##### Table of Contents



Form 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2004 Commission file number: 0-24091 Tweeter Home Entertainment Group, Inc. (Exact name of Registrant as specified in its charter)
 DELAWARE
    
    04-3417513(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 40 PEQUOT WAY
CANTON, MA 02021(Address of principal executive offices including zip code) 781-830-3000(Registrants telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No o Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). YesxNoo Indicate the number of shares outstanding of each of the registrants
classes of common stock, as of the latest practicable date. TITLE OF CLASS
    
    OUTSTANDING AT MAY 7, 2004Common Stock, $.01 par value
    
    
    24,272,947




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TWEETER HOME ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES INDEX PAGEPart I. FINANCIAL INFORMATIONItem 1 Condensed Consolidated Financial Statements (Unaudited)Consolidated Balance Sheets as of September 30, 2003 and March 31, 2004
    
    
    3Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2003 and 2004
    
    
    4Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2003 and 2004
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6-9Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations.
    
    
    10-14Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    15Item 4 Controls and Procedures
    
    
    15Part II. OTHER INFORMATIONItem 1 Legal Proceedings
    
    
    16Item 2 Changes in Securities and Use of Proceeds
    
    
    16Item 3 Defaults upon Senior Securities
    
    
    16Item 4 Submission of Matters to a Vote of Security Holders
    
    
    16Item 5 Other Information
    
    
    16-17Item 6 Exhibits and Reports on Form 8-K
    
    
    17Ex-31.1 Section 302 CEO CertificationEx-31.2 Section 302 CEO CertificationEx-32.1 Section 906 CEO CertificationEx-32.2 Section 906 CFO Certification
  2




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##### Table of Contents



Tweeter Home Entertainment Group, Inc. and Subsidiaries
Consolidated Balance Sheets September 30,
    
    March 31,2003
    
    2004(Unaudited)AssetsCurrent Assets:Cash and cash equivalents
    
    $
    1,850,449
    
    
    $
    1,316,857Accounts receivable, net of allowance for
doubtful accounts of $1,110,000 at
September 30, 2003 and $1,181,000 at March
31, 2004
    
    
    18,263,564
    
    
    
    19,747,044Inventory
    
    
    117,569,528
    
    
    
    123,950,624Deferred tax assets
    
    
    5,938,916
    
    
    
    7,571,302Prepaid expenses and other current assets
    
    
    26,930,455
    
    
    
    15,961,462Total current assets
    
    
    170,552,912
    
    
    
    168,547,289Property and equipment, net
    
    
    126,220,975
    
    
    
    124,376,444Long-term investments
    
    
    2,113,020
    
    
    
    2,032,937Deferred tax assets
    
    
    5,217,877
    
    
    
    3,932,785Intangible assets, net
    
    
    1,926,667
    
    
    
    1,586,667Other assets, net
    
    
    2,404,938
    
    
    
    2,357,586Total
    
    $
    308,436,389
    
    
    $
    302,833,708Liabilities and Stockholders EquityCurrent Liabilities:Current portion of long-term debt
    
    $
    7,364,925
    
    
    $
    3,367,987Accounts payable
    
    
    32,493,675
    
    
    
    29,521,535Accrued expenses
    
    
    22,735,570
    
    
    
    20,938,093Customer deposits
    
    
    21,168,837
    
    
    
    18,611,338Deferred warranty
    
    
    215,381
    
    
    
    154,503Total current liabilities
    
    
    83,978,388
    
    
    
    72,593,456Long-Term Debt
    
    
    48,266,937
    
    
    
    46,936,851Other Long-Term Liabilities:Rent related accruals
    
    
    11,056,253
    
    
    
    10,682,490Deferred warranty
    
    
    98,262
    
    
    
    38,230Total other long-term liabilities
    
    
    11,154,515
    
    
    
    10,720,720Total liabilities
    
    
    143,399,840
    
    
    
    130,251,027Stockholders EquityPreferred stock, $.01 par value, 10,000,000
shares authorized, no shares issued
    
    
    
    
    
    
    Common stock, $.01 par value, 60,000,000
shares authorized; 25,748,489 shares issued
at September 30, 2003 and 25,990,183 at
March 31, 2004
    
    
    257,485
    
    
    
    259,902Additional paid in capital
    
    
    294,969,338
    
    
    
    301,659,117Unearned equity compensation
    
    
    (408,142
    )
    
    
    (138,494
    )Accumulated other comprehensive income (loss)
    
    
    (15,931
    )
    
    
    378Accumulated deficit
    
    
    (127,967,415
    )
    
    
    (127,416,593
    )Total
    
    
    166,835,335
    
    
    
    174,364,310Less treasury stock: 1,742,616 shares at
September 30, 2003 and 1,718,106 shares at
March 31, 2004, at cost
    
    
    (1,798,786
    )
    
    
    (1,781,629
    )Total stockholders equity
    
    
    165,036,549
    
    
    
    172,582,681Total
    
    $
    308,436,389
    
    
    $
    302,833,708
 See notes to unaudited condensed consolidated financial statements. 3




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##### Table of Contents



Tweeter Home Entertainment Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited) Three Months Ended
    
    Six Months EndedMarch 31,
    
    March 31,2003
    
    2004
    
    2003
    
    2004Total revenue
    
    $
    181,970,524
    
    
    $
    189,274,185
    
    
    $
    431,620,401
    
    
    $
    444,513,936Cost of sales
    
    
    (117,296,324
    )
    
    
    (115,189,156
    )
    
    
    (279,930,389
    )
    
    
    (273,658,800
    )Gross profit
    
    
    64,674,200
    
    
    
    74,085,029
    
    
    
    151,690,012
    
    
    
    170,855,136Selling expenses
    
    
    57,286,706
    
    
    
    64,684,101
    
    
    
    123,743,800
    
    
    
    140,717,866Corporate, general and administrative expenses
    
    
    10,528,141
    
    
    
    11,310,814
    
    
    
