Tweeter Home Entertainment Group Reports Earnings For Its Second Fiscal Quarter Ending March 31, 2002
CANTON, Mass.--April 25, 2002--| -- | EPS of $0.11 on a diluted basis, in line with prior guidance |
| -- | Income from operations down 14.8% to $4.9 million from $5.7 million for the quarter |
| -- | Income from operations up 31.4% to $27.9 million from $21.2 million for the first six months |
| -- | Net Income up 18.5% to $16.1 million from $13.6 million for the first six months |
Tweeter Home Entertainment Group, Inc. announced its earnings results for the second fiscal quarter ended March 31, 2002.
For the quarter ended March 31, 2002, total revenue increased 57.7% to $186 million from $118 million in the same period last year. Comparable store sales decreased 6.7%, excluding the Big Screen City, Audio Video Systems, Sound Advice, Showcase Home Entertainment and Hillcrest chains. Net income for the quarter decreased 31.5% to $2.6 million from $3.8 million for the same period last year. Earnings per share decreased to $0.11 on a diluted basis, compared to $0.20 for the same period last year.
Income from operations decreased 14.8% to $4.9 million from $5.7 million in the same period last year. As a percentage of revenue, operating income decreased to 2.6% from 4.9% in the same period last year. This was primarily due to a decline in gross margin and de-leveraging fixed store expenses as comparable store sales declined, driving up those expenses as a percent of sales.
Overall gross margin decreased to 35.7% from 36.3% for the same quarter last year. The major component driving the decline in gross margin is a reduction in purchase rebates. As a component of margin, rebates declined 60 basis points to 350 basis points, compared to 410 basis points for the same period last year. Much of this decline is attributable to the inclusion of Sound Advice in the current period, and the chain missing certain performance targets with key suppliers for the Japanese fiscal year. Pure product gross margins were flat year over year.
Selling expenses, as a percentage of revenue, grew to 27.5% from 25.9% in the same period last year. This is primarily driven by declines in comparable store sales and increases in fixed costs as a percentage of sales. Occupancy, depreciation and insurance expenses as a percent of revenue together went up 80 basis points for this quarter compared to the same period last year. Fringe benefits and net advertising expense went up 50 basis points for this quarter compared to the same period last year. General and administrative expenses as a percent of revenue increased to 5.3% from 5.2% for the same quarter last year.
Jeffrey Stone, President and CEO said, "The quarter was certainly a challenging one from a sales perspective and that obviously impacted our profitability. We have moved on and are focused on the current quarter."
Stone added, "We are amazed at the sell-through of flat panel television. This category represented approximately 7% of our business in March and is running at about the same level in April. Our customer made the transition from analog to digital very quickly and it appears that they are making the transition from tube and projection television to flat panel even quicker.
We will open six stores and relocate two during our third quarter and open four more during our fourth fiscal quarter. Current plans are to open eight stores during the first quarter of fiscal 2003."
Joe McGuire, Chief Financial Officer said, "Our balance sheet ended the quarter in solid shape, although we are unhappy with current inventory levels, which are higher than plan. We expect to bring inventory in line by the end of the June quarter. At $155 million, our annualized turns are running at 3.5, less than our target of 3.8 for this quarter. We plan to finish the fiscal year with inventory turns at or above 3.8 times."
McGuire continued, "Accounts receivable at quarter end were $33.6 million. This represents growth of 7% from the beginning of the fiscal year, and down 24% from the December quarter. We are pleased that the year to date growth in receivables is running less than the 56.4% growth rate in revenue. Accounts payable, accrued expenses and other current liabilities declined 28% from the December quarter, ending the quarter at $79.4 million. Accounts payable is particularly low at this time, a result of our reducing open-to-buy dollars during the last half of the quarter. This should rise to normal levels by the end of June, and act as a source of cash during the coming quarter."
McGuire went on to say, "Due to the uncertain economic environment, we have revised our internal expectations for quarter ending June 30, 2002. We have planned for a comparable store sales decline of between 3% and 5%, and as a result are anticipating revenues in the range of $181 to $184 million, with earnings per share ranging from $0.07 to $0.08."
