SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2000
Commission File No. 1-9874
HomeServices.Com Inc.
(Exact name of registrant as specified in its charter)
Delaware 41-1945806
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6800 France Ave. South, Suite 600, Edina, Minnesota 55435
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 928-5900
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange
Common Stock, $0.01 on which registered
par value ("Common Stock") Nasdaq Stock Market
Securities registered pursuant to Section 12(g) of the Act: N/A
Indicate by check mark whether the Registrant (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_____
8,722,942 shares of Common Stock were outstanding on November 10, 2000.
<PAGE>
TABLE OF CONTENTS
Part I
Item 1. Financial Statements............................................... 3
Consolidated Balance Sheets................................................ 3
Consolidated Statements of Income.......................................... 4
Consolidated Statements of Cash Flows...................................... 5
Notes to Consolidated Financial Statements................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................. 8
Part II
Item 1. Legal Proceedings................................................. 13
Item 2. Changes in Securities............................................. 13
Item 3. Default on Senior Securities...................................... 13
Item 4. Submission of Matters to a Vote of Security Holders............... 13
Item 5. Other Information................................................. 13
Item 6. Exhibits and Reports on Form 8-K.................................. 13
Signatures................................................................ 14
Exhibit Index............................................................. 15
<PAGE>
Part I
Item 1. Financial Statements
HOMESERVICES.COM INC.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
As of _________
September 30, December 31,
2000 2000
Assets (Unaudited)
Current Assets:
Cash and cash equivalents $ 16,203 $ 10,318
Commissions and other trade receivables,
net of allowance of $383 and $1,332 13,837 7,077
Mortgage loans held for sale 5,333 2,974
Pending real estate sales contracts - 673
Cash held in trust 10,477 6,549
Income taxes receivable - 534
Deferred income taxes 1,546 1,571
Other current assets 3,500 3,236
Total current assets 50,896 32,932
Other Assets:
Office property and equipment, net 22,665 22,943
Intangible assets, net 104,009 106,706
Other assets 3,872 4,077
Total other assets 130,546 133,726
Total Assets $ 181,442 $ 166,658
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts and commissions payable $ 11,823 $ 7,172
Accrued expenses 12,459 12,668
Payable to affiliates 85 1,042
Cash held in trust 10,477 6,549
Current portion of long-term debt 616 707
Income taxes payable 4,701 -
Other current liabilities 2,175 862
Total current liabilities 42,336 29,000
Other Liabilities:
Long-term debt 36,880 48,110
Agent profit-sharing 6,561 6,282
Other noncurrent liabilities 464 914
Total other liabilities 43,905 55,306
Total liabilities 86,241 84,306
Commitments and contingencies (Note 4)
Stockholders' Equity:
Common stock, $0.01 par value, 38,000,000
shares authorized; 10,422,942 shares
issued and outstanding at September
30, 2000 and December 31, 1999,
respectively 104 104
Additional paid-in capital 78,705 78,705
Notes receivable (397) (651)
Accumulated other comprehensive income (loss) (12) (24)
Retained earnings 16,801 4,218
Total stockholders' equity 95,201 82,352
Total Liabilities and Stockholders' Equity $ 181,442 $ 166,658
The accompanying notes are an integral part of these financial statements.
<PAGE>
HOMESERVICES.COM INC.
Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------ ----------------------------------
--------------- -- ----------------- --------------- --- --------------
2000 1999 2000 1999
-------------- --------------- -------------- ---------------
Revenues:
<S> <C> <C> <C> <C>
Commission revenue $ 121,399 $ 112,280 $ 327,372 $ 261,259
Title fees 6,265 6,116 16,644 16,760
Other 6,450 4,977 16,647 13,078
-------------- --------------- -------------- ---------------
Total Revenues 134,114 123,373 360,663 291,097
-------------- --------------- -------------- ---------------
Operating expenses:
Commission expense 85,823 78,324 229,373 180,409
Salaries and employee benefits 15,992 15,829 48,727 40,101
Occupancy 5,263 4,860 16,759 13,886
Business promotion and advertising 4,560 4,623 14,387 11,841
Other operating expenses 6,219 6,264 19,699 17,990
Amortization of pending real
estate sales contracts - 2,157 665 2,157
Depreciation and amortization 2,791 2,357 8,300 6,075
-------------- --------------- -------------- ---------------
Total operating expenses 120,648 114,414 337,910 272,459
-------------- --------------- -------------- ---------------
Other income (expense):
Interest income 343 354 868 662
Interest expense (503) (1,128) (2,240) (3,211)
-------------- --------------- -------------- ---------------
Total other income (expense), net (160) (774) (1,372) (2,549)
-------------- --------------- -------------- ---------------
Income before income taxes 13,306 8,185 21,381 16,089
Income tax expense 5,433 3,320 8,798 6,598
-------------- --------------- -------------- ---------------
Net income $ 7,873 $ 4,865 $ 12,583 $ 9,491
============== =============== ============== ===============
Net income per share:
Basic $ 0.76 $ 0.62 $ 1.33 $ 1.32
Diluted $ 0.74 $ 0.62 $ 1.19 $ 1.32
Weighted average shares outstanding -
Basic 10,423 7,871 9,437 7,216
Weighted average shares outstanding -
Diluted 10,616 7,871 10,553 7,216
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
HOMESERVICES.COM INC.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------
------------- --------------
2000 1999
------------- --------------
Cash flows provided by operating activities:
<S> <C> <C>
Net income $ 12,583 $ 9,491
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 8,300 6,075
Amortization of pending real estate sales contracts 665 2,157
Undistributed earnings in unconsolidated affiliates (237) (843)
Loss (gain) on sale or disposal of office property and equipment 434 (2)
Decrease in notes receivable 254 97
Provision for deferred income taxes 1,327 2,070
Changes in assets and liabilities, net of effects from companies purchased:
Commission and other trade receivables (6,760) (2,480)
Mortgage loans held for sale (2,359) 11,865
Income taxes receivable (payable) 5,235 (607)
Payable to affiliates (957)
-
Agent profit-sharing 279 (5)
Accounts and commissions payable and accrued expenses 4,442 1,735
Other assets and liabilities 209 (875)
------------- --------------
Net cash provided by operating activities 23,415 28,678
Cash flows used in investing activities:
Purchase of companies, net of cash and cash equivalents acquired (532) (29,014)
Purchases of office property and equipment (5,492) (6,778)
Purchases of held-to-maturity securities (215) (290)
Other investing 60 (54)
------------- --------------
Net cash used in investing activities (6,179) (36,136)
Cash flows (used in) provided by financing activities:
Payments of long term debt (321) (266)
Net change in revolving credit facility (11,000) 6,500
Proceeds from capital transactions - 8,500
Loan costs (30) (494)
------------- --------------
Net cash (used in) provided by financing activities (11,351) 14,240
Net increase in cash and cash equivalents 5,885 6,782
Cash and cash equivalents at beginning of period 10,318 3,114
------------- --------------
Cash and cash equivalents at end of period $ 16,203 $ 9,896
============= ==============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
HOMESERVICES.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General:
HomeServices.Com Inc. (the "Company" or "HomeServices") was formed on July 13,
1999, for the purpose of merging with MidAmerican Realty Services Company
("MidAmerican Realty"). On October 7, 1999, the Company merged with MidAmerican
Realty. The accompanying financial statements include the financial position,
results of operations and cash flows of HomeServices, MidAmerican Realty, and
their wholly owned subsidiaries as if the Company was consolidated for all
periods presented. Approximately 70% of the outstanding common stock of the
Company (69% on a fully diluted basis) was owned by MidAmerican Energy Holdings
Company ("MidAmerican Holdings") as of September 30, 2000.