    21,913,685
    
    
    
    23,073,273Non-cash compensation charge
    
    
    
    
    
    
    5,144,186
    
    
    
    
    
    
    
    5,279,010Amortization of intangibles
    
    
    170,000
    
    
    
    170,000
    
    
    
    340,000
    
    
    
    340,000Income (loss) from operations
    
    
    (3,310,647
    )
    
    
    (7,224,072
    )
    
    
    5,692,527
    
    
    
    1,444,987Income from equity investments
    
    
    46,444
    
    
    
    181,761
    
    
    
    103,874
    
    
    
    454,037Interest expense
    
    
    837,606
    
    
    
    652,192
    
    
    
    1,229,352
    
    
    
    1,306,785Interest income
    
    
    3,368
    
    
    
    100,124
    
    
    
    8,438
    
    
    
    325,797Income (loss) before income taxes
    
    
    (4,098,441
    )
    
    
    (7,594,379
    )
    
    
    4,575,487
    
    
    
    918,036Income tax expense (benefit)
    
    
    (1,637,493
    )
    
    
    (3,037,752
    )
    
    
    1,832,079
    
    
    
    367,214Net Income (loss)
    
    $
    (2,460,948
    )
    
    $
    (4,556,627
    )
    
    $
    2,743,408
    
    
    $
    550,822Basic earnings (loss) per share
    
    $
    (0.10
    )
    
    $
    (0.19
    )
    
    $
    0.12
    
    
    $
    0.02Diluted earnings (loss) per share
    
    $
    (0.10
    )
    
    $
    (0.19
    )
    
    $
    0.12
    
    
    $
    0.02Weighted average shares outstanding:Basic
    
    
    23,596,396
    
    
    
    24,107,171
    
    
    
    23,580,726
    
    
    
    24,014,632Diluted
    
    
    23,596,396
    
    
    
    24,107,171
    
    
    
    23,763,801
    
    
    
    24,824,514
 See notes to unaudited condensed consolidated financial statements. 4




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##### Table of Contents



Tweeter Home Entertainment Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows Six Months EndedMarch 31,2003
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    2,743,408
    
    
    
    550,822Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    10,339,374
    
    
    
    11,376,228Non cash compensation
    
    
    
    
    
    
    5,279,010Loss on disposal of property and equipment
    
    
    383,695
    
    
    
    16,570Provision for uncollectible accounts
    
    
    62,100
    
    
    
    249,928Tax benefit from options exercised
    
    
    
    
    
    
    50,367Deferred income tax
benefit
    
    
    (755,285
    )
    
    
    (358,168
    )Amortization of deferred gain on sale leaseback
    
    
    
    
    
    
    (22,421
    )Income from equity investment
    
    
    
    
    
    
    (454,037
    )Changes in operating assets and liabilities:Increase in accounts receivable
    
    
    (432,737
    )
    
    
    (1,733,408
    )Increase in inventory
    
    
    (676,786
    )
    
    
    (6,358,558
    )Decrease in prepaid expenses and other assets
    
    
    1,508,026
    
    
    
    10,446,345Decrease in accounts payable and accrued expenses
    
    
    (21,850,247
    )
    
    
    (4,771,108
    )Increase (decrease) in customer deposits
    
    
    172,801
    
    
    
    (2,557,499
    )Increase (decrease) in deferred rent
    
    
    149,327
    
    
    
    (351,342
    )Decrease in deferred warranty
    
    
    (275,083
    )
    
    
    (120,910
    )Net cash provided by (used in) operating activities
    
    
    (8,631,407
    )
    
    
    11,241,819CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    (16,709,517
    )
    
    
    (8,647,117
    )Proceeds from sale of property and equipment
    
    
    28,088
    
    
    
    8,850Distributions from equity investment
    
    
    
    
    
    
    540,256Net cash used in investing activities
    
    
    (16,681,429
    )
    
    
    (8,098,011
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net change in amount due to bank
    
    
    6,744,937
    
    
    
    (3,919,609
    )Net proceeds (repayments) of long term debt
    
    
    17,758,977
    
    
    
    (1,407,415
    )Proceeds from options exercised
    
    
    70,751
    
    
    
    1,452,868Proceeds from employee stock purchase plan
    
    
    203,936
    
    
    
    196,756Net cash provided by (used in) financing activities
    
    
    24,778,601
    
    
    
    (3,677,400
    )DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (534,235
    )
    
    
    (533,592
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    2,282,635
    
    
    
    1,850,449CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    1,748,400
    
    
    
    1,316,857SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid (received) during the period for:Interest
    
    $
    715,595
    
    
    $
    1,499,134Taxes
    
    $
    561,000
    
    
    $
    (7,085,895
    )
 See notes to unaudited condensed consolidated financial statements. 5




