Troubled Tweeter Hints at Bankruptcy10 May, 2007 By: Erik Gruenwedel
High-end consumer electronics retailer Tweeter Home Entertainment Group Inc. May 10 announced it did not have sufficient working capital to fund its short-term financial needs and without securing additional funds might file for bankruptcy protection.
Canton, Mass.-based Tweeter earlier this year cited declining margins on projection and plasma televisions in addition to the competitive CE retail landscape for plans to shutter 49 of its 153 stores and restructure operations.
The chain shuttered six stores in April, two this month and will shutter all California locations by June.
Tweeter also operates nine HiFi Buys locations in Georgia, four Showcase Entertainment Centers in Arizona and 24 Sound Advice locations in Florida.
Costs associated with the store closures, including lump-sum payments to landlords, precipitated the cash crunch, said the company, in a statement.
Tweeter reported $1.9 million in available cash, current liabilities exceeding $95 million and $12 million available from a revolving $75 million credit facility.
For the second quarter (ended March 31), Tweeter said sales of projection and plasma TVs fell 44% and 35%, respectively. Sales of liquid crystal display (LCD) TVs increased 72% and flat screen TV unit sales increased 25%.
That wasn't enough, apparently, as Tweeter posted losses of $35.2 million on revenues of $163.2 million, compared to income of $424,000 and restated revenues of $186.8 million during the same period last year.
Same-store sales dropped 13%.
“Although we expect the restructuring to have a positive impact on our future operations, the decision to close those stores results in an additional short-term expense and puts further strain on our current cash needs,” said Gregory Hunt, SVP and CFO, in a call with investors. “We believe we do not have adequate working capital to fund all of our immediate needs.”
Hunt said the company had come to terms with about a third of the 60 landlords impacted by the closures.
“We're just going location by location,” he said.
The executives said the company was looking to sell its 18.75% stake in Tivoli Audio, a CE manufacturer.
The CFO also disclosed Tweeter had improperly accounted for deferred compensation in the first quarter, thereby requiring a restatement of the period's financial results.
President and CEO Joe McGuire said there were no plans to shutter additional stores should Tweeter enter into bankruptcy.
McGuire said there was no set deadline for a possible filing.