In the opinion of management, the accompanying unaudited consolidated financial
statements of HomeServices contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the financial position as of
September 30, 2000, the results of operations for the three month and nine month
periods ended September 30, 2000 and 1999 and cash flows for the nine month
period ended September 30, 2000 and 1999. The results of operations for periods
presented are not necessarily indicative of the results to be expected for the
full year.
2. Comprehensive Income:
Comprehensive income for the three months ended September 30, 2000 and 1999 was
$7,859,000 and $4,866,000 net of tax, respectively, and for the nine months
ended September 30, 2000 and 1999 was $12,595,000 and $9,467,000 net of tax.
Comprehensive income differs from net income primarily due to changes in the
fair market value of available-for-sale investment securities.
3. Earnings Per Share:
Diluted net income per share includes the dilutive impact of common stock
options having prices less than the average market price of the common stock of
192,673 and 191,187 for the three months and nine months ended September 30,
2000, respectively. In addition, there is a dilutive impact related to the
conversion of 1,500 shares of preferred stock to 1,500,000 shares of common
stock for the nine months ended September 30, 2000 of 925,182. For the three and
nine month periods ended September 30, 1999, basic and dilutive shares were
equal.
4. Commitments and Contingencies:
In the ordinary course of business, HomeServices and its subsidiaries are
involved in legal proceedings incidental to their operations. HomeServices and
its subsidiaries are not currently involved in any legal proceedings that
management believes would have a material adverse effect on the operations or
financial condition of HomeServices and its subsidiaries taken as a whole.
The J.C. Nichols Residential asset purchase agreement provides for earn-out
payments of up to $500,000 per year based on profitability levels achieved in
years 1999 and 2000. No payment was due for the year ended December 31, 1999.
Any obligation due for the year 2000 is to be paid within 60 days after year-end
and would be recorded as an additional cost of the acquisition.
The Long Realty stock purchase agreement provides for earn-out payments of up to
$1.5 million per year based on profitability levels achieved in years 1999 and
2000. A payment of $275,000 was made for the year ended December 31, 1999, and
recorded as an additional cost of the acquisition. Any obligation due for the
year 2000 is to be paid in the first quarter of 2001 and would also be recorded
as an additional cost of the acquisition.
The Champion Realty asset purchase agreement provides for an earn-out payment of
up to $400,000 based on EBITDA levels achieved for the year 2000. Any obligation
due is to be paid within 120 days after year-end and would be recorded as an
additional cost of the acquisition.
<PAGE>
5. Accounting Pronouncement:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which was delayed by SFAS No. 137 and
amended by SFAS No. 138. SFAS 133 establishes accounting and reporting standards
for derivative instruments and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This statement is effective for the Company beginning January 1, 2001. The
Company does not expect the adoption to have a material financial impact.
6. Subsequent Event:
On October 12, 2000, the Company purchased 1,700,000 of its outstanding common
shares in a block trade at a price of $10.50 per share. As a result of the
transaction, MidAmerican Holdings ownership increased to approximately 83.4% of
the Company's outstanding common stock. The Company obtained a waiver of the
restricted payment provisions under its $75 million senior secured revolving
credit agreement and agreed to reduce the amount of such facility to $65 million
to facilitate the purchase.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Results of operations of the Company are significantly influenced by the timing
of when entities are acquired. The results of operations reflect the revenues
and expenses of each of the entities from their respective dates of acquisition.
The Company's real estate brokerage business is subject to seasonal fluctuations
because more home sale transactions tend to close during the second and third
quarters of the year. As a result, the Company's operating results and
profitability are typically higher in the second and third quarters relative to
the remainder of the year.
Results of Operations of HomeServices for the Three Months and Nine Months Ended
September 30, 2000 and 1999
The following table presents selected consolidated financial data of the Company
as of and for the periods ended September 30, 2000 and 1999 (in thousands except
per share amounts).
