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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED MARCH 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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)
300 JUBILEE DRIVE
PEABODY, MASSACHUSETTS 01960
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(508) 538-5000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
6,000,000 shares of Common Stock ($.01 Par Value)
(Title of Class)
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 [ ]
Indicate by check mark if the disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant was $50,999,970 as of June 14, 1996.
There were 4,364,301 shares of Common Stock issued and outstanding as of June
14, 1996.
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DOCUMENTS INCORPORATED BY REFERENCE
(1) Registrant's Annual Report to Stockholders for the fiscal year ended
March 30, 1996 (Items 5, 6, 7, 8 and 14 (a)(1))
(2) Proxy Statement for Registrant's Annual Meeting of Stockholders to be
held on August 13, 1996 (Items 10, 11, 12 and 13)
<PAGE>
BOSTON ACOUSTICS, INC.
Securities and Exchange Commission
Item Number and Description Page
- ----------------------------------- ----
PART I
ITEM 1. Business 1
ITEM 2. Properties 7
ITEM 3. Legal Proceedings 7
ITEM 4. Submission of Matters to a Vote of Security Holders 7
PART II
ITEM 5. Market for Registrant's Common Equity
and Related Stockholder Matters 8
ITEM 6. Selected Financial Data 8
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
ITEM 8. Financial Statements and Supplementary Data 8
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 8
PART III
ITEM 10. Directors and Executive Officers of the Registrant 9
ITEM 11. Executive Compensation 9
ITEM 12. Security Ownership of Certain Beneficial
Owners and Management 9
ITEM 13. Certain Relationships and Related Transactions 9
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 10
SIGNATURES 12
INDEX TO FINANCIAL STATEMENT SCHEDULES F-1
Inasmuch as the calculation of shares of the registrant's voting stock held
by non-affiliates requires a calculation of the number of shares held by
affiliates, such figure, as shown on the cover page hereof, represents the
registrant's best good faith estimate for purposes of this annual report on
Form 10-K, and the registrant disclaims that such figure is binding for any
other purpose. The aggregate market value of Common Stock indicated is based
upon $23.00, the price at which the Common Stock was last sold on June 14,
1996 as reported by The Nasdaq Stock Market. All outstanding shares
beneficially owned by executive officers and directors of the registrant or
by any shareholder beneficially owning more than 10% of registrant's Common
Stock, as disclosed herein, were considered for purposes of this disclosure
to be held by affiliates.
-i-
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PART I
ITEM 1. BUSINESS
Boston Acoustics, Inc. ("the Company") engineers, manufactures and markets
moderately-priced, high-quality loudspeaker systems for use in home audio and
video entertainment systems and in after-market automotive audio systems.
The Company believes that its products deliver better sound quality than
other comparably priced loudspeaker systems. Most of the Company's products
are assembled by the Company from purchased components, although certain
automotive speakers are manufactured by others according to Company
specifications. All of the Company's products and subassemblies, including
those supplied by outside sources, have been designed by the Company's
engineering department. Boston Acoustics' speakers are marketed nationwide
through selected audio and audio-video specialty dealers and through
distributors in certain foreign countries.
The Company was organized as a Massachusetts corporation in 1979 by Francis
L. Reed and Andrew G. Kotsatos. Its principal executive offices and
manufacturing facilities are located at 300 Jubilee Drive, Peabody,
Massachusetts.
PRODUCTS
The Company operates in one business industry segment and has four distinct
product lines as discussed below.
The Home Loudspeaker line consists of five bookshelf models currently ranging
in price from $150 to $420 per pair, three floor-standing systems currently
priced from $550 to $1400 per pair, two three-piece subwoofer/satellite
systems currently priced at $500 and $750 per system, and three powered
subwoofers priced at $400, $600 and $1200. Additional products for the home
theater market include four different center-channel speakers currently
ranging in price from $130 to $400 each. The Company also produces
magnetically shielded versions of several models and produces three
indoor/outdoor speaker systems (Voyager-Registered Trademark-,
Runabout-Registered Trademark- I, and Runabout-Registered Trademark- II)
currently priced from $200 to $400 per pair. The Company also produces a
complete THX-Registered Trademark- Home Theater speaker system priced at
$2,400.
The Lynnfield Series is a line of premium performance home loudspeaker
systems consisting of three models. The first two models, the 300LII and the
500LII were originally introduced during fiscal 1993, while the 400L was
introduced during fiscal 1994. The three models are currently priced from
$1,800 to $5,000 per pair dependent on the size and finish.
The Designer Series line is a collection of speaker systems engineered for
flush mounting in the walls or ceilings of homes, businesses and recreational
vehicles. There are six models in the Designer Series line with prices
currently ranging from $130 to $500 per pair.
