<PAGE>
- ------------------------------------------------------------------------------
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 DECEMBER 30, 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 4,408,701 shares of Common Stock issued and outstanding as of
February 2, 1996.
- ------------------------------------------------------------------------------
<PAGE>
Boston Acoustics, Inc.
Index
Page
----
Part I: Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited)-
March 25, 1995 and December 30, 1995 4
Consolidated Statements of Income (Unaudited)-
Three months and Nine months ended December 24, 1994
and December 30, 1995 6
Consolidated Statements of Cash Flows (Unaudited)-
Nine months ended December 24, 1994 and
December 30, 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 December 30, 1995
-------------- -----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 3,570,790 $ 4,406,762
Short-term investments 8,132,145 7,237,444
Accounts receivable, net of allowance
for doubtful accounts of approximately
$207,000 and $339,000 respectively 7,759,876 9,041,742
Inventories 8,726,944 8,920,335
Prepaid income taxes 585,000 585,000
Prepaid expenses 474,092 522,590
---------- ----------
Total current assets 29,248,847 30,713,873
---------- ----------
Property and Equipment, at cost:
Land 1,164,800 1,418,365
Machinery and equipment 4,740,328 5,993,065
Office equipment and furniture 1,392,176 1,412,526
Leasehold improvements 440,413 440,413
Motor vehicles 345,454 345,454
Construction in Progress --- 4,731,200
---------- ----------
8,083,171 14,341,023
Less-accumulated depreciation
and amortization 5,252,728 5,998,548
---------- ----------
2,830,443 8,342,475
---------- ----------
Other Assets:
Long-term investment securities, at cost 5,308,601 2,291,626
Other assets 991,129 1,017,500
---------- ----------
Total other assets 6,299,730 3,309,126
---------- ----------
$38,379,020 $42,365,474
---------- ----------
---------- ----------
</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 December 30, 1995
<S> <C> <C>
Current Liabilities:
Accounts payable $ 876,031 $ 1,168,330
Accrued payroll and payroll-
related expenses 941,319 876,756
Dividend payable 540,550 546,617
Other accrued expenses 325,594 368,294
Accrued income taxes 641,558 371,433
---------- ----------
Total current liabilities 3,325,052 3,331,430
---------- ----------
Commitments
Shareholders' Equity:
Common stock, $.01 par value
Authorized -- 6,000,000 shares
Issued -- 4,518,324 at
March 25, 1995 and 4,569,233
shares at December 30, 1995 45,183 45,692
Additional paid-in capital 3,739,101 4,327,945
Retained earnings 31,353,474 34,744,197
---------- ----------
35,137,758 39,117,834
Less-Treasury stock, 193,920 shares,
at cost 83,790 83,790
---------- ----------
Total shareholders' equity 35,053,968 39,034,044
---------- ----------
$38,379,020 $42,365,474
---------- ----------
---------- ----------
</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 Nine Months Ended
------------------ -----------------
December 24, December 30, December 24, December 30,
1994 1995 1994 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $12,125,861 $13,557,816 $30,164,075 $35,067,551
Cost of goods sold 6,740,636 7,751,217 16,743,864 19,839,044
---------- ---------- ---------- ----------
Gross profit 5,385,225 5,806,599 13,420,211 15,228,507
---------- ---------- ---------- ----------
Selling and
marketing expenses 1,501,977 1,558,890 3,816,421 4,281,533
General and
administrative expenses 621,070 657,247 1,758,308 1,777,087
Engineering and
development expenses 509,316 647,828 1,443,228 1,811,542
---------- ---------- ---------- ----------
Total expenses 2,632,363 2,863,965 7,017,957 7,870,162
---------- ---------- ---------- ----------
Income from operations 2,752,862 2,942,634 6,402,254 7,358,345
Interest income 172,888 207,449 556,492 604,199
---------- ---------- ---------- ----------
Income before provision
for income taxes 2,925,750 3,150,083 6,958,746 7,962,544
Provision for income taxes 1,053,000 1,030,000 2,505,000 2,588,000
---------- ---------- ---------- ----------
Net income $1,872,750 $2,120,083 $4,453,746 $5,374,544
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per common share $ .44 $ .49 $ 1.04 $ 1.24
------ ------- ------- --------