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##### Table of Contents



TWEETER HOME ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The unaudited condensed consolidated financial statements of Tweeter Home
Entertainment Group, Inc. and its subsidiaries (Tweeter or the Company),
included herein, should be read in conjunction with the consolidated financial
statements and notes thereto included in Tweeters Annual Report on Form 10-K
for the fiscal year ended September 30, 2003. 2. Accounting Policies The unaudited condensed consolidated financial statements of Tweeter have
been prepared in accordance with accounting principles generally accepted in
the United States of America. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation of the interim consolidated financial statements have been
included. Operating results for the six-month period ended March 31, 2004 are
not necessarily indicative of the results that may be expected for the fiscal
year ending September 30, 2004. Tweeter typically records its highest revenue
and earnings in its first fiscal quarter. Vendor
Allowances, Allowance for Bad and Doubtful Accounts Accounts
receivable are primarily due from the vendors from which the Company buys its
product. The various types of accounts receivable are for purchase rebate
allowances, cooperative advertising allowances, returned merchandise and
warranty work performed by the Companys service departments. Cash discounts earned for timely payments of merchandise invoices are
recognized in the income statement upon the sale of the related inventory. Purchase rebate allowances and general cooperative advertising allowances
are earned based on the purchase of inventory and are recorded in accounts
receivable when the inventory is purchased. The carrying value of inventory is
initially reduced by the amount of purchase rebates earned, resulting in lower
cost of goods sold when the inventory is sold. Certain vendor agreements
include stretch goals where the level of funds earned is dependent upon the
Company achieving certain purchase levels. These program funds are recorded as
a reduction of inventory costs when it is determined that it is likely that the
Company will achieve the goal. Vendor allowances earned based on specific advertising activities and
other activities are recognized as a reduction to advertising expense as these
activities are performed and only to the extent that the cost of the activities
equals or exceeds the amount of the allowances. When the Company returns merchandise to a vendor, typically because it is
defective, the Company records a receivable for the value of the merchandise
returned and reduces the inventory balance. The Company sells products that come with a manufacturers warranty, but
the Company has service centers that repair products. When the Company repairs
products that are still under a manufacturers warranty, the vendor reimburses
the Company for the parts and the technicians labor. Once the product is
repaired, the Company establishes a receivable for the amounts due from the
vendor and records warranty revenue. During the quarter ended March 31, 2003, Tweeter adopted EITF 02-16,
Accounting by a Customer for Certain Consideration Received from a Vendor
(EITF 02-16) which addresses how and when to reflect consideration received
from vendors in the consolidated financial statements. Under EITF 02-16,
certain consideration received from vendors that would have previously been
recorded as a reduction to selling expenses, is now recorded as a reduction to
cost of goods sold. The amount of reimbursements received during the six months
and three months ended March 31, 2004 that were treated as a reduction of cost
of goods sold but which would have been recorded as a reduction of advertising
expenses (selling expenses) prior to EITF 02-16 amounted to $18.5 million and
$8.2 million, respectively. 6




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##### Table of Contents



Advertising Gross advertising including electronic media, newspaper,
buyers guides and direct mailings, are expensed when released. Cooperative
advertising funds specific to advertising activities received from vendors
reduce our gross advertising expense. Below are the gross expense, cooperative
funds received and net advertising for the three and six months ended March 31,
2003 and 2004. Three Months Ended
    
    Six Months EndedMarch 31,
    
    March 31,2003
    
    2004
    
    2003
    
    2004Gross advertising
    
    $
    11,029,741
    
    
    $
    9,894,189
    
    
    $
    27,089,582
    
    
    $
    25,778,991Cooperative advertising funds
    
    
    (5,960,175
    )
    
    
    (174,299
    )
    
    
    (15,051,555
    )
    
    
    (1,406,466
    )Net advertising
    
    $
    5,069,566
    
    
    $
    9,719,890
    
    
    $
    12,038,027
    
    
    $
    24,372,525
 Stock-based
compensation Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-Based Compensation, addresses the
financial accounting and reporting standards for stock or other equity-based
compensation arrangements. The Company accounts for stock based compensation to
employees using the intrinsic method. The Company provides disclosures based on
the fair value as permitted by SFAS No. 123. Stock or other equity-based
compensation for non-employees must be accounted for under the fair value-based
method as required by SFAS No. 123 and EITF No. 96-18, Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services, and other related interpretations.
Under this method, the equity-based instrument is valued at either the fair
value of the consideration received or the equity instrument issued on the date
of grant. The resulting compensation cost is recognized and charged to
operations over the service period, which is usually the vesting period. For purposes of determining the disclosures required by SFAS No. 123, the
fair value of each stock option granted in the three and six months ended March
31, 2003 and March 31, 2004 under the Companys stock option plan was estimated
on the date of grant using the Black-Scholes option-pricing model. Key
assumptions used to apply this pricing model were as follows: Three Months Ended
    
    Six Months EndedMarch 31,
    
    March 31,2003
    
    2004
    
    2003
    
    2004Risk free interest rate
    
    
    2.84
    %
    
    
    3.04
    %
    
    
    2.71
    %
    
    
    3.42
    %Expected life of options grants
    
    
    5.4
    
    
    
    7.2
    
    
    
    5.4
    
    
    
    7.2Expected volatility of underlying stock
    
    
    94.62
    %
    
    
    77.05
    %
    
    
    90.17
    %
    
    
    79.22
    %
 7




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##### Table of Contents



Had compensation cost for the Companys stock option plans been determined
using the fair value method, pro forma net income and pro forma diluted
earnings per share would have been: Three Months Ended
    
    Six Months EndedMarch 31,
    
    March 31,2003
    
    2004
    
    2003
    
    2004Net income (loss) as reported
    
    $
    (2,460,948
    )
    
    $
    (4,556,627
    )
    
    $
    2,743,408
    
    
    $
    550,822Total stock-based employee
compensation expense
recorded, net of related tax
effects
    
    
    
    
    
    
    80,894
    
    
    
    
    
    
    
    161,789Total stock-based employee
compensation expense
determined under fair value
based method for all
awards, net of related tax
effects
    
    
    (1,238,738
    )
    
    
    (1,551,116
    )
    
    
    (2,476,547
    )
    
    
    (2,978,978
    )Pro forma net income (loss)
    
    $
    (3,699,686
    )
    
    $
    (6,026,849
    )
    
    $
    266,861
    
    
    $
    (2,266,367
    )Earnings (loss) per shareBasic  as reported
    
    $
    (0.10
    )
    
    $
    (0.19
    )
    
    $
    0.12
    
    
    $
    0.02Basic  pro forma
    
    $
    (0.16
    )
    
    $
    (0.25
    )
    
    $
    0.01
    
    
    $
    (0.09
    )Diluted  as reported
    
    $
    (0.10
    )
    
    $
    (0.19
    )
    
    $
    0.12
    
    
    $
    0.02Diluted  pro forma
    
    $
    (0.16
    )
    
    $
    (0.25
    )
    
