Losses Grow as Homestore Restates Income
The scandal-plagued real estate play says bartered ads were improperly recorded as revenue for the year 2000; results for last year also to be restated.
Scandal-plagued Internet real estate play Homestore.com Inc. said it has completed its internal accounting inquiry for the year 2000 and found that $36.4 million in ad revenue had been improperly recorded as independent cash transactions.
The Westlake Village, Calif.-based company, whose troubles are now linked to the woes of Los Angeles-based online ad network L90 , said it found that the transactions in question “were reciprocal exchanges that should have been evaluated as barter transactions.”
The mess just seems to get more and more complex, especially with L90 now saying that federal regulators are probing its past reporting of revenues — specifically transactions with Homestore.
In early February the Securities and Exchange Commission began an investigation into L90’s finances, related in part to two barter advertising transactions with Homestore.com in the second and third quarters of 2001.
Homestore had said on Feb. 13 that it would restate its financial results for all of 2000, as well as the first three quarters of 2001 as a result of its internal accounting probe. The final restated results for last year have not yet been reported.
Homestore has said that online advertising revenue for the first three quarters of 2001 was overstated by $76 million to $82 million, and that non-advertising revenue for the period was overstated by $28 million to $31 million.
The initial bad news last January involved restatement of earnings only for 2001.
Homestore said late Tuesday that in addition to problems with the bartered ads, the shipment of certain software products, previously recorded as revenue in 2000, “did not meet all revenue recognition requirements” and, accordingly, $5 million should have been deferred at December 31, 2000. The total reduction in revenue for the year 2000 from the restatement was $41.4 million.
The company said that its net loss for 2000 increased from $115.2 million to $146.1 million and the reported net loss per share increased from $1.44 to $1.83.
Homestore said earlier that an audit committee investigation of its finances showed that it had accounted for barter advertising deals as regular ad sales transactions. A number of people have lost their jobs over the incident, and the former CEO was replaced.
The company has said it expects its cash flow from operations to be positive for the full year 2002. Homestore’s network of Web sites includes the flagship Realtor.com; HomeBuilder.com; Homestore Apartments & Rentals; and Homestore.com, a home information resource.
