Packaged Home Solutions, Inc. Announces Substantial Restructuring to Take Advantage of Downturn of Housing Market
Packaged Home Solutions, Inc. (PINKSHEETS: PKGH) www.packagedhomesolutions.com (“PHS” or “the Company”) today announced that it completed a significant restructuring of its operations that management has been implementing over the last sixty days. The restructured operations are designed to take advantage of immediate opportunities that exist in the marketplace resulting from the downturn in the housing market throughout most of the United States, while continuing to focus on the long term goals of developing a national presence by the end of 2008.
The Company has restructured its operations around the success of its 89% owned subsidiary, Southeastern Renovations Inc., in attracting installation services for major retailers of home improvement products, as well as those homeowners who are now improving their homes instead of selling them during this downturn. Furthermore, the Company is exploiting the advantage of many smaller companies leaving the home improvement industry to exploit the advantage that it has as a manufacturer of hurricane windows and doors, as well as the direct manufacturing relationship it has established in China for the production of all kitchen and bath improvements that give PHS a cost and quality advantage over competing US based manufacturers and distributors.
Southeastern Renovations, which the Company purchased in December 2006, is presently servicing the northern Florida and southern Georgia markets for homeowners and major retailers who need licensed, bonded and financially solvent installation companies to handle the installation of home improvement products bought by homeowners in order to improve their homes. The Company is presently handling over $150,000 per month of such installation services in its geographic areas, at margins that exceed 22%. At the request of several major retailers, Southeast has over the last 60 days began expanding its service area, increased its installation workforce and is adding senior management in order to increase sales to over $300,000 per month in the next 60 days and over $1 million per month by the end of the year. Furthermore, SER is finalizing its negotiations with its first major acquisition extending its service area which will add substantial revenues to its base, as well as expand its installation capabilities. SER contemplates making a minimum of 1 substantial acquisition per quarter for the next four quarters.
The Company’s wholly owned subsidiary Al-Vent Architectural Products Inc. has met with substantial market acceptance of its hurricane windows and doors, which have been tested to withstand hurricane force winds in excess of 275 miles per hour. The Company bought Al-Vent as a dormant company in December 2006 after the death of its founder. When PHS acquired the company, it had not actively marketed its products for over 12 month, was not actively manufacturing products and had no direction. Since taking control in January 2007, Al-Vent has generated sales of $650K and presently has outstanding bids for $300K. Al Vent has established manufacturing facilities in China which has reduced the cost of producing the windows and doors by 20% and resulted in engineering upgrades to its products that would have been too expensive in the US to implement and remain competitive. Al-Vent retains its manufacturing plant in North Carolina which is being utilized for emergency orders which can be sold at a substantial premium and for custom individual orders, which cannot be mass produced in China.
The Company has also formed PHS Wholesale Inc., which produces cabinets, toilets, bathroom and kitchen accessories and components in China for commercial projects located throughout the US, the Caribbean, and Latin and South America. Although there has been a substantial downturn in residential construction, there has not been a downturn in commercial construction. The Company has been approached by several major developers to provide more than just hurricane windows and doors, and the Company has leveraged its existing manufacturing capabilities in China to fulfill these needs. Although margins are substantially lower in the commercial fulfillment than the Company’s residential services and products area, the orders are substantially larger. The Company is presently bidding on 4 major projects totaling $15MM in gross orders, which it expects to average gross margins of 15%. Wherever possible, SER will handle the installation of these products where an additional gross margin of 10% will be generated.
The Company has also negotiated a services agreement with a private real estate trust with initial capitalization of $5,000,000 which is purchasing distressed residential housing in the market areas in which the Company has existing locations. The REIT will focus on middle market homes in or near to foreclosure that need substantial improvement. The REIT will be purchasing homes at a substantial discount to market value as lenders attempt to deal with the increasing number of foreclosures in their market areas. For example, foreclosures in Cincinnati have increased from 150 per month a year ago to over 3000 a month currently. PHS will provide the product improvements for each house as well as the installation services for each house purchased by the REIT at its cost plus 10% but will also receive 25% of the net profits generated from the housing portfolio. The REIT will purchase approximately 5 to 10 homes per month beginning in July, improve these homes and then put the houses up for rent or resale when such improvements are completed. PHS’ management believes that this relationship maximizes its expertise, allows it to smooth out its revenue streams during months when there is a downturn in its normal business lines, and allows an ultimate return greater than it could receive if it just sold its products and services to the REIT. Such operations will begin in July in Cincinnati and Jacksonville, Florida and be gradually expanded to the other geographic locations where PHS has a presence.