1
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The Company has 30 models of automotive speakers with prices currently
ranging from $60 to $650 per pair. The automotive line includes high-quality
full-range replacement speakers, sophisticated component systems, and
subwoofers. The component systems permit flexible speaker placement and
provide sound rivaling that of fine home speakers. The automotive line
includes the CX Series, the 700 Series of plate speakers, the Boston
Rally-TM- RC Series of component speakers, the Boston Rally-TM- RX Coaxial
Series, the Boston Rally-TM- RS Subwoofers, and the premium performance
ProSeries Speaker Systems.
NEW PRODUCTS
During fiscal 1996 the Company added a number of new products, described
below, to supplement or replace those products which have matured, to
increase penetration of current markets, and to gain footholds in new markets.
During fiscal 1996 the Company introduced additional home theater components
to the successful Lynnfield VR line of products, including the VR10 center
channel, VRS Pro diffuse-field surrounds, and the VR2000 powered subwoofer,
with suggested retail prices of $300, $500, and $1200 respectively.
During fiscal 1996 the Company supplemented its Compact Reference (CR) Series
with the CR2 center channel at $200 and the CR400 powered subwoofer at $400.
The Company also introduced the Boston Rally-TM- RS subwoofers in fiscal 1996
with six models priced from $200 to $260 per pair. Boston Rally subwoofers
are designed to play loud and low in compact enclosures.
The Company introduced a new line of water-resistant Designer Series in-wall
speakers. The 351, 361 and 381 replace the 350, 360II and 380, and are
priced at $300, $400, and $500 per pair, respectively.
ENGINEERING AND DEVELOPMENT
The Company's engineering and development department is actively engaged in
the development of new products and manufacturing processes, the improvement
of existing products and the research of new materials for use in the
Company's products. The Company has designed all of its products and
subassemblies, including those supplied by outside sources.
The Company's engineering and development staff includes 31 full-time
employees and one outside consultant. During fiscal years 1996, 1995 and
1994 the Company spent approximately $2,497,000, $2,046,000, and $1,734,000,
respectively, for engineering and development.
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MARKETING
The Company employs 16 salespersons and retains 5 manufacturer's
representatives who service the Company's dealer network. Boston Acoustics'
loudspeaker systems are distributed in the United States and Canada through
approximately 319 selected home dealers (some of whom have multiple outlets)
which are typically audio or audio-video specialty retailers. The Company
sells its automotive products through approximately 296 dealers located in
the United States and Canada including automotive sound specialty retailers
and many of the Company's home audio dealers. The Company's Designer Series
speakers are sold by many of its home audio dealers. The Company's dealers
usually stock and sell a broad variety of audio components including, in most
cases, competing loudspeaker lines. The Company seeks dealers who emphasize
quality products and who are knowledgeable about home and automotive
entertainment products. One dealer accounted for more than 10% of gross
sales during fiscal year 1996.
Boston Acoustics' product lines are also exported to dealers in Canada and
through exclusive distributors in certain foreign countries, primarily in
Western Europe and the Far East. Export sales accounted for approximately
22% of net sales in fiscal 1994, 22% in fiscal 1995, and 20% in fiscal 1996.
See also Note 6 to Consolidated Financial Statements incorporated herein by
reference, pursuant to Part II, Item 8.
The Company emphasizes the high performance-to-price ratio of its speakers in
its advertising and promotion. Boston Acoustics believes that specialty
retailers can be effective in introducing retail customers to the high dollar
value of the Company's products. The Company directly supports its dealer
network with a cooperative advertising program and by providing Company
prepared advertisements and detailed product literature. In addition, the
Company advertises in national magazines including STEREO REVIEW, AUDIO, CAR
AUDIO & ELECTRONICS, CAR STEREO REVIEW, VIDEO, and STEREOPHILE'S GUIDE TO
HOME THEATER. During fiscal 1996 the Company spent approximately $1,773,000
(3.8% of net sales) for advertising.
COMPETITION
The Company competes primarily on the basis of performance, price and the
strength of its dealer organization.
The market for branded loudspeaker systems is served by many manufacturers,
both foreign and domestic. Many products are available over a broad price
range, and the market is highly fragmented and competitive. The Company
distributes its products primarily through specialty retailers where it
competes directly for space with other branded speaker manufacturers.
Loudspeaker systems produced by many of the Company's competitors can be
purchased by consumers through mass merchandisers, department stores,
mail-order merchants, and catalogue showrooms. The Company believes it is
more advantageous to distribute through specialty retailers who provide sales
support and service to consumers.