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
----------------------------------------------- ----------------------------------------------
2000 1999 2000 1999
--------------------- --------------------- --------------------- ---------------------
Commission revenue
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 121,399 90.5% $ 112,280 91.0% $ 327,372 90.8% $ 261,259 89.7%
Title fees 6,265 4.7% 6,116 5.0% 16,644 4.6% 16,760 5.8%
Other 6,450 4.8% 4,977 4.0% 16,647 4.6% 13,078 4.5%
----------- ----------- ----------- -----------
Total revenues 134,114 100.0% 123,373 100.0% 360,663 100.0% 291,097 100.0%
----------- ----------- ----------- -----------
Commission expense 85,823 64.0% 78,324 63.5% 229,373 63.6% 180,409 62.0%
All other operating
expenses 32,034 23.9% 31,576 25.6% 99,572 27.6% 83,818 28.8%
Amortization of
pending real estate
sales contracts - - 2,157 1.7% 665 0.2% 2,157 0.7%
Depreciation and
amortization 2,791 2.1% 2,357 1.9% 8,300 2.3% 6,075 2.1%
----------- ----------- ----------- -----------
Total operating
expenses 120,648 90.0% 114,414 92.7% 337,910 93.7% 272,459 93.6%
----------- ----------- ----------- -----------
Other income
(expense), net (160) (0.1%) (774) (0.7%) (1,372) (0.4%) (2,549) (0.9%)
----------- ----------- ----------- -----------
Income before
income taxes 13,306 9.9% 8,185 6.6% 21,381 5.9% 16,089 5.5%
Income tax expense 5,433 4.0% 3,320 2.7% 8,798 2.4% 6,598 2.2%
----------- ----------- ----------- -----------
Net income $ 7,873 5.9% $ 4,865 3.9% $ 12,583 3.5% $ 9,491 3.3%
=========== =========== =========== ===========
Net income per
share:
Basic $ 0.76 $ 0.62 $ 1.33 $ 1.32
=========== =========== =========== ===========
Diluted $ 0.74 $ 0.62 $ 1.19 $ 1.32
=========== =========== =========== ===========
</TABLE>
Results of Operations of HomeServices for the Nine Months Ended September 30,
2000
Revenues. Total revenues for the nine months ended September 30, 2000 were
$360.7 million, an increase of $69.6 million or 23.9% compared to the same
period in 1999. Total revenue from companies acquired during 1999 was $76.0
million and $14.1 million in the nine months ended September 30, 2000 and 1999,
respectively. Commission revenue for the nine months ended September 30, 2000
was $327.4 million or 90.8% of total revenues, an increase of $66.1 million or
25.3% compared to the same period in 1999. Commission revenue from companies
acquired during 1999 was $73.6 million and $14.1 million in the nine months
ended September 30, 2000 and 1999, respectively. Total closed transactions for
the nine months ended September 30, 2000 were 67,778, an increase of 10,420 or
18.2% primarily attributable to acquired companies. The average home sales price
increased from $149,600 in the first nine months of 1999 to $160,700 in the
first nine months of 2000, an increase of 7.4%. The combination of the increase
in closed transactions and the higher average home sales price resulted in a
26.9% increase in closed transaction volume to $10.9 billion for the nine months
ended September 30, 2000 compared to the same period in 1999.
Title fees for the nine months ended September 30, 2000 and 1999 were $16.6
million or 4.6% of total revenues, and $16.8 million or 5.8% of total revenues,
respectively. The decrease in title fees is due to the decline in the refinance
business partially offset by the incremental title fees from a company acquired
in the fourth quarter of 1999 and the addition of title services in two markets
in 2000.
<PAGE>
Other revenues for the nine months ended September 30, 2000 were $16.6 million
or 4.6% of total revenues, an increase of $3.6 million or 27.3% compared to the
same period in 1999. The increase is primarily attributed to an increase in the
brokerage administrative commission and mortgage origination fees.
Commission Expense. Commission expense from the real estate brokerage operations
for the nine months ended September 30, 2000 was $229.4 million, an increase of
$49.0 million or 27.1% compared to the same period in 1999. The increase in
commission expense is due to higher volume of closed transactions resulting from
acquired companies and higher percentage payouts to the agents due primarily to
higher sales associate productivity. Commission expense as a percentage of
commission revenue increased from 69.1% for the nine months ended September 30,
1999 to 70.1% for the same period in 2000.
