<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 23, 1995
OR
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NO. 33-9875
--------------------------
BOSTON ACOUSTICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-2662473
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR IDENTIFICATION NO.)
ORGANIZATION)
70 BROADWAY
LYNNFIELD, MASSACHUSETTS 01940
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(617) 592-9000
(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 [ ]
There were 4,332,504 shares of Common Stock issued and outstanding as of
November 1, 1995.
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<PAGE>
Boston Acoustics, Inc.
Index
Page
-----
Part I: Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited)-
March 25, 1995 and September 23, 1995 4
Consolidated Statements of Income (Unaudited)-
Three months and Six months ended September 24, 1994
and September 23, 1995 6
Consolidated Statements of Cash Flows (Unaudited)-
Six months ended September 24, 1994 and
September 23, 1995 7
Notes to Unaudited Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II: Other Information
Items 1 through 6 11
Signatures 12
2
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
3
<PAGE>
Boston Acoustics, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
Assets
<TABLE>
<CAPTION>
March 25, 1995 September 23, 1995
-------------- ------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 3,570,790 $ 5,953,330
Short-term investments 8,132,145 7,514,143
Accounts receivable, net of allowance
for doubtful accounts of approximately
$207,000 and $247,000 respectively 7,759,876 8,182,010
Inventories 8,726,944 9,228,030
Prepaid income taxes 585,000 585,000
Prepaid expenses 474,092 299,832
----------- -----------
Total current assets 29,248,847 31,762,345
----------- -----------
Property and Equipment, at cost:
Land 1,164,800 1,418,365
Machinery and equipment 4,740,328 5,708,330
Office equipment and furniture 1,392,176 1,492,789
Leasehold improvements 440,413 440,413
Motor vehicles 345,454 345,454
Construction in Progress --- 797,431
----------- -----------
8,083,171 10,202,782
Less-accumulated depreciation
and amortization 5,252,728 5,743,924
----------- -----------
2,830,443 4,458,858
----------- -----------
Other Assets:
Long-term investment securities, at cost 5,308,601 3,904,999
Other assets 991,129 1,015,070
----------- -----------
Total other assets 6,299,730 4,920,069
----------- -----------
$38,379,020 $41,141,272
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE>
Boston Acoustics, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
Liabilities and Shareholders' Equity
<TABLE>
<CAPTION>
March 25, 1995 September 23, 1995
-------------- ------------------
<S> <C> <C>
Current Liabilities:
Accounts payable $ 876,031 $ 1,532,924
Accrued payroll and payroll-
related expenses 941,319 1,075,257
Dividend payable 540,550 541,438
Other accrued expenses 325,594 391,704
Accrued income taxes 641,558 310,433
----------- -----------
Total current liabilities 3,325,052 3,851,756
----------- -----------
Commitments
Shareholders' Equity:
Common stock, $.01 par value
Authorized -- 6,000,000 shares
Issued -- 4,518,324 at
March 25, 1995 and 4,525,424
shares at September 23, 1995 45,183 45,254
Additional paid-in capital 3,739,101 3,802,393
Retained earnings 31,353,474 33,525,659
----------- -----------
35,137,758 37,373,306
Less-Treasury stock, 193,920 shares,
at cost 83,790 83,790
----------- -----------
Total shareholders' equity 35,053,968 37,289,516
----------- -----------
$38,379,020 $41,141,272
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE>
Boston Acoustics, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 24, September 23, September 24, September 23,
1994 1995 1994 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $9,506,918 $11,647,894 $18,038,214 $21,509,735
Cost of goods sold 5,267,215 6,599,421 10,003,228 12,087,827
---------- ----------- ----------- -----------
Gross profit 4,239,703 5,048,473 8,034,986 9,421,908
---------- ----------- ----------- -----------
Selling and
marketing expenses 1,305,125 1,414,984 2,314,444 2,722,643
General and
administrative expenses 572,697 578,570 1,137,238 1,119,840
Engineering and
development expenses 464,787 585,620 933,912 1,163,714
---------- ----------- ----------- -----------
Total expenses 2,342,609 2,579,174 4,385,594 5,006,197
---------- ----------- ----------- -----------
Income from operations 1,897,094 2,469,299 3,649,392 4,415,711
Interest income 194,751 190,169 383,604 396,750
---------- ----------- ----------- -----------
Income before provision
for income taxes 2,091,845 2,659,468 4,032,996 4,812,461
Provision for income taxes 753,000 869,000 1,452,000 1,558,000
---------- ----------- ----------- -----------
Net income $1,338,845 $ 1,790,468 $ 2,580,996 $ 3,254,461
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Net income per common share $ .31 $ .41 $ .60 $ .75
-------- --------- --------- ---------
-------- --------- --------- ---------
Weighted average number
of common shares
outstanding 4,294,581 4,327,482 4,291,489 4,326,272
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Dividends per share $ .10 $ .125 $ .20 $ .25
-------- --------- --------- ---------
-------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
6
<PAGE>
Boston Acoustics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
----------------
September 24, 1994 September 23, 1995
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,580,996 $ 3,254,461
