Strong Growth Exhibited, Third Quarter Revenue Increases 144% to $10.3 Million, Net Income Improves to $3.2 Million Compared to Net Loss in 2008

NEW YORK and GUANGDONG, China, Nov. 17 /PRNewswire-Asia/ -- Home System Group (OTC Bulletin Board: HSYT; "Home System" or the "Company"), an international manufacturer and distributor of a variety of household appliances to large retailers, announced today its financial results for the three and nine months ended September 30, 2009.

    Third Quarter Highlights
    -- Revenue was $10.3 million, an increase of 144% from $4.2 million in
       2008.
    -- The Company's Weihe subsidiary, acquired last October, contributed
       significantly to the Company's revenue and operating results.
    -- Gross profit was $3.3 million, compared to $162,000 in 2008.
    -- The Company recorded a $2.2 million pre-tax gain on a transfer of
       property, which provided a $0.026 per share benefit to the 2009
       results.
    -- Net income was $3.2 million, compared to a loss of $151,000 in 2008.
    -- Fully diluted earnings per share increased to $0.05 from none in 2008.

Third Quarter and Nine Month 2009 Results Commentary

"Home System Group's ceiling fan and decorative lamp business through our recently acquired Weihe subsidiary continues to add significant growth to both our top and bottom lines," said Mr. Lei Yu, Home System Group's newly appointed Chief Executive Officer. "We are seeing good sales activity and are benefiting from lower cost of sales due in large part to the reduction in the pricing of raw materials, such as steel."

Home System Group's revenue in the third quarter of 2009 was $10.3 million, an increase of 144% from $4.2 million in the third quarter of 2008. The increase was primarily driven by $7.4 million of revenue from Weihe, which assembles and distributes ceiling fans and lighting products and was acquired by the Company in October, 2008. Revenue for the nine months ended September 30, 2009 was $46.2 million, an increase of $25.0 million from the corresponding 2008 level, reflecting the additional revenue from Weihe.

Gross profit in the third quarter of 2009 was $3.3 million, compared with gross profit of approximately $162,000 in the third quarter of 2008. The gross profit margin was 32% in the third quarter of 2009 compared to only 4% in the third quarter of 2008. This significant gross margin improvement was primary due to the Company's new Weihe subsidiary, which has higher levels of margin, and lower raw material costs, which benefited all of the Company's operations. Gross profit for the nine months ended September 30, 2009 was $11.1 million compared to a gross loss of $356,000 in the comparable period of 2008, again reflecting the benefits of the addition of Weihe as well as reduced raw material costs.

General selling and administrative expenses in the third quarter of 2009 were $1.3 million, compared to approximately $705,000 in the third quarter of 2008. This increase was primarily due to increased selling and administrative costs associated with the operations of Weihe. General selling and administrative expenses for the nine months ended September 30, 2009 were $4.3 million, an increase of $2.0 million over the prior year period, largely resulting from the addition of Weihe.

Income from operations in the third quarter of 2009 was $2.0 million, compared with a loss from operations of approximately $542,000 in the third quarter of 2008. This improvement was primarily due to the increased revenue and operating profit resulted from the addition of Weihe and the raw material cost reductions. Overall, operating margin was 19% in the third quarter of 2009. Income from operations for the nine months ended September 30, 2009 was $6.8 million with a corresponding 15% operating margin, compared to a loss from operations of $2.6 million in 2008.

Contributing to pre-tax income was a recorded $2.2 million gain on a transfer of property, which provided a $0.026 per share benefit to the 2009 results.

Income taxes were approximately $1.1 million in the third quarter of 2009 and $2.1 million for the nine months ended September 30, 2009. There were no taxes in the comparable periods of 2008 due to losses incurred.

Net income for the third quarter of 2009 was $3.2 million, compared to a net loss of $151,000 in the third quarter of 2008. Fully diluted earnings per share were $0.05 for the third quarter of 2009, compared to none in the third quarter of 2008. Likewise, net income for the nine months ended September 30, 2009 improved to $6.1 million from a loss of $2.2 million in the comparable period of 2008, and fully diluted earnings per share of $0.10 compared to a loss per share of $0.04, respectively.

Financial Condition

As of September 30, 2009, Home System Group had cash and cash equivalents of $2.4 million. During the nine months ended September 30, 2009, net cash used by operating activities was $4.8 million as the Company was able to significantly reduce its trade debt from $30.8 million to $13.9 million.

Recent Developments

In August 2009, the Company transferred certain building assets and land use rights valued at $6.1 million to former shareholders of Weihe and in return the notes due as a result of the acquisition of Weihe were reduced by this amount. The pre-tax gain on the transfer of the building assets and land use right is $2.2 million.

