Flooring News and Information

Irvine, CA, Nov. 26—House2Home has released financial results for its third fiscal quarter and nine month period ended October 27. On November 7, the company and its subsidiaries filed voluntary petitions under Chapter 11 of the Federal Bankruptcy Code in the U.S. Bankruptcy Court in Santa Ana, California. The company is in the process of liquidating all 42 of its House2Home home decorating superstores and will cease normal business operations over the next three to four months.

The company reported a net loss for the fiscal third quarter of $20.6 million, or $0.55 per diluted share. For the prior year period, the company reported a net loss of $10.3 million, or $0.27 per diluted share. Sales for the company's 42 House2Home stores totaled $119.4 million for the quarter. Sales totaled $334 million for the third quarter a year ago when the company operated 84 HomeBase stores and five House2Home test stores.

For the nine month period, the company reported a net loss of $187.9 million, or $5.00 per diluted share. The company reported a net loss of $10 million, or $0.27 per diluted share, for the corresponding prior year period. Sales for the current nine month period were $530.4 million. Net sales for the corresponding prior year period were $1.1 billion, including sales at both HomeBase and House2Home stores.

As previously reported, sales for the company's House2Home stores fell severely following the September 11 terrorist attacks, exacerbating an already difficult retail environment. In addition, the company was approaching its peak borrowing levels against its credit facility following the August completion of the store conversion program. These factors, in combination, led to extreme pressure on the company's cash position. Despite intense efforts, no other strategic alternatives materialized that would permit the company to avoid liquidation.

Upon receiving Bankruptcy Court approval, inventory liquidation sales began on November 14 at all 42 House2Home stores. The inventory liquidation process is being conducted by a joint venture, led by Gordon Brothers Retail Partners, LLC, and is expected to take approximately 13 weeks to complete. The company also reported that it has reached an agreement with the major constituencies in the bankruptcy case, and, subsequently, has received Bankruptcy Court approval, to honor outstanding pre-petition House2Home gift certificates, gift cards and credit vouchers. All House2Home stores are now accepting these forms of store credit. In addition, a committee representing the company's unsecured creditors has been established. The company is also developing a process for the orderly disposition of its owned and leased properties. Based on information currently available, the company does not believe there will be equity value remaining after proceeds from the liquidation of inventory, real estate and other assets are used to repay secured and unsecured creditors.