Adjustments to reconcile net income
to net cash provided by operating
activities-
Depreciation and amortization 411,242 491,196
Changes in assets and liabilities-
Accounts receivable 317,735 (422,134)
Inventories (1,133,391) (501,086)
Prepaid expenses (130,325) 174,261
Accounts payable 280,490 656,893
Accrued expenses 274,964 200,048
Accrued income taxes (22,500) (331,125)
----------- -----------
Net cash provided by
operating activities 2,579,211 3,522,514
----------- -----------
Cash flows from investing activities:
Net additions to property
and equipment (372,460) (2,119,611)
Decrease (increase) in investments (2,011,864) 2,021,604
Increase in other assets (101,681) (23,941)
----------- -----------
Net cash used in investing
activities (2,486,005) (121,948)
----------- -----------
Cash flows from financing activities:
Dividends paid (856,821) (1,081,389)
Exercise of stock options 70,050 63,363
----------- -----------
Net cash used in financing
activities (786,771) (1,018,026)
----------- -----------
Increase (decrease) in cash and
cash equivalents (693,565) 2,382,540
Cash and cash equivalents, beginning
of period 5,099,151 3,570,790
----------- -----------
Cash and cash equivalents, end of
period $ 4,405,586 $ 5,953,330
----------- -----------
----------- -----------
Items not affecting cash flows:
Dividends payable $ 429,550 $ 541,438
----------- -----------
----------- -----------
Supplemental Disclosure:
Cash paid for income taxes $ 1,474,500 $ 1,889,125
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
7
<PAGE>
Boston Acoustics, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(1) Basis of Presentation
The unaudited consolidated financial statements included herein
have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission and include,
in the opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of interim
period results. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations. The Company believes, however, that its
disclosures are adequate to make the information presented not
misleading. The results for the three and six-month periods ended
September 23, 1995 are not necessarily indicative of results to be
expected for the full fiscal year.
(2) Inventories
Inventories are stated at the lower of cost (first-in, first-out)
or market and consist of the following:
March 25, 1995 September 23,1995
-------------- -----------------
Raw materials and work-in process $5,288,966 $5,669,281
Finished goods 3,437,978 3,558,749
---------- ----------
$8,726,944 $9,228,030
---------- ----------
---------- ----------
Work-in-process and finished goods inventories consist of
materials, labor and manufacturing overhead.
(3) Net Income Per Common Share
Net income per common share is computed using the weighted average
number of shares of common stock outstanding during each period. Common
equivalent shares (stock options) have not been considered in the
calculation of earnings per share as their effect would not be
significant. Fully diluted earnings per share have not been presented
as the amounts would not differ significantly from primary earnings per
share.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The following table sets forth the results of operations for the three-
month and six-month periods ended September 24, 1994 and September 23,
1995 expressed as percentages of net sales.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
September 24, September 23, September 24, September 23,
1994 1995 1994 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 55.4 56.7 55.5 56.2
---- ---- ---- ----
Gross profit 44.6 43.3 44.5 43.8
---- ---- ---- ----
Selling and marketing
expenses 13.7 12.1 12.8 12.7
General and administrative
expenses 6.0 5.0 6.3 5.2
Engineering and development
expenses 4.9 5.0 5.2 5.4
---- ---- ---- ----
24.6 22.1 24.3 23.3
---- ---- ---- ----
Income from operations 20.0 21.2 20.2 20.5
Interest income 2.0 1.6 2.1 1.8
---- ---- ---- ----
Income before provision for
income taxes 22.0 22.8 22.3 22.3
Provision for income taxes 7.9 7.5 8.0 7.2
---- ---- ---- ----
Net income 14.1% 15.3% 14.3% 15.1%
---- ---- ---- ----
---- ---- ---- ----
</TABLE>
Net sales increased 23 percent, from approximately $9,507,000 during the
second quarter of fiscal 1995 to approximately $11,648,000 during the second
quarter of fiscal 1996. For the six months ended September 23, 1995 net
sales increased approximately 19% from $18,038,000 to $21,510,000. Increases
in sales of home and automotive products contributed to the overall increase
in sales both domestically and to international distributors during the
three-month and six-month periods ended September 23, 1995. Contributing to
the increase in automotive products were the recent introductions of the
Rally-Registered Trademark- RX
9
<PAGE>
Coaxial series of component speakers (March 1995) and the new Boston
Rally-Registered Trademark- Subwoofer Series of automotive products
introduced during the three-month period ended September 23, 1995. The
Rally-Registered Trademark- RS Subwoofers are high power handling, low
distortion woofers that work in small enclosures. The three models, the RS8,
RS10, and RS12, have suggested retail prices ranging from $200 to $260 per
pair.
The Company's gross margin for the three-month and six-month periods
ended September 23, 1995 decreased as a percentage of net sales due
primarily to a shift in the sales mix to loudspeaker models with
slightly lower margins.