All Other Operating Expenses. All other operating expenses for the nine months
ended September 30, 2000 were $99.6 million, an increase of $15.8 million or
18.8% compared to the same period in 1999. All other operating expenses include
expenses such as salaries and employee benefits, occupancy and business
promotion and marketing. The increase is primarily attributed to acquired
companies and to a lesser extent, higher activity levels related to the
e-commerce initiatives.
Amortization of Pending Real Estate Sales Contracts. Amortization of pending
real estate sales contracts was $0.7 million for the nine months ended September
30, 2000 attributable to the acquisition of Champion Realty in December 1999.
Amortization of pending real estate sales contracts was $2.2 million for the
nine months ended September 30, 1999 attributable to the acquisition of Paul
Semonin Realtors and Long Realty in July and August 1999, respectively.
Depreciation and Amortization. Depreciation and amortization for the nine months
ended September 30, 2000 was $8.3 million, excluding the amortization of pending
real estate sales contracts, an increase of $2.2 million or 36.6% compared to
the same period in 1999, primarily attributed to companies acquired.
Other Income (Expense), Net. Other income (expense), net for the nine months
ended September 30, 2000 and 1999 consisted primarily of interest expense and
interest income. Interest expense for the nine months ended September 30, 2000
was $2.2 million, a decrease of $1.0 million or 30.2% compared to the same
period in 1999. The decrease is attributed primarily to lower borrowings under
the revolving credit facility.
Income Tax Expense. The effective tax rate was 40.8% and 40.6% for the nine
months ended September 30, 2000 and 1999, respectively. The higher income tax
expense for the nine months ended September 30, 2000 as compared to the same
period in 1999 is primarily due to higher pre-tax income.
Net Income. Net income for the nine months ended September 30, 2000 was $12.6
million, an increase of $3.1 million or 32.6% compared to the net income for the
same period in 1999.
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) for the
nine months ended September 30, 2000 and 1999 was $31.7 million and $26.9
million, respectively. EBITDA is defined as net income (loss) before income
taxes, interest and other income (expense), net, and depreciation and
amortization including amortization of pending real estate sales contracts.
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------------------------
(in thousands) 2000 1999
------------------------ ----------------------
<S> <C> <C>
Net income $ 12,583 $ 9,491
Income tax expense 8,798 6,598
Interest and other (income) expense, net 1,372 2,549
------------------------ ----------------------
Operating income 22,753 18,638
Amortization of pending real estate sales contracts 665 2,157
Depreciation and amortization 8,300 6,075
------------------------ ----------------------
EBITDA $ 31,718 $ 26,870
======================== ======================
</TABLE>
<PAGE>
Results of Operations of HomeServices for the Three Months Ended September 30,
2000
Revenues. Total revenues for the three months ended September 30, 2000 were
$134.1 million, an increase of $10.7 million or 8.7% compared to the same period
in 1999. Total revenue from companies acquired during 1999 was $26.2 million and
$14.1 million in the three months ended September 30, 2000 and 1999,
respectively. Commission revenue for the three months ended September 30, 2000
was $121.4 million or 90.5% of total revenues, an increase of $9.1 million or
8.1% compared to the same period in 1999. Commission revenue from companies
acquired during 1999 was $25.2 million and $14.1 million in the three months
ended September 30, 2000. Total closed transactions for the three months ended
September 30, 2000 were 24,499, an increase of 534 or 2.2% primarily attributed
to companies acquired. The average home sales price increased from $154,600 in
the third quarter of 1999 to $165,500 in the third quarter of 2000, an increase
of 7.1%. The combination of the increase in closed transactions and the higher
average home sales price resulted in a 9.4% increase in closed transaction
volume to $4.1 billion for the three months ended September 30, 2000 compared to
the same period in 1999.
