Real estate media and technology supplier Homestore, Inc. (HOMS, Trade) today reported its financial results for the quarter ended June 30, 2002.

Homestore reported second quarter revenue of $65.9 million, down 15 percent from revenue of $77.7 million for the second quarter of 2001. The loss from continuing operations was $(62.4) million, or $(0.53) per share compared to a loss of $(120.9) million, or $(1.12) per share for the second quarter 2001. The net loss for the quarter was $(52.3) million, or $(0.44) per share compared to a net loss of $(120.9) million, or $(1.12) per share for the second quarter 2001. Homestore's second quarter results reflect a $23.0 million charge to its operating results for the settlement of the Memberworks litigation that was announced earlier today. The results for the second quarter also include a gain from discontinued operations of $10.2 million from the sale of the company's ConsumerInfo division, which was sold to Experian on April 2, 2002.

Compared to results from the first quarter of 2002, Homestore's revenue declined 11 percent from $74.1 million, the loss from continuing operations increased by $(26.8) million, or $(0.23) per share, and the net loss increased by $(17.4) million or $(0.14) per share. In the first quarter the Company had income of $0.8 million from discontinued operations and other income totaling $6.7 million. In the second quarter, the company had a $10.2 million gain from the sale of ConsumerInfo.com and the $23.0 million litigation settlement charge. Excluding these non-recurring and one time items, the loss from continuing operations decreased in the second quarter to $(39.4) million from $(42.3) million. Non-cash items included in operating results in the second quarter, consisting of stock-based charges, depreciation and amortization, were $32.2 million.

The decline in revenue of $8.2 million from the first quarter is a result of certain non-recurring revenue items in that quarter as well as a restructuring of the Company's advertising sales group which was not completed until late May of this year. Operating expenses declined by $9.7 million between the first and second quarter.

"I am extremely proud of the Homestore team's work over the past six months to gain control of our expense structure. Both operating expenses and net loss are down significantly from a year ago," said Mike Long, Homestore's Chief Executive Officer. "We continue to believe that Homestore's results from operations, excluding non-cash stock-based charges, depreciation and amortization will be positive for December. However, we are not making any forecasts with respect to 2003 and no inference from 2002 should be drawn."

Homestore began making structural changes to its media business during the second quarter. Specifically, the company combined product development teams across its Realtor.com, HomeBuilder.com and Homestore Apartments & Rentals organizations in order to develop a common product platform for its property verticals.

"These changes will enable Homestore to refine its media products and better align around customer needs. We have created a more cohesive organization with a more focused objective to build, sell and support media products with maximum efficiency and effectiveness. Homestore's customers will benefit from more consistent products and customer service as well as greater choice," commented Long.

Homestore announced today in a separate press release that it has reached a definitive settlement in the lawsuit commenced by Memberworks, Inc. in March 2002, regarding Homestore's purchase of ConsumerInfo's former parent company iPlace, Inc. A judge had placed $58.0 million of the $130.0 million in proceeds from the sale of ConsumerInfo into a constructive trust pending the outcome of litigation. As part of the settlement agreement announced today,

Homestore will receive $35.0 million of unrestricted cash from the constructive trust. Memberworks and certain other former iPlace shareholders will receive $23.0 million as settlement of its claims and Memberworks has agreed to file a voluntary dismissal of the lawsuit.

Accordingly, for the second quarter, Homestore has recorded a $23.0 million liability and a charge to its operating results. In the third quarter, Homestore will record a $58.0 million reduction in restricted cash as well as a $35.0 million increase in cash and cash equivalents. At June 30, 2002, Homestore had $64.9 million in cash and cash equivalents available to fund operations, in addition to $151.2 million in restricted cash. After giving effect to the settlement with Memberworks, Homestore had approximately $100 million in unrestricted cash at June 30, 2002.