Tweeter Home Entertainment Group, Inc. was founded in 1972 by current Chairman Sandy Bloomberg. Based in Canton, Massachusetts, the Company is a specialty retailer of mid- to high-end audio and video consumer electronics products. The Company's fiscal 2001 revenues were $540 million. Tweeter was named "Consumer Electronics Retailer of the Year" four out of the past six years by Audio-Video International, "1999 Retail Leader" by TWICE, and awarded Dealerscope's 1999 Dealer's Pride award. Tweeter Home Entertainment Group now operates 161 stores under the Tweeter, HiFi Buys, Sound Advice, Bang & Olufsen, Electronic Interiors, Showcase Home Entertainment and Hillcrest High Fidelity names in the New England, Texas, San Diego, Mid-Atlantic, Chicago, Southeast, Florida and Phoenix markets. The Company employs more than 3,800 associates.
Further information on the Tweeter Home Entertainment Group can be found on the company's website at www.twtr.com
Certain statements contained in this press release, including, without limitation, statements containing the words "expects," "anticipates," "believes," and words of similar import, constitute "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements and projections are subject to various risks and uncertainties, including, risks associated with new store openings, risks associated with projected June 2002 inventory levels and projected annual inventory turns, risks related to planned revenues and earnings per share estimates for the June 2002 quarter, risks related to the June 2002 projected accounts payable balances, risks associated with management of growth, the risks of economic downturns generally, and in Tweeter's industry specifically, the risks associated with competitive pricing pressure and seasonal fluctuations, the risks associated with the potential failure by Tweeter to anticipate and react to changes in consumer demand and preferences, Tweeter's dependence on key personnel, the risks associated with obtaining financing for our business model, and those risks referred to in Tweeter's Registration Statement filed on Form S-3 (SEC file number 333-94433) on January 11, 2000 and in the Company's Annual Report on Form 10-K filed on December 21, 2001 (copies of which may be accessed through the SEC's web site at http:\\www.sec.gov), that could cause actual future results and events to differ materially from those currently anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements and financial projections.
Tweeter Home Entertainment Group, Inc.
Consolidated Statements of Operations
For the Six Months and Three Months Ended March 31,
2002 (In thousands except share and per share amounts)
(Unaudited)
Three Months ended Six Months ended
March 31, March 31,
2002 2001 2002 2001
Total revenue $185,822 $117,833 $437,735 $279,801
Cost of sales 119,460 75,046 279,471 178,901
Gross profit 66,362 42,787 158,264 100,900
Selling expenses 51,176 30,491 109,661 66,540
Corporate, general and
administrative expenses 9,895 6,095 19,905 12,156
Amortization of intangibles 416 480 791 960
Income from operations 4,875 5,721 27,907 21,244
Income from joint venture -- 199 72 684
Interest (expense) income,
net (551) 380 (1,150) 702
Income before income taxes 4,324 6,300 26,829 22,630
Income tax expense 1,732 2,516 10,734 9,048
Net income $ 2,592 $ 3,784 $ 16,095 $ 13,582
TWEETER HOME ENTERTAINMENT GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, Sept. 30,
2002 2001
ASSETS (unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 3,012 $ 3,278
Accounts receivable, net 33,573 31,251
Inventory 155,216 129,173
Other current assets 8,308 7,523
Total current assets 200,109 171,225
PROPERTY AND EQUIPMENT, NET 130,798 109,142
LONG-TERM INVESTMENTS 1,132 1,195
INVESTMENT IN JOINT VENTURE 2,413 3,398
OTHER ASSETS, NET 1,891 537
GOODWILL / INTANGIBLES, NET 198,364 194,931
TOTAL $534,707 $480,428
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 289 $ 322
Amount due to bank 31,822 8,465
Accounts payable, accrued expenses
and other current liabilities 79,365 91,977
Total current liabilities 111,476 100,764
LONG-TERM DEBT:
Long-term debt 61,407 36,699
OTHER LONG-TERM LIABILITIES 10,241 10,573
Total liabilities 183,124 148,036
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY 351,583 332,392
TOTAL $534,707 $480,428