Boston Acoustics competes with a substantial number of branded speaker
manufacturers, including Bose Corporation, Infinity and JBL (divisions of
Harman International Industries), Advent (division of International Jensen,
Inc.), Polk Audio, Inc., and Klipsch and Associates, Inc. Some of these
competitors have greater technical and financial resources than the Company
and may have broader brand recognition than Boston Acoustics.
3
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In addition to competition from branded loudspeaker manufacturers, the
Company's products compete indirectly with single name "rack systems". Rack
systems contain all the various components needed to form an audio system,
and are sold by Sony, Pioneer, Technics, Yamaha and many others. Rack
systems are generally sold through mass merchandisers and department stores,
although many of the Company's dealers also sell rack systems.
MANUFACTURING AND SUPPLIERS
Most of the Company's products are assembled by the Company from components
specially fabricated for the Company, although certain automotive speakers
are manufactured by others according to Company specifications.
The Company purchases materials and component parts from approximately 121
suppliers located in the United States, Canada, Western Europe and the Far
East. Although Boston Acoustics relies on single suppliers for certain parts,
the Company could, if necessary, develop multiple sources of supply for these
parts. The Company does not have long-term or exclusive purchase commitments
nor does the Company have written agreements with any of its inventory
suppliers. No supplier accounted for more than 10% of the Company's purchases
during fiscal year 1996.
SEASONALITY AND CONSUMER DISCRETION
The home and automotive audio markets are both somewhat seasonal, with a
majority of home speaker retail sales normally occurring in the period
October through March and a majority of automotive speaker retail sales
normally occurring in the period April through October.
The Company's sales and earnings can also be affected by changes in the
general economy since purchases of home entertainment and automotive audio
products, including loudspeakers, are discretionary for consumers.
PATENTS AND TRADEMARKS
Boston Acoustics holds two United States patents which relate to certain
automotive speaker assemblies and cabinet design. The Company also has
several registered trademarks including Boston-Registered Trademark-, Boston
Acoustics-Registered Trademark-, Varimount-Registered Trademark-,
Magnaguard-Registered Trademark-, PowerVent-Registered Trademark-,
Tempo-Registered Trademark-, Voyager-Registered Trademark-, and
Runabout-Registered Trademark-. The Company believes that its growth,
competitive position and success in the marketplace are more dependent on its
technical and marketing skills and expertise than upon the ownership of
patent and trademark rights. There can be no assurance that any patent or
trademark would ultimately be proven valid if challenged.
BACKLOG
The Company currently has no significant backlog. The Company's policy is to
maintain sufficient inventories of finished goods to fill all orders within
two business days of receipt.
4
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WARRANTIES
Boston Acoustics warrants its home speakers to be free from defects in
materials and workmanship for a period of five years, its Designer Series
speakers for a period of one year and its automotive speakers for one year.
Warranty costs during fiscal 1996 were not significant.
EMPLOYEES
As of June 14, 1996, the Company had 212 full-time employees who were engaged
as follows: 135 in production and materials management; 31 in engineering
and development; 29 in marketing and sales support; and 17 in administration.
None of the Company's employees are represented by a collective bargaining
agreement and the Company believes that its relations with its employees are
satisfactory.
PENDING ACQUISITION
The Company has signed a letter of intent to purchase the business of Snell
Acoustics, Inc., a Massachusetts based manufacturer of home entertainment
loudspeaker systems. This purchase is currently scheduled to close in late
June 1996.
5
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EXECUTIVE OFFICERS OF THE REGISTRANT
There is incorporated herein by reference the information concerning Francis
L. Reed, who is Chairman of the Board, Chief Executive Officer and Treasurer
of the Company, and Andrew G. Kotsatos, who is President and Assistant Clerk
of the Company, from the Company's definitive Proxy Statement for its Annual
Meeting of Stockholders to be held on August 13, 1996, under the headings
"Proposal No. 1 -- Election of Directors", "Board of Directors", and "Certain
Transactions and Relationships". Information concerning the Company's other
executive officers as of June 14, 1996 is set forth below.
Name Age Title
- ---- --- -----
Robert A. Clark 64 Vice President - Manufacturing
Ira S. Friedman 36 Vice President - Marketing
Moses A. Gabbay 51 Vice President - Engineering
Paul F. Reed 32 Vice President - Administrative Services
Debra A. Ricker-Rosato 40 Vice President - Finance
Robert L. Spaner 35 Vice President - Sales
Robert A. Clark has served as Vice President - Manufacturing since August
1994. He joined the Company in 1987 as a manufacturing engineer. In 1993 he
became Director of Manufacturing. Mr. Clark previously held positions with
other audio manufacturers, including Precision Loudspeakers, Inc., Peerless
Audio Manufacturing and Bose Corporation. His last position at Precision
Loudspeakers, Inc. was Vice President - Manufacturing. He holds a B.A. in
Engineering and Manufacturing from Northeastern University.
