Tweeter: We may file for Chapter 11

May 10, 2007 10:53 AM E-mail| |Comments ()| Text size – +

Tweeter Home Entertainment Group Inc.'s second quarter swung to a loss, and the company said it doesn't have enough working capital to fund its short-term needs.

The Canton, Mass., specialty-electronics retailer said it may choose to file for Chapter 11 bankruptcy protection if it isn't able to raise enough money.

Tweeter, which said in late March that it would cut 20% of jobs and close 49 stores, two regional facilities and exit several U.S. regions, is investigating the marketability of its 18.75% stake in privately held Tivoli, which makes computer-network management software, as well as other alternatives for raising capital. The costs associated with store closings, including lump-sum payments to landlords of closed stores with whom it reaches settlement, are part of the reason for Tweeter's cash shortfall.

Tweeter said any additional capital could take the form of debt or equity, but there could be no assurance that additional debt or equity will be available on acceptable terms or at all.

Equity financing could result in substantial dilution to existing stockholders.

Tweeter posted a loss of $35.2 million, or $1.38 a share, from a year-earlier profit of $424,000, or 2 cents a share. The loss was worsened by charges of $27.2 million for restructuring and $1.71 million for impairment.

Revenue for the period ended March 31 fell 13% to $163.3 million from $186.8 million a year earlier, hurt by a 44% sales decrease for projection televisions and 35% for plasma televisions, partially offset by a 72% increase in revenue from LCD televisions.

Gross profit margin was 39.2% for the fiscal second quarter, down from 43% a year earlier. The decline was due to lower gross margin in the television category, as well as reduced vendor funding in volume rebates and stretch goals as compared to last year.

Tweeter caters to a higher-end shopper than discount electronics retailers, but many retailers are looking to nab the upscale shopper with home theater packages, service and installation. (Dow Jones)