------ ------- ------- --------
Weighted average number
of common shares
outstanding 4,296,586 4,345,166 4,293,188 4,332,885
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Dividends per share $ .10 $ .125 $ .30 $ .375
------ ------- ------- --------
------ ------- ------- --------
</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>
Nine Months Ended
-----------------
December 24, 1994 December 30, 1995
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,453,746 $ 5,374,544
Adjustments to reconcile net income
to net cash provided by operating
activities-
Depreciation and amortization 731,153 745,820
Changes in assets and liabilities-
Accounts receivable (1,777,753) (1,281,866)
Inventories (1,776,570) (193,391)
Prepaid expenses (304,719) (48,498)
Accounts payable 1,048,711 292,299
Accrued expenses 161,638 (21,863)
Accrued income taxes (162,132) (270,125)
---------- ----------
Net cash provided by
operating activities 2,374,074 4,596,920
---------- ----------
Cash flows from investing activities:
Net additions to property and equipment (959,023) (6,257,852)
Decrease (increase) in investments (1,974,528) 3,911,676
Increase in other assets (134,893) (26,371)
---------- ----------
Net cash used in investing activities (3,068,444) (2,372,547)
---------- ----------
Cash flows from financing activities:
Dividends paid (1,286,371) (1,622,827)
Exercise of stock options 115,175 234,426
---------- ----------
Net cash used in financing activities (1,171,196) (1,388,401)
---------- ----------
Increase (decrease) in cash and cash
equivalents (1,865,566) 835,972
Cash and cash equivalents, beginning
of period 5,099,151 3,570,790
---------- ----------
Cash and cash equivalents, end of
period $ 3,233,585 $ 4,406,762
---------- ----------
---------- ----------
Items not affecting cash flows:
Dividends payable $ 430,100 $ 546,617
---------- ----------
---------- ----------
Supplemental Disclosure:
Cash paid for income taxes $ 2,667,132 $ 2,858,125
---------- ----------
---------- ----------
</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 nine-month periods ended
December 30, 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 December 30,1995
Raw materials and work-in process $5,288,966 $5,832,177
Finished goods 3,437,978 3,088,158
----------- -----------
$8,726,944 $8,920,335
----------- -----------
----------- -----------
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 nine-month periods ended December 24, 1994 and December 30,
1995 expressed as percentages of net sales.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
December 24, December 30, December 24, December 30,
1994 1995 1994 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 55.6 57.2 55.5 56.6
----- ----- ----- -----
Gross profit 44.4 42.8 44.5 43.4
----- ----- ----- -----
Selling and marketing
expenses 12.4 11.5 12.7 12.2
General & administrative
expenses 5.1 4.8 5.8 5.1
Engineering & development
expenses 4.2 4.8 4.8 5.1
----- ----- ----- -----
21.7 21.1 23.3 22.4
----- ----- ----- -----
Income from operations 22.7 21.7 21.2 21.0
Interest income 1.4 1.5 1.9 1.7
----- ----- ----- -----
Income before provision
for income taxes 24.1 23.2 23.1 22.7
Provision for income
taxes 8.7 7.6 8.3 7.4
----- ----- ----- -----
Net income 15.4% 15.6% 14.8% 15.3%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
Net sales increased 12 percent, from approximately $12,126,000 during
the third quarter of fiscal 1995 to approximately $13,558,000 during the
third quarter of fiscal 1996. For the nine months ended
December 30, 1995 net sales increased 16% from approximately $30,164,000
to approximately $35,068,000. The third quarter of fiscal 1996 covers 14
weeks of sales and earnings compared to 13 weeks for the third quarter of
fiscal 1995. During the quarter, the Company introduced two new
Lynnfield VR Series of products. Shipments of the VR10 center channel
and the VR2000 powered subwoofer, with suggested retail prices of $300
and $1200, respectively, began in November 1995. In addition, sales
increases in the home and automotive loudspeaker categories, both
domestically and to international distributors,
9
<PAGE>
contributed to the overall sales increase during the three-month and
nine-month periods ended December 30, 1995.
