Article Excerpt:
TWST: We would like to begin with a brief historical sketch of the company and a picture of the things you are doing at the present time.Mr. McGuire: Tweeter was founded in the early 1970s as a traditional hi- fi company; it has its roots in New England. In the mid-1990s we identified that the trend of digital television, which had been talked about in the industry for at least a decade at that point, was finally going to happen. As we looked around the industry, we saw that Circuit City and Best Buy had done a terrific job consolidating the entry and mid-level shopping places. They put most of the superregionals out of business. But the high end of the business was still very fragmented and ruled by mom and pop shops. So Tweeter became the acquiror of choice within that space over the course of the next five to six years. We acquired several companies and continued to open up stores organically in the markets where we did acquisitions. The company grew from a little over $100 million in 1995 to about $800 million today. We took a brief stop in 1998 to go public during that time and did a couple of subsequent offerings. In 2001 the company hit a wall. It hit a wall with a double shot of the economy, and the stock market in particular really taking a hit after 9/11. After doing what had been our largest acquisition of a company called Sound Advice in Florida, at that time Tweeter was doing about $500 million of revenue, and Sound Advice was doing about $200 million of revenue. Up until that time, the average size of the companies that we had acquired was probably about $40 million, so the nature of doing an acquisition of a company that size was very different. We found that very difficult to digest. Of course, we were working hard to digest that at a time when the stock market really went down a great deal and the spending among our particular group of customers was really pulled back. That put two very difficult years in front of the company. During those two years, we've essentially worked on our turnaround, and that is the process we are engaged in today. We've spent a lot of time re-systemizing and implementing best practices throughout the company. We've spent a lot of the last 18 months working on supply chain initiatives to try to make Tweeter a more capital efficient retailer. This was not a place where we have traditionally excelled. We believe in today's environment, you cannot be a surviving retailer if you are not also a very capital efficient retailer. So we've made terrific strides in that regard. A lot of those improvements showed up on our balance sheet for fiscal year 2004. Our fiscal year ends in September, so for the year ending September 2004 we threw off about $40 million in cash flow from operations. Even though we lost money on the income statement, from a cash flow perspective it was probably the best year we've had in quite some time. Our expectation for 2005 is that while we don't expect to go back to historical profit levels where typically the company put up an operating margin of around 5%, we do expect fiscal year 2005 to be at least a little profitable and that our comp store sales will return to positive for the year.
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