
December 31, 2002 | ||||
| Current assets: |
(unaudited) |
|||||
| Cash and cash equivalents, including restricted cash of $ 33,189 and $33,191 at March 31, 2003 and December 31, 2002, respectively |
$ |
2,502,728 |
$ |
3,672,571 | ||
| Finance receivables held for sale |
|
— |
|
2,884,967 | ||
| Accounts receivable, net |
|
1,994,046 |
|
1,373,498 | ||
| Notes receivable |
|
158,403 |
|
— | ||
| Commission advances |
|
510,774 |
|
395,332 | ||
| Inventory |
|
2,116,501 |
|
1,898,695 | ||
| Prepaid expenses |
|
614,513 |
|
956,560 | ||
| Deferred income taxes |
|
137,998 |
|
137,998 | ||
| Total current assets |
|
8,034,963 |
|
11,319,621 | ||
| Finance receivables held for investment, net |
|
7,232,083 |
|
54,683 | ||
| Property, plant, and equipment, net |
|
6,197,700 |
|
6,242,839 | ||
| Goodwill |
|
7,357,284 |
|
7,357,284 | ||
| Credit facility origination costs, net of amortization |
|
778,917 |
|
— | ||
| Other assets |
|
401,367 |
|
435,725 | ||
| Total assets |
$ |
30,002,314 |
$ |
25,410,152 | ||
| Liabilities and Stockholders’ Equity |
||||||
| Current liabilities: |
||||||
| Accounts payable |
$ |
2,653,371 |
$ |
2,299,280 | ||
| Customer deposits |
|
2,661,623 |
|
2,080,264 | ||
| Accrued wages, commissions, and bonuses |
|
800,667 |
|
1,119,886 | ||
| Federal, state, and local taxes payable |
|
58,188 |
|
363,765 | ||
| Current portion of long-term debt |
|
738,701 |
|
2,974,742 | ||
| Current portion of long-term capital lease obligations |
|
180,476 |
|
155,791 | ||
| Other accrued liabilities |
|
609,638 |
|
576,949 | ||
| Total current liabilities |
|
7,702,664 |
|
9,570,677 | ||
| Deferred income taxes |
|
352,383 |
|
352,383 | ||
| Deferred revenue |
|
112,500 |
|
— | ||
| Long-term debt, net of current portion |
|
9,180,801 |
|
2,265,383 | ||
| Long-term capital lease obligations, net of current portion |
|
639,595 |
|
627,858 | ||
| Mandatory redeemable preferred stock – $0.01 par value, 16,000 shares issued and outstanding, liquidation value $10 per share |
|
160,000 |
|
160,000 | ||
| Stockholders’ equity: |
||||||
| Preferred stock – $0.01 par value, 100,000 shares authorized, 16,000 mandatory redeemable preferred shares outstanding |
|
– |
|
– | ||
| Preferred stock – $0.001 par value, 1,000,000 shares authorized, no shares outstanding |
|
– |
|
– | ||
| Common stock – $0.001 par value, 30,000,000 shares authorized, 6,453,371 shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively |
|
6,454 |
|
6,454 | ||
| Additional capital |
|
9,300,255 |
|
9,300,255 | ||
| Retained earnings |
|
2,547,662 |
|
3,127,142 | ||
| Total stockholders’ equity |
|
11,854,371 |
|
12,433,851 | ||
| Total liabilities and stockholders’ equity |
$ |
30,002,314 |
$ |
25,410,152 | ||
-1-
U.S. Home Systems, Inc.
Consolidated Statements of Operations
(unaudited)
| Three-months ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Contract revenues |
$ |
14,210,680 |
|
$ |
9,005,340 |
| ||
| Revenue from loan portfolio sales |
|
159,791 |
|
|
713,383 |
| ||
| Other revenues |
|
335,917 |
|
|
237,354 |
| ||
| Total revenues |
|
14,706,388 |
|
|
9,956,077 |
| ||
| Cost of goods sold |
|
6,848,303 |
|
|
4,057,601 |
| ||
| Gross profit |
|
7,858,085 |
|
|
5,898,476 |
| ||
| Operating expenses: |
||||||||
| Branch operating |
|
607,238 |
|
|
398,485 |
| ||
| Sales and marketing |
|
5,535,418 |
|
|
3,863,211 |
| ||
| License fees |
|
180,681 |
|
|
186,937 |
| ||
| General and administrative |
|
2,406,132 |
|
|
1,436,529 |
| ||
| Income (loss) from operations |
|
(871,384 |
) |
|
13,314 |
| ||
| Other (expenses), net |
|
(74,381 |
) |
|
(28,973 |
) | ||
| Loss before tax benefit |
|
(945,765 |
) |
|
(15,659 |
) | ||
| Tax benefit |
|
(370,285 |
) |
|
(5,950 |
) | ||
| Net loss |
$ |
(575,480 |
) |
$ |
(9,709 |
) | ||
| Net loss per common share – basic and diluted |
$ |
(0.09 |
) |
$ |
(0.00 |
) | ||
| Weighted average shares – basic and diluted |
|
6,453,371 |
|
|
5,897,815 |
| ||
See accompanying notes.
-2-
U.S. Home Systems, Inc.
Consolidated Statements of Stockholders’ Equity
(unaudited)
| Common Stock |
Additional Capital |
Retained Earnings |
Total Stockholders’ Equity |
|||||||||||||
| Shares |
Amount |
|||||||||||||||
| Balance at December 31, 2002 |
6,453,371 |
$ |
6,454 |
$ |
9,300,255 |
$ |
3,127,142 |
|
$ |
12,433,851 |
| |||||
| Accrued dividends – mandatory redeemable preferred stock |
— |
|
— |
|
— |
|
(4,000 |
) |
|
(4,000 |
) | |||||
| Net loss |
— |
|
— |
|
— |
|
(575,480 |
) |
|
(575,480 |
) | |||||
| Balance at March 31, 2003 |
6,453,371 |
$ |
6,454 |
$ |
9,300,255 |
$ |
2,547,662 |
|
$ |
11,854,371 |
| |||||
See accompanying notes.
-3-
U.S. Home Systems, Inc.
Consolidated Statements of Cash Flows
(unaudited)
| Three-months ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Operating Activities |
||||||||
| Net loss |
$ |
(575,480 |
) |
$ |
(9,709 |
) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
|
353,677 |
|
|
133,111 |
| ||
| Provision for loan losses and bad debts |
|
6,515 |
|
|
— |
| ||
| Changes in operating assets and liabilities net of effects of acquired business: |
||||||||
| Finance receivables: |
||||||||
| Sales of, and receipts on, loan portfolios |
|
1,645,300 |
|
|
6,308,193 |
| ||
| Purchases of finance receivables |
|
— |
|
|
(6,818,509 |
) | ||
| Accounts receivable |
|
(620,565 |
) |
|
(451,328 |
) | ||
| Inventory |
|
(217,806 |
) |
|
(30,598 |
) | ||
| Commission advances and prepaid expenses |
|
226,605 |
|
|
(214,182 |
) | ||
| Accounts payable and customer deposits |
|
935,451 |
|
|
761,865 |
| ||
| Other assets and liabilities |
|
(647,662 |
) |
|
(199,573 |
) | ||
| Net cash provided by (used in) operating activities |
|
1,106,035 |
||||||