U.S. Home Systems Reports Fourth Quarter and Full Year 2007 Financial Results

Business Wire, March 18, 2008

Board Approves Additional $2 Million Stock Buyback

DALLAS -- U.S. Home Systems, Inc. (NasdaqNGM: USHS) today reported financial results for the fourth quarter and full year ended December 31, 2007. USHS is engaged in the specialty products home improvement business. The Company's principal product lines include kitchen cabinet refacing products, bathroom tub liners and wall surround products, wood and composite decks and related accessories.

For the fourth quarter of 2007, USHS reported revenues of $29.3 million as compared to $31.0 million in the fourth quarter ended December 31, 2006. In the fourth quarter, new orders increased 17.1% to $31.0 million from $26.4 million in the fourth quarter last year due primarily to the Company's in-store-marketing program which was initiated in June 2007. Although new orders increased in the fourth quarter, the Company's installation completions were lower resulting in a $1.7 million decline in fourth quarter revenues as compared to the prior year. The Company's backlog of uncompleted orders was $24.0 million at December 31, 2007 as compared to $19.0 million at December 31, 2006. The decline in revenues in the quarter resulted in a reduction of the Company's gross profit of $1.0 million. Gross profit was also adversely affected by higher material and manufacturing labor costs resulting principally from product enhancements in the Company's kitchen refacing program, and reduced deck product selling prices in its deck product line. The Company made price adjustments in January 2008 to improve the gross profit margin of its kitchen refacing product line. In addition, the Company experienced approximately $108,000 of start-up losses in markets opened in June and July 2007.

The loss in the fourth quarter from continuing operations was $434,000, or $(0.05) per share, as compared to income from continuing operations of $1.2 million, or $0.14 per share, for the same period last year.

Murray Gross, chairman and chief executive officer, commented "We are encouraged with the early results from our new in-store marketing initiative. In January and February 2008 we continued to generate an increase in new orders over the same period in 2007. Based on these successes, we are planning to expand this program in 2008. We expect this more robust in-store marketing initiative will help to grow our new orders and resulting revenue."

Gross continued, "As I stated in June last year, my experience has been that consumer demand for kitchen and bath products recover at a faster rate than the general housing market and that increasing numbers of potential home sellers will undertake economical remodeling expenditures to spruce up their house to stand out against competition while many other home owners will choose to incur remodeling investments to upgrade their existing home. I believe that our current new orders levels are in line with my experience. However, we remain cautious about growth prospects as tighter credit standards, increasing fuel costs, rising unemployment and falling consumer confidence are expected to place continued pressures on remodeling expenditures. U.S. Home Systems remains strategically well-positioned within this market, and even as we head into what has historically been a seasonally slow quarter for us, we remain optimistic. We expect our first quarter bottom-line results to range between a $0.02 loss per share and a $0.02 gain in earnings per share, based on the timing of installations. I would also remind shareholders that the second and third calendar quarters represent what have historically been our strongest quarters each year."

Mr. Gross concluded, "In August 2007 our Board of Directors authorized the repurchase of up to $5.0 million of our outstanding common shares. As of December 31, 2007 we had purchased 737,093 shares at a cost of approximately $4,985,000. I am pleased to announce today that our Board has authorized a new program for the repurchase of up to $2 million of our outstanding common stock in the open market. As before, we will make purchases at such prices and time as we determine are appropriate. Based on our current stock price, we believe repurchases of the Company's stock represent an excellent investment that will provide long-term value to our shareholders."

For the year ended December 31, 2007, revenues were $123.3 million as compared to $120.8 million in the same period last year. Approximately 70% of the increase, or $1,735,000, was realized in markets that were opened prior to 2007. Income from continuing operations was $2.4 million, or $0.29 per share, as compared to $4.1 million, or $0.49 per share, respectively, in 2006.

USHS previously reported that effective September 30, 2007 it had completed the sale of its consumer finance subsidiary assets. Operating results of its former consumer finance segment have been reclassified as discontinued operations for all periods. Loss from these discontinued operations for the year ended December 31, 2007 was $2.7 million, or $0.33 per share, which included a loss of $2.2 million on the disposal of the business consisting of a pre-tax loss of $1.3 million and an income tax expense of $910,000 on the transaction. Income from discontinued operations for the year ended December 31, 2006 was $122,000, or $0.02 per share.