Total operating expenses decreased as a percentage of net sales during
both the three-month and six-month periods ended September 23, 1995.
Selling and marketing expenses have decreased primarily due to decreased
advertising expenditures as compared to the same three-month and six-
month periods a year ago. General and administrative expenses have
remained relatively stable in absolute dollars, and as a result have
decreased as a percentage of net sales for both the three-month and six-
month periods ended September 23, 1995. Engineering and development
expenses have increased primarily due to increased salaries and benefits
relating to additional personnel, as well as increased material and
supplies relating to new product development.
Interest income has decreased as a percentage of net sales due primarily
to long-term investments maturing and designated for capital
expenditures during fiscal 1996.
The Company's effective income tax rate decreased from 36% for both the
three-month and six-month periods ended September 24, 1994 to
approximately 32.3% in fiscal 1996, primarily due to a lower state
effective tax rate resulting from the favorable tax treatment afforded
the Company's foreign sales corporation and Massachusetts securities
corporation, as well as tax credits relating to capital expenditures.
Net income for the second quarter increased 34%, from approximately
$1,339,000 in fiscal 1995 to $1,790,000 in fiscal 1996 while earnings
per share increased 32% from $.31 to $.41 per share. Net income for the
six-month period ended September 23, 1995 increased 26% from
approximately $2,581,000 in fiscal 1995 to approximately $3,254,000 in
fiscal 1996, while earnings per share for the six-month period increased
25% from $.60 to $.75 per share.
Liquidity and Capital Resources
During the first half of fiscal 1996, the Company financed its growth
with cash generated by operations. As of September 23, 1995 the
Company's working capital was approximately $27,911,000. The Company's
cash and cash equivalents were approximately $5,953,000, short-term
investments were approximately $7,514,000, and long-term investments
were approximately $3,905,000. The Company also has a $1,500,000
unsecured bank line of credit. The Company has had no borrowings under
any line of credit since December 1985.
During 1995, the Company purchased two parcels of land for approximately
$1.2 million. In April 1995, the Company purchased a third parcel of
land for approximately $255,000. The Company will use this land to
construct its new manufacturing and office facility. Construction began
in June 1995 and occupancy should occur by the end of fiscal 1996. The
Company intends to use approximately $6 million of its available working
capital to construct this facility, including approximately $797,000
utilized to date.
The Company believes that its resources are adequate to meet its
requirements for working capital and capital expenditures through fiscal
1996.
10
<PAGE>
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of the Shareholders of the Company held on
August 15, 1995, shareholders acted affirmatively to elect nominees
for directors proposed by management. Each Director is to serve
until the next Annual Meeting of Shareholders and thereafter until
his/her successor is elected and qualified.
Votes "For" Votes "Withheld"
----------- ----------------
Francis L. Reed 4,047,667 17,997
Andrew G. Kotsatos 4,047,667 17,997
Fred E. Faulkner, Jr. 4,047,267 18,397
John G. Markos 4,047,867 17,797
Dorothea T. Reed 4,047,867 17,797
Shareholders also voted to ratify the action of the Directors in
selecting Arthur Andersen LLP as auditors of the Company. A total of
4,063,132 votes were cast in favor of the proposal, 1,930 votes were
cast against, and there were 602 abstentions.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits required by Item 601 of Regulation S-K
Exhibit 27. - Financial Data Schedule
b) Reports on Form 8-K
No reports were filed during the quarter ended September 23, 1995.
11
<PAGE>
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.
Boston Acoustics, Inc.
----------------------
Registrant
Date: November 1, 1995 By: /s/ Francis L. Reed
-------------------
Francis L. Reed
Director, Chief Executive Officer
and Treasurer (Principal Financial
Officer)
Date: November 1, 1995 By: /s/ Andrew G. Kotsatos
----------------------
Andrew G. Kotsatos
Director, President and
Assistant Clerk
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's financial statements in its Quarterly Report on Form 10-Q for the
quarterly period ended September 23, 1995 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-END> SEP-23-1995
<CASH> 5953330
<SECURITIES> 7514143
<RECEIVABLES> 8182010
<ALLOWANCES> 274000
<INVENTORY> 9228030
<CURRENT-ASSETS> 31762345
<PP&E> 10202782
<DEPRECIATION> 5743924
<TOTAL-ASSETS> 41141272
<CURRENT-LIABILITIES> 3851756
<BONDS> 0
<COMMON> 45254
0
0
<OTHER-SE> 37328052
<TOTAL-LIABILITY-AND-EQUITY> 41141272
<SALES> 21509735
<TOTAL-REVENUES> 21509735
<CGS> 12087827
<TOTAL-COSTS> 5006197
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4812461
<INCOME-TAX> 1558000
<INCOME-CONTINUING> 3254461
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3254461
<EPS-PRIMARY> $.75
<EPS-DILUTED> 0
</TABLE>