    $
    0.01
    
    
    $
    (0.09
    )
 3. Earnings per Share The weighted average shares used in computing basic and diluted net income
per share are presented in the table below. Certain options are not included in
the earnings per share calculation when the exercise price is greater than the
average market price for the period. The number of options excluded in each
period is reflected in the table. Three Months Ended
    
    Six Months EndedMarch 31,
    
    March 31,2003
    
    2004
    
    2003
    
    2004Basic Earnings (Loss) Per Share:Numerator:Net income (loss)
    
    $
    (2,460,948
    )
    
    $
    (4,556,627
    )
    
    $
    2,743,408
    
    
    $
    550,822Denominator:Weighted average common shares outstanding
    
    
    23,596,396
    
    
    
    24,107,171
    
    
    
    23,580,726
    
    
    
    24,014,632Basic earnings (loss) per share
    
    $
    (0.10
    )
    
    $
    (0.19
    )
    
    $
    0.12
    
    
    $
    0.02Diluted Earnings (Loss) Per Share:Numerator:
    
    $
    (2,460,948
    )
    
    $
    (4,556,627
    )
    
    $
    2,743,408
    
    
    $
    550,822Denominator:Weighted average shares outstanding
    
    
    23,596,396
    
    
    
    24,107,171
    
    
    
    23,580,726
    
    
    
    24,014,632Potential common stock outstanding
    
    
    
    
    
    
    
    
    
    
    183,075
    
    
    
    809,882Total
    
    
    23,596,396
    
    
    
    24,107,171
    
    
    
    23,763,801
    
    
    
    24,824,514Diluted earnings (loss) per share
    
    $
    (0.10
    )
    
    $
    (0.19
    )
    
    $
    0.12
    
    
    $
    0.02Anti dilutive options not included in earnings
per share calculation
    
    
    1,856,467
    
    
    
    3,159,489
    
    
    
    906,538
    
    
    
    2,526,446Price range of anti dilutive options
    
    $
    0.305 to $32.125
    
    
    $
    0.305 to $32.125
    
    
    $
    6.90 to $32.125
    
    
    $
    12.00 to $32.125
 8




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##### Table of Contents



4. Comprehensive Income Comprehensive income (loss) for the three and six months ended March 31,
2003 and March 31, 2004 was as follows: Three Months Ended
    
    Six Months EndedMarch 31,
    
    March 31,2003
    
    2004
    
    2003
    
    2004Net income (loss)
    
    $
    (2,460,948
    )
    
    $
    (4,556,627
    )
    
    $
    2,743,408
    
    
    $
    550,822Change in fair value of long-term investments (net of tax)
    
    
    (495
    )
    
    
    10,572
    
    
    
    49
    
    
    
    17,204Change in fair value of interest rate forward contract (net of tax)
    
    
    
    
    
    
    (17,956
    )
    
    
    
    
    
    
    (895
    )Comprehensive income (loss)
    
    $
    (2,461,443
    )
    
    $
    (4,564,011
    )
    
    $
    2,743,457
    
    
    $
    567,131
 5. Intangible Assets The financial information for acquired intangible assets is as follows: As of September 30, 2003
    
    As of March 31, 2004Gross Carrying
    
    Accumulated
    
    Gross Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Amount
    
    AmortizationAmortized intangible assets:Non compete agreements and tradenames
    
    
    3,400,000
    
    
    
    1,473,333
    
    
    
    3,400,000
    
    
    
    1,813,333
 For the six months ended March 31, 2003 and 2004, the aggregate
amortization expense was $340,000 in each period. For each of the fiscal years
2004 through 2005, the amortization expense is estimated to be approximately
$680,000 and for fiscal year 2006, the amortization expense is estimated to be
approximately $567,000. 6. Related-Party Transactions On June 30, 2003, Tweeter made an additional investment in Tivoli Audio,
LLC, a manufacturer of consumer electronic products, which increased its
ownership to 25%. The Company accounts for this investment in Tivoli under the
equity method of accounting, recognizing the Companys share of Tivolis income
or loss in the Companys statement of income. For the six months ended March
31, 2003 and March 31, 2004 the Company purchased $903,000 and $612,000,
respectively, of product from Tivoli. Dividends received from Tivoli amounted
to $104,000 and $540,000 for the six months ended March 31, 2003 and March 31,
2004, respectively. Amounts payable to Tivoli were $68,100 and $36,800 at March
31, 2003 and March 31, 2004, respectively. 7. Reclassifications Certain 2003 reclassifications have been made to conform to the 2004
presentation. 8. Subsequent Events On April 13, 2004, Tweeter announced that it reached an agreement in
principle to acquire NOW! AudioVideo (NOW!) located in the greater
Raleigh-Durham, North Carolina, Greensboro-Winston-Salem, North Carolina, and
Knoxville, Tennessee markets. NOW!, which has operated in North Carolina for 30
years, is a six-store specialty retailer with a significant focus on custom
installation with annual sales of approximately $21 million. The companies
expect to complete the transaction on or about July 1, 2004. Tweeter expects to
fund the purchase price of approximately $4.0 million with a combination of
cash and stock. The Company intends to issue these shares from its shelf
registration filed on April 13, 1999, and amended on December 23, 1999. The
transaction will be accounted for as a purchase. 9