Ira S. Friedman has served as Vice President - Marketing since February 1991.
He joined the Company in 1989 as Director of Marketing. In 1990 he became
Director of Marketing and Sales. Mr. Friedman was previously a marketing
consultant for various advertising agencies, including Vector Research and
Celltronics. He holds an MBA degree from Harvard Business School.
Moses A. Gabbay has been Vice President - Engineering since joining the
Company in 1981. Mr. Gabbay was previously Director of Engineering at Avid
Corporation and an acoustic engineer for Teledyne Acoustic Research.
Paul F. Reed was named Vice President - Administrative Services in May 1993.
He has been with the Company since its inception in 1979. From production
and shipping, Mr. Reed moved to sales in 1986 and, in 1989, became a Regional
Sales Manager. He was named Director of Administrative Services in 1990.
Debra A. Ricker-Rosato was named Vice President - Finance in May 1993. Prior
to joining the Company in October 1986 as Controller, Ms. Ricker-Rosato was
employed by Babco-Textron from 1975, a manufacturer of small aircraft engine
components. Her last position with Babco-Textron was that of Assistant
Controller. She holds an MSF degree from Bentley College.
Robert L. Spaner was named Vice President - Sales in May 1993. He joined the
Company in 1987 as a regional sales manager. In 1990 he became National
Sales Manager. Mr. Spaner was formerly employed by Kloss Video as Western
Regional Manager and worked six years in retail sales at Tweeter, Etc.
6
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Each executive officer is elected for a term scheduled to expire at the
meeting of Directors following the Annual Meeting of Stockholders or until a
successor is duly chosen and qualified. There are no arrangements or
understandings pursuant to which any executive officer was or is to be
selected for election or reelection. There are no family relationships among
any Directors or executive officers, except that Francis L. Reed, a Director
and executive officer, and Dorothea T. Reed, a former Director, are husband
and wife, and Paul F. Reed, an executive officer, and Lisa M. Reed, a
director, are the son and daughter of Mr. and Mrs. Reed.
ITEM 2. PROPERTIES
During fiscal 1995 and 1996, the Company purchased a total of three parcels
of land totaling 11 acres for approximately $1.4 million. This land was used
to construct the Company's new principal executive offices and manufacturing
facilities at 300 Jubilee Drive, Peabody, Massachusetts. Construction of the
150,000 square foot building began in June 1995 with occupancy taking place
in February 1996.
Prior to February 1996, the Company leased all of the real properties used in
its business. The Company had leased its principal executive offices and
manufacturing facilities at 70 Broadway, Lynnfield, Massachusetts. The
102,400 square foot building was leased from an unrelated party under an
operating lease which expired in April 1996.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings affecting the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of shareholders during the fourth
quarter of fiscal 1996.
7
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information required by this item is incorporated by reference to the
section entitled "Stock Market Activity" on page 12 in the Registrant's 1996
Annual Report to Stockholders, which is filed herewith as Exhibit 13.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference to the
section entitled "Selected Financial Data" on page 11 in the Registrant's
1996 Annual Report to Stockholders, which is filed herewith as Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by this item is incorporated by reference to the
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations" on pages 4 and 5 in the Registrant's 1996 Annual
Report to Stockholders, which is filed herewith as Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference to the
Consolidated Financial Statements at March 30, 1996 and notes thereto on
pages 6 through 10 in the Registrant's 1996 Annual Report to Stockholders,
which is filed herewith as Exhibit 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
8
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K and Instruction 3 to Item
401(b), the information required by this item concerning executive officers,
including certain information incorporated herein by reference to the
information appearing in the Company's definitive Proxy Statement for its
Annual Meeting of Stockholders to be held on August 13, 1996 concerning
Francis L. Reed, who is the Chairman of the Board, Treasurer and Chief
Executive Officer of the Company, and Andrew G. Kotsatos, who is President
and Assistant Clerk of the Company, is set forth in Part I, Item 1, hereof,
under the heading "Executive Officers of the Registrant" and information
concerning Directors, including Messrs. Reed and Kotsatos, is incorporated by
reference to the sections entitled "Proposal No. 1 -- Election of Directors",
"Compensation Interlocks and Insider Participation" and "Board of Directors"
in the Registrant's definitive Proxy Statement for its Annual Meeting of
Stockholders to be held August 13, 1996.