Title fees for the three months ended September 30, 2000 and 1999 were $6.3
million or 4.7% of total revenues, and $6.1 million or 5.0% of total revenues,
respectively. The decrease in title fees as a percent of total revenues is due
to title fee revenue in 1999 from refinance business being significantly higher
than the comparable period in 2000 partially offset by the addition of title
services in two markets in 2000.
Other revenues for the three months ended September 30, 2000 were $6.5 million
or 4.8% of total revenues, an increase of $1.5 million or 29.6% compared to the
same period in 1999. The increase is primarily attributed to an increase in
broker's administrative commission and mortgage origination fees.
Commission Expense. Commission expense from the real estate brokerage operations
for the three months ended September 30, 2000 was $85.8 million, an increase of
$7.5 million or 9.6% compared to the same period in 1999. The increase in
commission expense is due to higher volume resulting from acquired companies and
higher percentage payouts to the agents due primarily to higher sales associate
productivity. Commission expense as a percentage of commission revenue increased
from 69.8% for the three months ended September 30, 1999 to 70.7% for the same
period in 2000.
All Other Operating Expenses. All other operating expenses for the three months
ended September 30, 2000 were $32.0 million, an increase of $0.5 million or 1.5%
compared to the same period in 1999. All other operating expenses include
expenses such as salaries and employee benefits, occupancy and business
promotion and marketing.
Depreciation and Amortization. Depreciation and amortization for the three
months ended September 30, 2000 was $2.8 million, an increase of $0.4 million or
18.4% compared to the same period in 1999, primarily as a result of business
acquisitions.
Amortization of Pending Real Estate Sales Contracts. Amortization of pending
real estate sales contracts was $2.2 million for the three months ended
September 30, 1999 attributable to the acquisition of Paul Semonin Realtors and
Long Realty in July and August 1999, respectively.
Other Income (Expense), Net. Other income (expense), net for the three months
ended September 30, 2000 and 1999 consisted primarily of interest expense.
Interest expense for the three months ended September 30, 2000 was $0.5 million,
a decrease of $0.6 million or 55.4% compared to the same period in 1999. The
decrease is attributed to lower borrowings under the revolving credit facility.
Income Tax Expense. The effective tax rate was 41.1% and 41.0% for the three
months ended September 30, 2000 and 1999, respectively. The higher income tax
expense for the three months ended September 30, 2000 as compared to the same
period in 1999 is primarily due to higher pre-tax income.
Net Income. Net income for the three months ended September 30, 2000 was $7.9
million, an increase of $3.0 million or 61.8% compared to the net income for the
same period in 1999.
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) for the
three months ended September 30, 2000 and 1999 was $16.3 million and $13.5
million, respectively. EBITDA is defined as net income (loss) before income
taxes, interest and other income (expense), net, and depreciation and
amortization including amortization of pending real estate sales contracts.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------------------------
(in thousands) 2000 1999
------------------------ ----------------------
<S> <C> <C>
Net income $ 7,873 $ 4,865
Income tax expense 5,433 3,320
Interest and other (income) expense, net 160 774
------------------------ ----------------------
Operating income 13,466 8,959
Amortization of pending real estate sales contracts - 2,157
Depreciation and amortization 2,791 2,357
------------------------ ----------------------
EBITDA $ 16,257 $ 13,473
======================== ======================
</TABLE>
Liquidity and Capital Resources
The Company's capital requirements consist primarily of working capital, capital
expenditures and acquisitions. Historically, the Company has funded its working
capital and capital expenditures using cash and cash equivalents on hand.
Acquisitions have historically been financed through the Company's initial
public offering, borrowings under its revolving credit facility, the private
placement of the 7.12% senior notes, loans from MidAmerican Energy Holdings
Company ("MidAmerican Holdings"), capital contributions prior to the IPO and
cash on hand. The Company's cash and cash equivalents totaled $16.2 million as
of September 30, 2000.