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION Tweeter Home Entertainment Group, Inc. (Tweeter or the Company) is a
specialty retailer of mid- to high-end audio and video consumer electronics
products. Tweeter currently operates 174 stores under the Tweeter, HiFi Buys,
Sound Advice, Bang & Olufsen, Electronic Interiors, Showcase Home Entertainment
and Hillcrest names in the New England, Mid-Atlantic, Southeast, Texas,
Southern California, Chicago, Florida and Phoenix markets. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2004 AS COMPARED TO THREE MONTHS ENDED MARCH 31,
2003 Total Revenue.Total revenue includes delivered merchandise, labor, net
commissions on service contracts sold, completed service center work orders,
insurance replacement and corporate sales. Total revenue increased $7.3
million, or 4.0%, to $189.3 million for the three months ended March 31, 2004
from $182.0 million for the three months ended March 31, 2003. Comparable store
sales increased $5.2 million, or 3.1%. Comparable store sales is a term we use
to compare the year-over-year sales performance of our stores. A store is
included in the comparable store sales base after it is in operation for 12
full months. An acquired store is included after 12 full months from the date
of acquisition. Remodeled or relocated stores are excluded from the comparable
store base until they have competed 12 full months of operation from the date
the remodeling was completed or the store re-opened after relocation. In
addition to the comparable store sales increase, $2.1 million of sales were
generated from new stores that have not been opened for a twelve-month period
and are therefore not yet includable in the comparable store sales base. There
was also a decrease in sales of $1.5 million related to stores that closed. In
addition, our corporate sales/insurance replacement sales increased by $920,000
due to an increased concentration in our fulfillment business. For the quarter
ended March 31, 2004, flat panel television sales grew to 18.8% of total sales
compared to 11.6% for the quarter ended March 31, 2003. For the quarter ended
March 31, 2004, plasma televisions represented 73.6% of the flat panel
categorys dollars and 46.2% of the units sold. The television monitors
category decreased to 4.8% of revenue from 8.5% of revenue for the quarters
ended March 31, 2004 and March 31, 2003, respectively. The projection
television category increased to 24.6% of revenue from 22.3% of revenue for the
quarters ended March 31, 2004 and March 31, 2003, respectively. Home
installation labor revenue grew to 3.5% of revenues during the quarter ended
March 31, 2004 from 2.8% during the quarter ended March 31, 2003.Total digital
sales represented over 60.4% of total revenue for the quarter ended March 31,
2004 as compared to 55.8% for the quarter ended March 31, 2003. Cost of Sales and Gross Profit.Cost of sales includes merchandise costs,
net delivery costs, distribution costs, home installation labor costs, purchase
discount and vendor allowances. Cost of sales decreased $2.1 million, or 1.8%,
to $115.2 million for the three months ended March 31, 2004 from $117.3 million
for the three months ended March 31, 2003. Gross profit increased $9.4 million,
or 14.6%, to $74.1 million for the three months ended March 31, 2004 from $64.7
million for the three months ended March 31, 2003. The gross margin percentage
increased 360 basis points to 39.1% for the three months ended March 31, 2004
from 35.5% for the three months ended March 31, 2003. The quarter ended March
31, 2004 includes $8.2 million that was recorded as a reduction to cost of
goods sold that would have previously been recorded as a reduction of selling
expenses prior to the adoption of EITF 02-16 on January 1, 2003. The
reclassification moved certain vendor allowances out of cooperative advertising
(selling expenses) and into vendor rebates (cost of sales). Without the
reclassification, the gross margin percentage for the quarter ended March 31,
2004 would have been 34.8%, a decrease of 70 basis points from the prior year.
Overall margins, excluding vendor allowances, distribution and labor costs,
decreased by 40 basis points. Vendor allowances decreased by 190 basis points,
excluding the EITF 02-16 reclassification. Distribution costs decreased by 140
basis points, mainly attributable to lower compensation costs and lower vehicle
costs, and labor costs decreased by 10 basis points. 10




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Selling Expenses.Selling expenses include the compensation of store
personnel and store specific support functions, occupancy costs, store level
depreciation, advertising, pre-opening expenses and credit card fees. Selling
expenses increased $7.4 million, or 12.9%, to $64.7 million for the three
months ended March 31, 2004 from $57.3 million for the three months ended March
31, 2003. As a percentage of revenue, selling expenses increased to 34.2% for
the three months ended March 31, 2004 from 31.5% for the three months ended
March 31, 2003. The quarter ended March 31, 2004 includes a reclassification of
$8.2 million from the adoption of EITF 02-16 on January 1, 2003. The
reclassification moved vendor allowances out of cooperative advertising
(selling expenses) and into vendor rebates (cost of sales). Without the
reclassification, selling expenses for the quarter ended March 31, 2004 would
have decreased 170 basis points. The decrease in selling expenses as a percent
of revenue is due to a 20 basis point reduction in store level compensation
costs,driven by the product mix shift to video as the video categories pay a
lower commission than the other categories. Credit card fees decreased by 30
basis points, as the Company shifted financing promotions away from the no
payments required promotions to promotions requiring monthly payments, which
have a lower cost. Gross advertising expense was 202 basis points lower than
last year. In addition, occupancy costs and insurance costs were leveraged and
decreased by 50 basis points. These decreases were offset by increases in
fees related to our E-Commerce division. Corporate, General and Administrative Expenses.Corporate, general and
administrative expenses include the costs of the finance, information systems,
merchandising, marketing, human resources and training departments, related
support functions and executive officers. Corporate, general and administrative
expenses increased 7.4% or $783,000 to $11.3 million for the three months ended
March 31, 2004 from $10.5 million for the three months ended March 31, 2003. As
a percentage of total revenue, corporate general and administrative expenses
were 5.8% and 6.0% for the three months ended March 31, 2003 and the three
months ended March 31, 2004, respectively. Non-cash compensation charge.Non-cash compensation charge was $5.1
million for the three months ended March 31, 2004 and there was no charge for
the three months ended March 31, 2003. The $5.1 million is attributed to the
value of warrants issued to Retail Masters, LLC., and for other equity-based
executive compensation arrangements. Amortization of Intangibles.Amortization of intangibles was $170,000 for
the three months ended March 31, 2004 and March 31, 2003. Interest Expense.Interest expense decreased to $652,000 for the three
months ended March 31, 2004 compared to $837,000 for the three months ended
March 31, 2003. This decrease is due to the reduction of borrowings on our
revolving credit agreement during the three months ended March 31, 2004
compared to the balances borrowed during the three months ended March 31, 2003. Interest Income.Interest income increased to $100,000 for the three
months ended March 31, 2004 compared to $3,000 for the three months ended March
31, 2003. The increase was due to $75,000 of interest income paid by suppliers
on pre-payments to secure inventory purchases. In addition, there was $25,000
of interest income received for both overpayments on federal income taxes and
interest accrued on construction escrow deposits. Income from Equity Investment.Income from equity investment increased to
$182,000 for the three months ended March 31, 2004 from $46,000 as the Company
increased its share of ownership. In June 2003, the Company increased its
investment in Tivoli Audio, LLC to 25% from 17.5%. Income Taxes.The effective tax rate for the three months ended March 31,
2004 and March 31, 2003 was 40.0%. Seasonality.Tweeters operations, in common with other retailers, are
subject to seasonal influences. Historically, Tweeter has realized more of its
revenue and net earnings in the first fiscal quarter, which includes the
holiday season, than in any other fiscal quarter. The net earnings of any
interim quarter are seasonally disproportionate to net sales since certain
selling expenses and administrative expenses are relatively fixed during the
year. Therefore, interim results should not be relied upon as indicative of
results for the entire fiscal year. 11