There is incorporated herein by reference to the discussion under "Compliance
with Section 16(a) of the Securities Exchange Act of 1934" in the Company's
definitive Proxy Statement for its Annual Meeting of Stockholders to be held
August 13, 1996 the information with respect to delinquent filings of reports
pursuant to Section 16(a) of the Securities Exchange Act of 1934.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the
sections entitled "Executive Compensation" in the Registrant's definitive
Proxy Statement for its Annual Meeting of Stockholders to be held August 13,
1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is incorporated by reference to the
section entitled "Principal and Management Stockholders" in the Registrant's
definitive Proxy Statement for its Annual Meeting of Stockholders to be held
August 13, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to the
section entitled "Certain Relationships and Transactions" in the Registrant's
definitive Proxy Statement for its Annual Meeting of Stockholders to be held
August 13, 1996.
9
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a) The following documents are included as part of this report:
(1) FINANCIAL STATEMENTS
The following consolidated financial statements are incorporated by
reference to the Registrant's 1996 Annual Report to Stockholders:
Report of Independent Public Accountants.
Consolidated Balance Sheets as of March 30, 1996 and March 25, 1995.
Consolidated Statements of Income for the three years ended March 30,
1996.
Consolidated Statements of Shareholders' Equity for the three years
ended March 30, 1996.
Consolidated Statements of Cash Flows for the three years ended March
30, 1996.
Notes to Consolidated Financial Statements.
(2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedules are filed as part of this
report and should be read in conjunction with the consolidated financial
statements:
Report of Independent Public Accountants on Schedules
Schedule II -- Valuation and Qualifying Accounts
Other financial schedules have been omitted because they are not
required or because the required information is given in the
Consolidated Financial Statements or notes thereto.
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(3) LISTING OF EXHIBITS
EXHIBITS
3.A. - Articles of Organization (1)
3.B. - Amendment to Articles of Organization (1)
3.C. - Second Amendment to Articles of Organization (1)
3.D. - Bylaws (1)
4.A. - Specimen Share Certificate (1)
10.B.+ - 1986 Incentive Stock Option Plan adopted by Boston
Acoustics, Inc. on October 15, 1986, as amended (2)
10.C. - Lease between Boston Acoustics, Inc. and Newburyport
Turnpike Associates Limited Partnership dated August
24, 1988 relating to office and manufacturing
facilities (3)
10.D. - First Amendment between Boston Acoustics, Inc. and
Newburyport Turnpike Associates Limited Partnership
dated March 23, 1994 relating to office and manufacturing
facilities (4)
13.* - 1996 Annual Report to Shareholders
21.* - Subsidiaries of the Registrant
23.1* - Consent of Independent Public Accountants
27.* - Financial Data Schedule
99.* - "Safe Harbor" Statement under Private Securities Litigation Reform
Act of 1995
* Indicates an exhibit which is filed herewith.
+ Indicates an exhibit which constitutes an executive compensation plan.
________________
(1) Incorporated by reference to the similarly numbered exhibits in Part II
of File No. 33-9875.
(2) Incorporated by reference to the similarly numbered exhibit in Item 14 of
the Company's Annual Report on Form 10-K for the year ended March 27, 1993.
(3) Incorporated by reference to the similarly numbered exhibit in Item 14 of
the Company's Annual Report on Form 10-K for the year ended March 25, 1989.
(4) Incorporated by reference to the similarly numbered exhibit in Item 14 of
the Company's Annual Report on Form 10-K for the fiscal year ended March 26,
1994.
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed by the Registrant during the last quarter
covered by this report, and no other such reports were filed subsequent to
March 30, 1996 through the date of this report.
11
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of
Peabody, Commonwealth of Massachusetts, on the 14th day of June 1996.
BOSTON ACOUSTICS, INC.
(Registrant)
BY: s/Francis L. Reed
____________________________
Francis L. Reed
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signatures Capacities Date
/s/Francis L. Reed
_______________________ Director, Chief Executive 6/14/96
Francis L. Reed Officer and Treasurer _________
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
/s/Andrew G. Kotsatos
______________________ Director, President 6/14/96
Andrew G. Kotsatos Assistant Clerk _________
_______________________ Director _________
Fred E. Faulkner, Jr.
_____________________ Director __________
John G. Markos
/s/Lisa M. Reed
_______________________ Director 6/14/96
Lisa M. Reed __________
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BOSTON ACOUSTICS, INC. AND SUBSIDIARIES
INDEX TO SCHEDULE
Report of Independent Public Accountants on Schedule
Schedule II - Valuation and Qualifying Accounts
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To Boston Acoustics, Inc.:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements included in Boston Acoustics, Inc. and
subsidiaries' annual report to shareholders, incorporated by reference in
this Form 10-K, and have issued our report thereon dated May 10, 1996. Our
audits were made for the purpose of forming an opinion on those statements
taken as a whole. The schedule listed in the index is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly states, in all material respects, the
financial data required to be set forth therein, in relation to the basic
consolidated financial statements taken as a whole.