On October 13, 2009, Home System Group announced the appointment of Mr. Lei Yu as CEO, replacing Mr. Fuying Wang. Mr. Yu's background includes senior management operating experience at various companies in China. Most notably, Mr. Yu was CEO of Hebei Huda Technology & Education Development Co. Mr. Yu directed the project that successfully transformed that company into a manufacturer and distributor of electrical wire and cable products.

Business Outlook

"Our strong results this year gives us reason to be optimistic about Home System Group's growth potential going forward, especially with gradual improvement in the world's economies" said Mr. Yu. "Our most recent quarterly results are exceptional when compared to 2008. With the increased contributions we are seeing from our Weihe subsidiary, we are well on our way to achieving record annual sales and profits for 2009."

About Home System Group

Home System Group is primarily engaged in the production of a variety of small household appliances, including stainless steel gas grills and ovens, gas and electric heaters, residential water pumps, ceiling and table fans, decorative lamps, LEDs and energy-saving lamps. Its products are sold through distributors and direct to retailers located in China, America, Europe, Australia, Africa, and Southeast Asia. For more information, please visit: http://www.homesystemgroup.com .

FORWARD-LOOKING STATEMENTS:

This document includes forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements concerning future acquisitions, estimates of, and increases in, production, cash flows and values, statements relating to the continued advancement of Home System Group's products and other statements which are not historical facts. When used in this document, the words such as "could," "plan," "estimate," "expect," "intend," "may," and similar expressions denote forward-looking statements. Although Home System Group believes that its expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Important factors that could cause actual results to differ from these forward-looking statements include, but are not limited to, those set forth in our reports filed with the Securities and Exchange Commission, together with the risks discussed in our press releases and other communications to shareholders issued by us from time to time, such as our ability to raise capital as and when required, the availability of raw products and other supplies, competition, the costs of goods, government regulations, and political and economic factors in the People's Republic of China in which our subsidiaries operate. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. Home Systems Group undertakes no obligation to update any forward-looking statements to reflect new information, events or circumstances after the date they are made, or to reflect the occurrence of unanticipated events.

    For more information, please contact:

    Home System Group
     Eva Wang
     Tel:   +1-347-624-5699
     Email: vp@homesystemgroup.com


                      Home System Group and Subsidiaries
                Selected Consolidated Statements of Operations
            (unaudited and in millions, except per share amounts)

                                   Three months ended      Nine months ended
                                      September 30,          September 30,
                                     2009       2008        2009       2008

    Net sales                       $10.3        $4.2      $46.2       $20.5
    Cost of sales                     7.0         4.0       35.1        20.8
    General selling and admin
     expenses                         1.3         0.7        4.3         2.3
    Income from operations            2.0        (0.5)       6.8        (2.6)

    Other income (*)                  2.7         0.4        2.9         0.4
    Interest expense                 (0.4)         --       (1.5)       (0.0)
    Provision for income taxes       (1.1)         --       (2.1)         --

    Net income (loss)                $3.2       $(0.2)      $6.1       $(2.2)

    Basic and diluted earnings
     per share                      $0.05         $--      $0.10      $(0.04)

    Basic and diluted weighted
     average shares                  62.5        62.5       62.5        62.5

    (*) This includes a gain of $2.2 million resulting from the transfer of
        property to the former shareholders of Weihe

    NOTE: The above numbers may not equal the total due to rounding.


                      Home System Group and Subsidiaries
                  Selected Consolidated Balance Sheet Items
                                (in millions)

                                               (unaudited)
                                               September 30,      December 31,
                                                   2009                2008

    Cash and cash equivalents                       $2.4               $1.6
    Accounts receivable - trade                     19.5               21.1
    Notes receivables                                7.8                4.9
    Inventories                                     18.3               15.6
    Property, plant & equipment - net                6.9                9.5
    Goodwill                                        25.0               25.0
    Trade and related payables                      13.9               30.8
    Total debt                                      41.4               51.4
    Total stockholders' equity                     $18.1              $11.8


    NOTE: The above numbers may not equal the total due to rounding.



                      Home System Group and Subsidiaries
                    Selected Consolidated Cash Flow Items
                                (in millions)

                                                          (unaudited)
                                                       Nine months ended
                                                          September 30,
                                                    2009                2008

    Net cash used by operating activities          $(4.8)              $(0.8)
    Net cash used in investing activities           (2.9)
    Net cash provided by financing activities        8.5                 0.7
    Net change in cash and cash equivalents         $0.8               $(0.2)

    NOTE: The above numbers may not equal the total due to rounding.

SOURCE Home System Group

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http://www.homesystemgroup.com