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SIX MONTHS ENDED MARCH 31, 2004 AS COMPARED TO SIX MONTHS ENDED MARCH 31, 2003 Total Revenue.Total revenue increased $12.9 million, or 3.0% to $444.5
million for the six months ended March 31, 2004 from $431.6 million for the six
months ended March 31, 2003.Comparable store sales increased by $3.3 million
or .8%, excluding acquired stores. In addition to the increase in comparable
stores sales was a $9.0 million increase in sales from new and relocated
stores. Digital technology products continue to drive sales performance as they
represented over 62% of revenues for the six months ended March 31, 2004
compared to 57% for the six months ended March 31, 2003. Gross Profit.Cost of sales decreased $6.3 million, or 2.2%, to $273.7
million for the six months ended March 31, 2004 from $279.9 million for the six
months ended March 31, 2003. Gross profit increased $19.2 million, or 12.6%, to
$170.9 million for the six months ended March 31, 2004 from $151.7 million for
the six months ended March 31, 2003. The gross margin percentage increased 330
basis points to 38.4% from 35.1% last year. The main component of this
increase was due to the adoption of EITF 02-16. The six months ended March 31,
2004 includes $18.5 million that was recorded as a reduction to cost of goods
sold that would have previously been recorded as a reduction of selling
expenses prior to the adoption of EITF 02-16 on January 1, 2003. The
reclassification moved certain vendor allowances out of cooperative advertising
(selling expenses) and into vendor rebates (cost of sales). Without the
reclassification, the gross margin percentage for the six months ended March
31, 2004 would have been 34.3%, a decrease of 80 basis points from the prior
year. It is impractical for the Company to determine what the prior year
reclassification would have been; therefore the two periods are not
comparative. Contributing to the decrease in gross margin percentage was a 150
basis point reduction in product margins, driven by the increase in video
products sold, a 50 basis point decline in vendor allowances, excluding the
EITF 02-16 reclassification, and a 10 basis point increase in labor costs.
Offsetting these increases was a reduction of 120 basis points in distribution
costs, mostly attributable to reduced compensation and vehicle costs. Selling Expenses.Selling expenses increased $17.0 million, or 13.7%, to
$140.7 million for the six months ended March 31, 2004 from $123.7 million for
the six months ended March 31, 2003. As a percentage of revenue, selling
expenses increased 3.0% to 31.7% for the six months ended March 31, 2004 from
28.7% in the prior year period. The six months ended March 31, 2004 includes a
reclassification of $18.5 million from the adoption of EITF 02-16 on January 1,
2003. The reclassification moved vendor allowances out of cooperative
advertising (selling expenses) and into vendor rebates (cost of sales). Without
the reclassification, selling expenses for the six months ended March 31, 2004
would have decreased 120 basis points. The decrease was primarily due to a 50
basis points reduction in gross advertising, a 30 basis points reduction in
store level compensation costs, and a 30 basis point reduction in bank fees for
the six months ended March 31, 2004 compared to the same period last year. Corporate, General and Administrative Expenses.Corporate, general and
administrative expenses for the six months ended March 31, 2004 increased 5.3%
to $23.1 million from $21.9 million for the six months ended March 31, 2003. As
a percentage of total revenue, corporate, general and administrative expenses
increased to 5.2% for the six months ended March 31, 2004 from 5.1% for the
prior year period. This increase is attributed to increases in various
consulting and other professional service fees. Non-cash compensation charge.Non-cash compensation charge was $5.3
million for the six months ended March 31, 2004 and there was no charge for the
six months ended March 31, 2003. The $5.3 million is attributed to the value
of warrants issued to Retail Masters, LLC., and for other equity-based
executive compensation arrangements. Amortization of Intangibles.Amortization of intangibles was $340,000 for
the six months ended March 31, 2004 and six months ended March 31, 2003. Interest Expense.Interest expense increased to $1.3 million for the six
months ended March 31, 2004 from $1.2 million for the six months ended March
31, 2003. This increase is due to the increase in borrowings on our 12