Boston, Massachusetts
May 10, 1996
F-2
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BOSTON ACOUSTICS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
----------------------------------------------------------
BALANCE, CHARGED TO
BEGINNING OF COSTS AND BALANCE,
YEAR EXPENSES DEDUCTIONS (1) END OF YEAR
<S> <C> <C> <C> <C>
For the fiscal years ended:
March 30, 1996 $ 207,000 $ 134,000 $ 34,000 $ 307,000
---------- ---------- ---------- ----------
March 25, 1995 $ 173,000 $ 104,000 $ 70,000 $ 207,000
---------- ---------- ---------- ----------
March 26, 1994 $ 146,000 $ 151,000 $ 124,000 $ 173,000
---------- ---------- ---------- ----------
</TABLE>
(1) AMOUNTS DEEMED UNCOLLECTIBLE AND RECOVERIES OF PREVIOUSLY RESERVED
AMOUNTS.
F-3
<PAGE>
BOSTON ACOUSTICS
1996
ANNUAL
REPORT
[Photograph of Rally RS10 Subwoofer]
FINANCIAL HIGHLIGHTS
[Bar graph presenting the following data regarding net sales
(amounts in thousands): '92 - $32,583; '93 - $32,603; '94 - $34,488;
'95 - $41,046; '96 - $46,325.]
[Bar graph presenting the following data regarding net income
(amounts in thousands): '92 - $4,933; '93 - $4,772; '94 - $4,682;
'95 - $5,949; '96 - $6,631.]
<PAGE>
TO THE SHAREHOLDERS:
[Photograph of Frances L. Reed, Chairman and Chief Executive Officer]
[Photograph of Andrew G. Kotsatos, President]
FISCAL 1996 WAS OUR SEVENTEENTH STRAIGHT YEAR OF RECORD SALES. DESPITE A
FOURTH QUARTER THAT WAS DEPRESSED BY ONE OF THE SNOWIEST WINTERS IN HISTORY,
NET SALES FOR THE YEAR WERE UP BY 13%, TO $46,324,791, FROM $41,045,703 IN
FISCAL 1995. NET INCOME ALSO REACHED A NEW RECORD, INCREASING 11% TO
$6,630,576. EARNINGS PER SHARE HIT A NEW HIGH OF $1.52, UP 10% COMPARED TO
LAST YEAR'S $1.38.
IT WAS ANOTHER EXCITING YEAR FOR THE COMPANY. IN ADDITION TO SETTING NEW
SALES AND EARNINGS RECORDS, WE MOVED INTO A NEW FACILITY, INTRODUCED A HOST
OF NEW PRODUCTS, STRENGTHENED OUR INTERNATIONAL DISTRIBUTION NETWORK, AND
ANNOUNCED THE ACQUISITION OF A NEW SUBSIDIARY.
WHILE SALES WERE STRONG ACROSS THE BOARD, OUR GROWTH WAS FUELED BY NEW
PRODUCTS--NEW COMPACT REFERENCE AND DESIGNER SERIES IN-WALL HOME
SPEAKERS--AND NEW AUTOMOTIVE SYSTEMS. OUR PRODUCT LINES NOW INCLUDE MORE THAN
75 SPEAKERS, RANGING IN PRICE FROM $60 TO $5,000 A PAIR.
HOME IS WHERE THE THEATER IS
The "action" in home speaker systems is in the home theater market. During
fiscal 1996, we enhanced our position as the company best prepared to serve
this market.
[Photograph of CR400. Caption: "CR400, introduced January 1996."]
We added two new products to the highly successful CR (Compact Reference)
line that we launched in late 1994. The CR2 is a video-shielded center
channel speaker, with a $200 suggested retail price, and the CR400 is a high
performance powered subwoofer, affordably priced at a suggested retail of
$400. Both products can be combined with other members of the CR family to
create complete high performance home theater speaker systems.
[Photograph of Lynnfield VR System for Dolby Digital. Caption: "Lynnfield VR
System for Dolby Digital, introduced December 1995."]
We also added three new models to our highly acclaimed Lynnfield VR family.
Our new THX-certified VRS Pro diffuse-field surround speakers--priced at $500
per pair--offer the low frequency extension and power handling capabilities
demanded by the new Dolby Digital-TM- (AC-3) systems. The new $1,200 VR2000
subwoofer incorporates a Boston-designed 300-watt amplifier and is the
smallest single-unit subwoofer to meet THX requirements. Combined with our
VR40 main speakers, the VRS Pro surround sounds and the VR12 center channel
speaker, the subwoofer is a key component of a first-class $3,500 home
theater speaker system.
[Photograph of Designer Series 381. Caption: "Designer Series 381,
introduced November 1995."]