The Company is also announcing today a recapitalization of the Company and the addition of a new senior management team. Dan Smith has resigned his position as CEO of the Company for health reasons and in order to focus on sales and marketing for Al-Vent and PHS Wholesale as a full time consultant to such companies. Mr. Smith will continue to serve on the board of directors of the Company. The Company will now be led by Todd Medina, as CEO. Mr. Medina has over 30 years of experience in the home improvement business holding senior management positions with and representing The Home Depot, Sears Home Central and Owens Corning. Mr. Medina will also continue as CEO of SER. Mr. Medina will be announcing the further management senior management team members by the end of June, when he announces financial results for the second quarter of 2007, as well as the Company’s financial guidance for the remainder of the year.
The Company has reduced its direct overhead over the past sixty days as well as recapitalized the Company for its expansion by converting all senior debt to equity at $.25 per share, with a two-year lockup period on the sale of such stock into the market. Such investor group has also committed to lend up to an additional $500,000 of short-term capital for the Company. As a requirement of this investor group, Mr. Medina and Mr. Smith have agreed to a prohibition from sale of their stock in the Company for an additional two-year period ending May 31, 2009.
Dan Smith and Todd Medina, in a joint statement describing the restructuring stated: “We apologize to our shareholders on the lack of information that we could release, which resulted in an unrealistic short-term stock price, while these significant developments were taking place at the Company, but as all shareholders can see from what we are announcing today, the steps that we have taken will result in substantial value for all shareholders. We will be announcing over the next few weeks material announcements on each part of this plan which will show our shareholders the immediate impact that these steps will have on both our top line but increased bottom line.” Mr. Media continued: ” I want to express my personal appreciation for the leadership of Dan Smith over the last three years in building a substantial company. Dan will continue to lead the sales and marketing efforts for the Company, while not being faced with the administrative burdens of running the day to day operations of the Company, which will now be absorbed by myself and the new senior management team. Although we are still positioned for growth in the residential home improvement area, the sign of a dynamic management team is to adjust to market conditions and implement strategies that maximize the opportunities that the market has generated for us. The housing downturn has decreased our competition, but given rise to immediate profit and expansion opportunities that really did not exist 12 months ago. We believe that our shareholders will realize long-term value for these short term opportunities that we are now exploiting.”
About Packaged Home Solutions
Packaged Home Solutions, Inc., formed in 2004, has created a systematized approach that makes remodeling fast and as “customer-friendly” as possible. The Company’s executives have over 138 years of experience in the home improvement business, including senior positions with several of the largest retail home improvement chains in the US. The Company was established to provide consumers with reliable, attractive home improvement solutions, including kitchens, bathrooms, basement and exterior improvements that provide the best in product selection and installation services. The Company focuses on the middle market home in range of $100,000 to $750,000, specializing in improvements to increase the value of
the home, and maximizing value of the home for sale in a softening real estate market.
The Company’s subsidiaries, Al-Vent Architectural Products Inc. and PHS Wholesale Inc focus of providing hurricane windows and doors and general home improvement products manufactured in China. SER, another subsidiary of the Company, focuses on providing installations services directly to homeowners and large national home improvement retailers. By the end of 2008, the Company plans to have 30 operational offices, making it one of, if not the largest, home improvement services company in the United States. At that time, the management of the Company will consider various options to maximize shareholders’ value, including a sale to an industry participant.
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Statements about Packaged Home Solutions, Inc.’s expectations, including future revenues and earnings, and all other statements in this press release other than historical facts are “forward-looking statements” within the meaning of section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and as the term is defined in the Private Litigation Reform Act of 1995. Packaged Home Solutions’ actual results could differ materially from expected results. Packaged Home Solutions undertakes no obligation to update forward-looking statements to reflect subsequently occurring events or circumstances. Should events occur which materially affect any comments made within this press release; Packaged Home Solutions will appropriately inform the public.
Contacts: Packaged Home Solutions: Todd Medina 904-735-6092
SOURCE: Packaged Home Solutions