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revolving credit agreement during the six months ended March 31, 2004
compared to the balances borrowed during the six months ended March 31, 2003. Interest Income.Interest income increased to $326,000 for the six months
ended March 31, 2004 compared to $8,000 for the six months ended March 31,
2003. The increase was due to $300,000 of interest income paid by suppliers on
pre-payments to secure inventory purchases. In addition, there was $25,000 of
interest income received for both overpayments on federal income taxes and
interest accrued on construction escrow deposits. Income from Equity Investment.Income from equity investment increased to
$454,000 for the three months ended March 31, 2004 from $104,000 as the Company
increased its share of ownership. In June 2003, the Company increased its
investment in Tivoli Audio, LLC to 25% from 17.5%. Income Taxes.The effective tax rate for the six months ended March 31,
2004 and March 31, 2003 was 40.0%. BALANCE SHEET COMPARISON: MARCH 31, 2004 AS COMPARED TO SEPTEMBER 30, 2003 Inventory. Total inventory increased during the six months ended March 31,
2004 compared to September 30, 2003 by $6.4 million. The increase is
attributable to the change in the Companys mix percentage as video products
are driving the business. Video products have a higher cost per unit than the
other categories sold by the Company. Accounts receivable.Total accounts receivable increased by $1.5 million
during the six months ended March 31, 2004 compared to September 30, 2003. The
increase was primarily attributable to monies due from vendors for allowances
that were higher as a result of the increase in purchases for the six months
ended March 31, 2004. Prepaid expenses and other current assets.Prepaid expenses and other
current assets decreased by $9.3 million during the six months ended March 31,
2004 compared to September 30, 2003. The decrease was primarily due to $7.1
million of income tax refunds received, a $1.1 million decrease in prepaid
health insurance premiums, and the receipt of a $1.0 million construction
escrow deposit. Current portion of long-term debt.Current portion of long-term debt
decreased by $4.0 million during the six months ended March 31, 2004 compared
to September 30, 2003. The decrease is a result of the timing of accounts
payable checks clearing the bank. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities was $11.2 million for the six
months ended March 31, 2004 compared to net cash used in operations of $8.6
million for the six months ended March 31, 2003. Cash provided by operating
activities for the six months ended March 31, 2004 was primarily the result of
an increase in inventory of $6.4 million, a decrease in customer deposits of
$2.6 million, an increase in accounts receivable of $1.7 million and a decrease
in accounts payable and accrued expenses of $4.8 million. This was offset by
net income of $551,000 and a decrease in prepaid expenses and other current
assets of $10.4 million. The adjustments to reconcile net income to net cash
provided by operating activities consisted primarily of $11.4 million for
depreciation and amortization and non cash compensation of $5.3 million, as
well as other minor items. At March 31, 2004, working capital was $96.0 million, compared to $86.6
million at September 30, 2003. The ratio of current assets to current
liabilities was 2.32 to 1 at March 31, 2004 and 2.03 to 1 at September 30,
2003. The increase was primarily the result of lower current portion of
long-term debt, in addition to a decrease in accounts payable and customer
deposits. Net cash used in investing activities for the six months ended March 31,
2004 consisted mainly of capital expenditures of $8.6 million, primarily used
for the building of new video displays in stores and the relocation of an
existing store. 13




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Net cash used in financing activities during the six months ended March
31, 2004 was $3.7 million, which was primarily due to a decrease in current
portion of long-term debt of $3.9 million. This decrease was due to the timing
and clearing of outstanding checks. In addition, during the six months ended
March 31, 2004 there were net payments on long-term debt of $1.4 million as
well as proceeds from options exercised of $1.5 million. On April 16, 2003, Tweeter entered into an agreement with Fleet National
Bank and Fleet Retail Finance Inc., on behalf of themselves and other
co-lenders, for a new three-year senior secured revolving credit facility in
the amount of $110 million. The facility replaced a $100 million line of credit
that was due to expire in 2004. Availability under the credit facility will be
based on a borrowing base tied to a percentage of eligible inventory,
receivables and real estate. The interest rate on the new facility ranges from
2.00% to 2.50% over LIBOR, provided Tweeter commits the balances for a period
of thirty days or more, or 0% to .25% over the prime rate. The line is secured
by substantially all of the assets of Tweeter and its subsidiaries and contains
various covenants and restrictions, including that: (i) Tweeter cannot create,
incur, assume or permit additional indebtedness, (ii) Tweeter cannot create,
incur, assume or permit any lien on any property or asset, (iii) Tweeter cannot
merge or consolidate with any other person or permit any other person to merge
or consolidate with Tweeter, (iv) Tweeter cannot purchase, hold or acquire any
investment in any other person except those specifically permitted, (v) Tweeter
cannot sell, transfer, lease or otherwise dispose of any asset except permitted
exceptions, and (vi) Tweeter cannot declare or make any restricted payments.
The borrowers under the credit facility will be subsidiaries of Tweeter, and
Tweeter will be a guarantor of any amounts borrowed. In addition, there is a
commitment fee for the unused portion of the line of .375%. Our
weighted-average interest rate on outstanding borrowings under this credit
facility for the first six months of fiscal 2004 was approximately 3.5%. The
credit facility has a maturity date of April 1, 2006, and there are no required
quarterly or monthly principal prepayments under the facility. Under the credit facility as originally signed, we were required to
maintain a certain fixed charge coverage ratio as of the end of each month. On
August 30, 2003, we amended the agreement to eliminate this requirement, and
replaced it with additional reserves in the amount of $6.0 million, used when
computing the available borrowing base under the facility. As of March 31, 2004, the Company had $16.6 million available under this
revolving credit facility and $46.9 million outstanding. Tweeter believes that its existing cash, together with cash generated by
operations and available borrowings under its credit facility, will be
sufficient to finance its working capital and capital expenditure requirements
for at least the next twelve months. Furthermore, due to the seasonality of its
business, Tweeters working capital needs are significantly higher in the
fiscal third and fourth quarters and there is the possibility that this could
cause unforeseen capital constraints in the future. Within our credit facility,
there is an option during our peak holiday season buying periods to have more
availability on our credit line to meet these needs. FORWARD-LOOKING STATEMENTS Certain statements contained in this Quarterly Report on Form 10-Q,
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 are subject to
various risks and uncertainties, including Company growth and acquisitions,
dependence on key personnel, the need for additional financing, competition and
seasonal fluctuations, and those referred to in the Companys Annual Report on
Form 10-K filed on December 12, 2003, 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. 14