The third new VR speaker is the VR10 center channel. Smaller than the VR12,
and with a $300 suggested retail price, this three-way speaker also meets the
demands of Dolby Digital.
We introduced three new Designer Series of flush mount speakers in fiscal
1996. Featuring broad-dispersion Kortec-TM- tweeters and butyl rubber
surrounds, the 351, 361 and 381 models feature improved sound and
weather-proofing qualities.
2
<PAGE>
NEW AUTO SOUNDS
We enriched our automotive product lines by completing the introduction of
the Boston Rally-TM- RX Coaxial Series and the addition of the Rally RS
subwoofer line. The new RS series consists of three models with suggested
retail prices from $200 to $260 per pair.
[Photograph of Rally RS10. Caption: "Rally RS10, introduced July 1995."]
PRIZE PRODUCTS
Awards, positive reviews, and other forms of recognition are important in our
industry. Faced with an overwhelming array of choices, consumers and
professional sales people look to experts to evaluate alternatives and,
through awards and reviews, to make recommendations. As a result, we are
always pleased to see our name on the winners' list.
We had winners in seven categories of the AUDIOVIDEO INTERNATIONAL 17th
Annual Hi-Fi Grand Prix Awards.
- - The VR40: mid-size floor standing speaker of the year.
- - The Lynnfield VR system: A/V speaker system of the year.
- - The SubSat7 system: best sub/sat speaker system.
- - The VR12: center channel speaker of the year.
- - Our VRS: special recognition in the rear channel/surround sound category.
- - The 380: in-wall speaker honors.
In the under 12" Subwoofer category, the VR500 was cited for features that
include video shielding and automatic turn-on, as well as for its audiophile
sound qualities.
We also won AutoSound 1996 Grand-Prix Awards in six categories:
- - The CX9: best of 6 x 9" speakers.
- - The RX67: best flush-mounted speaker.
- - The ProSeries 5.4: best speaker component system.
- - The ProSeries Neo4t: best tweeter.
- - The ProSeries 6.4LF: best midrange and midbass speaker.
- - The RS12: special speaker separates recognition.
Boston Acoustics products took three prestigious Innovations '96 awards for
new product design and engineering at the International Winter Consumer
Electronics Show in January. The awards are based on innovation, value,
aesthetics and contributions to users' quality of life. The judges are
consumer electronics experts that include industrial designers and members of
the trade press. The winners were the VRS Pro Surround, the VR10 Center
Channel and the Compact Reference CRX surround.
As a company, we made the BOSTON GLOBE's Eighth Annual Globe 100 "Best of
Massachusetts Business" List, moving up from 98th place to 57th.
QUOTABLE REVIEWS
Reviewers consistently recognize the sound quality and the value of our
products. During the past year, AUDIO magazine praised the CR7 as "a fine
choice for a budget high-performance stereo system." VIDEO said that "Boston
Acoustics' CR Series sounds great--and doesn't break the bank doing it."
STEREOPHILE GUIDE TO HOME THEATER called the VR500 "remarkable."
OUR NEW BUILDING
In February, we moved our entire company--all manufacturing, warehouse and
administrative offices--into a new building in Peabody, Massachusetts. We
paid for the new building--the first designed for us--out of earnings, so we
are still debt-free. With 150,000 square feet of floor space and a large
high-bay area, we have more than twice the usable space we had before. Its
facilities include our new automated tweeter manufacturing line, the first of
its kind in the world.
[Photograph of interior of Company's new building]
IMPROVING OUR DISTRIBUTION NETWORK
Our international distribution network is a key factor in the continuing
growth of our sales overseas. In fiscal 1996, we strengthened our Latin
American organization and expanded our distribution channels in Asia and
Europe.
OUR FIRST ACQUISITION
During fiscal 1996, we agreed to purchase Snell Acoustics, Inc. of Haverhill,
Massachusetts. The closing is scheduled to occur in late June of 1996.
Snell has an excellent reputation for quality, and its high-end speaker
systems complement ours. It was the first company to introduce a THX speaker
system. Snell has its own distribution network, so we believe we can increase
our total volume without adding distribution.
MORE NEW PRODUCTS ON THE WAY
To help fuel sales in the coming year, we have a number of new products for
home and auto applications in the pipeline--a new Micro Reference Series to
replace the SubSat Series, 3-way THX Tower and Center Channel speakers for
the finest home theater and music systems, and new Boston Rally-TM- subwoofer
enclosures for cars and trucks.
LOOKING AHEAD
We will celebrate our tenth year as a public company in fiscal 1997. While we
are a well established, mature organization in many ways, we are still
growing and developing at a healthy rate.
We are looking forward to another excellent year.