The Company's gross margin for the three-month and nine-month periods
ended December 30, 1995 decreased as a percentage of net sales due
primarily to a shift in the sales mix to loudspeaker models with
slightly lower margins, as well as to increased labor and related
expenses and costs associated with temporary additional offsite
warehousing.
Total operating expenses increased in absolute dollars but decreased as
a percentage of net sales during both the three-month and nine-month
periods ended December 30, 1995 as compared to the corresponding periods
in fiscal 1995. Selling and marketing expenses have decreased as a
percentage of net sales primarily due to lower advertising and
literature expenditures as compared to the corresponding three-month and
nine-month periods in the preceding fiscal year. 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 nine-month periods ended December 30, 1995.
Engineering and development expenses as a percentage of net sales and in
absolute dollars have increased primarily due to increased salaries and
benefits relating to additional personnel, as well as increases in the
cost of materials and supplies relating to new product development.
Interest income has decreased as a percentage of net sales for the nine-
month period ended December 30, 1995 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 nine-month periods ended December 24, 1994 to
approximately 32.7% for the three-month and 32.5% for the nine-month
period ended December 30, 1995, primarily due to a lower effective state
tax rate resulting from the favorable tax treatment afforded the
Company's foreign sales corporation and Massachusetts securities
corporation, as well as to tax credits relating to capital expenditures.
Net income for the third quarter increased 13% from approximately
$1,873,000 in fiscal 1995 to $2,120,000 in fiscal 1996 while earnings
per share increased 11% from $.44 to $.49 per share. Net income for the
nine-month period ended December 30, 1995 increased 21% from
approximately $4,454,000 in fiscal 1995 to approximately $5,375,000 in
fiscal 1996, while earnings per share for the nine-month period
increased 19% from $1.04 to $1.24 per share.
Liquidity and Capital Resources
During the first nine months of fiscal 1996, the Company financed its
growth with cash generated by operations. As of December 30, 1995 the
Company's working capital was approximately $27,382,000. The Company's
cash and cash equivalents were approximately $4,407,000, short-term
investments were approximately $7,237,000, and long-term investments
were approximately $2,292,000. 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 adjacent parcels of land for
approximately $1.2 million. In April 1995, the Company purchased a
third adjacent parcel of land for approximately $255,000. The Company
has begun construction of its new manufacturing and office facility on
this land. A total of $6 million of working capital is expected to be
used to construct this facility with approximately $4.7 million used
since construction began in June 1995. Full occupancy is expected by
the end of fiscal 1996.
The Company believes that its resources are adequate to meet its
requirements for working capital and capital expenditures through the
next twelve months.
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
---------------------------------------------------
None
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 on Form 8-K were filed during the quarter ended
December 30, 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: February 2, 1996 By: /s/ Francis L. Reed
-------------------
Francis L. Reed
Director, Chief Executive
Officer and Treasurer
(Principal Financial
Officer)
Date: February 2, 1996 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 December 30, 1995 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-END> DEC-30-1995
<CASH> 4406762
<SECURITIES> 7237444
<RECEIVABLES> 9041742
<ALLOWANCES> 339000
<INVENTORY> 8920335
<CURRENT-ASSETS> 30713873
<PP&E> 14341023
<DEPRECIATION> 5998548
<TOTAL-ASSETS> 42365474
<CURRENT-LIABILITIES> 3331430
<BONDS> 0
0
0
<COMMON> 45692
<OTHER-SE> 39072142
<TOTAL-LIABILITY-AND-EQUITY> 42365474
<SALES> 35067551
<TOTAL-REVENUES> 35067551
<CGS> 19839044
<TOTAL-COSTS> 7870162
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7962544
<INCOME-TAX> 2588000
<INCOME-CONTINUING> 5374544
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5374544
<EPS-PRIMARY> $1.24
<EPS-DILUTED> $1.24
</TABLE>