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The principle market risk inherent in our financial instruments and in our
financial position is the potential for loss arising from adverse changes in
interest rates. We do not enter into financial instruments for trading
purposes. At March 31, 2004, the Company had $46.9 million of variable rate
borrowings outstanding under its revolving credit agreements, which
approximates fair value. A hypothetical 10% adverse change in interest rates
for this variable rate debt would have an approximate $164,000 annual impact on
the Companys earnings and cash flows. On July 14, 2003, the Company entered into an interest rate swap that
fixes the interest rate on up to $35 million of LIBOR-based borrowings under
the revolving term bank loan at 1.69%, plus the applicable margin, for the
period from January 1, 2004 to December 31, 2004. The interest rate swap has
been designated as a cash flow hedge. The effective portion of the gain or loss
on the derivative instrument is reported as a component of accumulated other
comprehensive income and reclassified into earnings in the same period or
periods during which the hedged transaction affects earnings. The remaining
gain or loss on the derivative instrument in excess of the cumulative change in
the present value of future cash flows of the hedged item, if any, is
recognized in current earnings during the period of change. For the quarter
ended March 31, 2004, we did not record any expense or income in the statement
of income with respect to this instrument. 
 ITEM 4. CONTROLS AND PROCEDURES Our chief executive officer and chief financial officer, after evaluating
the effectiveness of our disclosure controls and procedures (as defined in
the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the
end of the period covered by this quarterly report (the Evaluation Date),
have concluded that as of the Evaluation Date our disclosure controls and
procedures were effective and designed to ensure that material information
relating to Tweeter would be made known to them by others within the company.
During the period covered by this quarterly report, there were no changes in
our internal control over financial reporting that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting. 15




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PART II. OTHER INFORMATION 
 ITEM 1. LEGAL PROCEEDINGS None 
 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES None 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On January 15, 2004, the Company held its Annual Meeting of Stockholders.
At the meeting, the stockholders elected as directors Jeffrey Bloomberg (with
18,578,753 affirmative votes and 2,500,514 votes withheld) and Jeffrey Stone
(with 18,685,868 affirmative votes and 2,393,399 votes withheld). The
stockholders also approved the adoption of Tweeters 2004 Long-Term Incentive
Plan (with 12,438,686 affirmative votes, 5,789,946 votes against, 2,780,639 non
votes and 69,996 votes abstaining). The stockholders also approved the
issuance of warrants, and underlying shares of Tweeter common stock, to
RetailMasters, LLC in partial payment for consulting services (with 17,233,406
affirmative votes, 995,138 votes against, 2,780,639 non votes and 70,084 votes
abstaining). The stockholders also approved the designation of Deloitte &
Touche LLP to audit the books and records of the Company for the fiscal year
ending September 30, 2004 (with 20,363,414 shares voting for, 649,415 against
and 66,438 abstaining). 
 ITEM 5. OTHER INFORMATION  (a)
    
    Subsequent Event On April 13, 2004, Tweeter announced that it had reached an agreement in
principle to acquire NOW! AudioVideo located in the greater Raleigh-Durham,
North Carolina, Greensboro-Winston-Salem, North Carolina, and Knoxville,
Tennessee markets. NOW!, which has operated in North Carolina for 30 years, is
a six-store specialty retailer with a significant focus on custom installation
with annual sales of approximately $21 million. The companies expect to
complete the transaction on or about July 1, 2004. Tweeter expects to fund the
purchase price of approximately $4.0 million with a combination of cash and
stock. The company intends to issue these shares from its shelf registration
filed on April 13, 1999, and amended on December 23, 1999. The transaction will
be accounted for as a purchase.  (b)
    
    Nomination Procedures Tweeters nominating committee will consider director candidates
recommended by stockholders provided the stockholders follow the procedures set
forth below. Stockholders who wish to recommend individuals for consideration by the
nominating committee to become nominees for election to the Board of Directors
at the next Annual Meeting of Stockholders may do so by submitting a written
recommendation to the committee, care of Tweeter, at 40 Pequot Way, Canton, MA
02021, Attention: Joseph McGuire, in accordance with the procedures set forth
in Tweeters proxy statement under the heading Deadline for Receipt of
Stockholder Proposals. For nominees for election to the Board of Directors
proposed by stockholders to be considered, the following information concerning
each nominee must be timely submitted in accordance with the required
procedures: 16




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
    
    The candidates name, age, business address, residence address,
principal occupation or employment, the class and number of shares of
Tweeters capital stock the candidate beneficially owns, a brief
description of any direct or indirect relationships with Tweeter, and
the other information that would be required in a proxy statement
soliciting proxies for the election of the candidate as a director;
    
    A signed consent of the nominee to being named as a nominee, to
cooperate with reasonable background checks and personal interviews
and to serve as a director of Tweeter, if elected; and
    
    As to the stockholder proposing such nominee, that stockholders name and
address, the class and number of shares of Tweeters capital stock the
stockholder beneficially owns, a description of all arrangements or
understandings between the stockholder and the candidate and any other
person or persons (including their names) pursuant to which the
recommendation is being made, a list of all other companies that the
stockholder has recommended the candidate to for election as a director in
that fiscal year, and a representation that the stockholder intends to
appear in person or by proxy at the meeting to nominate the person named in
its notice. 
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K  (a)
    
    Exhibits 31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certifications.31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certifications.32.1
    
    
    Section 1350 Certifications.32.2
    
    
    Section 1350 Certifications.
  (b)
    
    Reports on Form 8-K On January 2, 2004, Tweeter filed with the Securities and Exchange
Commission a Current Report on Form 8-K, to state that, subject to stockholder
approval of Tweeters 2004 Long-Term Incentive Plan at the annual meeting,
Tweeter agreed that any awards issued under Tweeters 1998 Stock Option and
Incentive Plan, from the date of the annual meeting until the expiration of the
1998 plan, would be deducted from the number of shares available to be issued
under the 2004 plan. On January 29, 2004, Tweeter filed with the Securities and Exchange
Commission a Current Report on Form 8-K to announce its earnings results for
the quarter ended December 31, 2003. In addition, Tweeter filed a transcript of
its earnings conference call held on the same day. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized. TWEETER HOME ENTERTAINMENT GROUP, INC.By:
    
    /s/ Joseph McGuireJoseph McGuire,
Senior Vice-President and Chief Financial Officer
 Date: May 14, 2004 17