The Company's cash provided by operating activities was $21.9 million and $28.7
million for the nine months ended September 30, 2000 and 1999, respectively. In
the first nine months of 1999, cash flows from mortgage loans held for sale were
positively impacted by the timing of the sale of 1998 mortgage loans delayed
into 1999 due to increased mortgage volume and system conversions by major
investors in December 1998. Certain of the Company's mortgage operations are
conducted through non-consolidated affiliates. For the nine months ended
September 30, 2000, the company's share of earnings from such affiliates was
$1,724,000, of which $1,487,000 was received as cash distributions.
The Company's cash used in investing activities was $4.7 million and $36.1
million for the nine months ended September 30, 2000 and 1999, respectively. The
Company's cash used in investing activities for the nine months ended September
30, 2000 were primarily attributable to the purchase of office property and
equipment of $5.5 million. The Company's cash used in investing activities for
the nine months ended September 30, 1999 were primarily attributable to the
acquisition of Paul Semonin Realtors in July 1999 and Long Realty in August 1999
for $29.0 million collectively and the purchase of office property and equipment
of $6.8 million.
The Company's cash (used in) provided by financing activities was ($11.4)
million and $14.2 million for the nine months ended September 30, 2000 and 1999,
respectively. The Company's cash used in financing activities for the nine
months ended 2000 was primarily a result of payments under the revolving credit
agreement. The Company's cash provided by financing activities for the nine
months ended 1999 was primarily a result of proceeds under the revolving credit
agreement and a capital contribution from MidAmerican Holdings in connection
with the acquisition of Paul Semonin Realtors.
On October 12, 2000, the Company purchased 1,700,000 of its outstanding common
shares in a block trade at a price of $10.50 per share. The Company obtained a
waiver of the restricted payment provisions under its $75 million senior secured
revolving credit agreement and agreed to reduce the amount of such facility to
$65 million to facilitate the purchase.
The Company believes that the cash flow from operations and available borrowings
under its $65 million revolving credit facility, will be adequate to meet its
needs for working capital, capital expenditures, debt service, planned
acquisitions and the continued development of its e-commerce platform. However,
future acquisition growth may result in the need to raise additional funds
through public or private financings or the formation of strategic ventures.
<PAGE>
New accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which was delayed by SFAS No. 137 and
amended by SFAS No. 138. SFAS 133 establishes accounting and reporting standards
for derivative instruments and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This statement is effective for the Company beginning January 1, 2001. The
Company does not expect the adoption to have a material financial impact.
Forward-looking Statements
Certain information included in this report contains forward-looking statements
made pursuant to the Private Securities Litigation Reform Act of 1995 ("Reform
Act"). Such statements are based on current expectations and involve a number of
known and unknown risks and uncertainties that could cause the actual results
and performance of the Company to differ materially from any expected future
results or performance, expressed or implied, by the forward-looking statements.
In connection with the safe harbor provisions of the Reform Act, the Company has
identified important factors that could cause actual results to differ
materially from such expectations, including operating uncertainty, acquisition
uncertainty, uncertainties relating to economic and political conditions and
uncertainties regarding the impact of regulations, changes in government policy
and competition. Reference is made to all of the Company's SEC filings,
including the Company's Report on Form 8-K dated March 17, 2000, incorporated
herein by reference, for a description of certain risk factors. The Company
assumes no responsibility to update forward-looking information contained
herein.
<PAGE>
Part II
Item 1. Legal Proceedings
In the ordinary course of business, HomeServices and its subsidiaries are
involved in legal proceedings incidental to their operations. HomeServices and
its subsidiaries are not currently involved in any legal proceedings that
management believes would have a material adverse effect on the operations or
financial condition of HomeServices and its subsidiaries taken as a whole.
Item 2. Changes in Securities
Not applicable.
Item 3. Default on Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index.
(b) Reports on Form 8-K - none.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of Edina, State
of Minnesota, on this ___th day of November, 2000.
HOMESERVICES.COM INC.
By: /s/ Galen K. Johnson
Senior Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit Page
No. No.
27 Financial Data Schedule 16