Sincerely,
/s/ Francis L. Reed /s/ Andrew G. Kotsatos
Francis L. Reed Andrew G. Kotsatos
CHAIRMAN AND PRESIDENT
CHIEF EXECUTIVE OFFICER
3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
RESULTS OF OPERATIONS
The following table sets forth the results of operations for the years ended
March 30, 1996, March 25, 1995, and March 26, 1994 expressed as percentages
of net sales.
For the Year Ended
March 30, March 25, March 26,
1996 1995 1994
(53 wks)
- --------------------------------------------------------------------
Net Sales 100.0% 100.0% 100.0%
Cost of goods sold 57.1 56.1 57.3
- --------------------------------------------------------------------
Gross profit 42.9 43.9 42.7
Selling and marketing
expenses 12.6 12.4 12.8
General & administrative
expenses 5.5 6.0 5.7
Engineering & development
expenses 5.4 5.0 5.0
- --------------------------------------------------------------------
23.5 23.4 23.5
- --------------------------------------------------------------------
Income from operations 19.4 20.5 19.2
Interest income 1.7 1.9 2.0
- --------------------------------------------------------------------
Income before provision for
income taxes 21.1 22.4 21.2
Provision for income taxes 6.8 7.9 7.6
- --------------------------------------------------------------------
Net income 14.3% 14.5% 13.6%
- --------------------------------------------------------------------
- --------------------------------------------------------------------
FISCAL 1996 COMPARED WITH FISCAL 1995
Net sales increased 13% from approximately $41.0 million to $46.3 million.
Because the Company works on a 5-4-4 week quarter, there is an extra week
every five years. The third quarter fiscal 1996 represents 14 weeks of sales
and earnings compared to 13 weeks during the third quarter fiscal 1995.
Fiscal 1996, therefore, represents 53 weeks of sales and earnings compared to
52 weeks during fiscal 1995.
New product introductions throughout fiscal 1996 contributed to the continued
growth in sales, both domestically and to international distributors. The
Company augmented its automotive speaker categories by completing the
introduction of the Boston Rally Coaxial Series during the first quarter. The
RX57, RX67, RX87 and RX97 have suggested retail prices ranging from $140 to
$200 per pair. In addition, during the second fiscal quarter the Rally RS
subwoofer category of products was introduced. The Rally 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 also expanded its home category of loudspeaker models. The CR2
video-shielded center channel speaker with a suggested retail price of $200
and the CR400 powered subwoofer with a suggested retail price of $400 were
added to the CR Series of products. The VR2000, a powered subwoofer, the
THX-certified VRS Pro diffuse-field surround speakers and the VR10 center
channel with suggested retail prices of $1200, $500 and $300, respectively,
were added to the highly acclaimed Lynnfield VR Series of products. These
products make excellent components of a first class home theater speaker
system. Our Designer Series was enhanced with the introduction of the 351,
361, and 381 models featuring improved sound and weather-proofing qualities.
The Company's gross margin decreased from 43.9% in fiscal 1995 to 42.9%
primarily due to a shift in sales mix to products with lower margins, certain
raw material price increases absorbed by the Company, and increased expenses
relating to new production equipment and tooling. In addition, the Company
had increased costs relating to temporary additional offsite warehouse space
during the fiscal year, as well as an increased allocation of costs relating
to the relocation of the Company's office and manufacturing facilities.
Total operating expenses remained relatively stable as a percentage of net
sales in fiscal 1996 despite an increase in absolute dollars and increases
associated with the allocation of facility relocation costs. Selling and
marketing expenses have increased slightly due primarily to increased
salaries and related payroll expenses along with certain advertising and
international sales related expenses. General and administrative expenses as
a percentage of net sales decreased slightly from 6.0% in fiscal 1995 to 5.5%
in fiscal 1996. Increased salary and related expenses, as well as costs
associated with the termination of the lease of the Company's former
manufacturing and office facilities were partially offset by non-recurring
legal costs expensed during fiscal 1995. Engineering and development expenses
have increased primarily due to increased salaries and payroll related
expenses, as well as materials and supplies relating to new product
development.
Interest income decreased slightly 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 35.3% in fiscal 1995
to 32.0%, 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 fiscal 1996 capital expenditures.
Net income increased 11%, from approximately $5.9 million to $6.6 million,
while earnings per share increased 10% from $1.38 to $1.52 per share.
FISCAL 1995 COMPARED WITH FISCAL 1994
Net sales increased 19% from approximately $34.5 million to $41.0 million.
Increases were reflected in all product categories, stimulated by new product
introductions in fiscal 1995 and the latter part of fiscal 1994, and
increased demand for the Company's products in both the domestic and
international markets.
During fiscal 1995 the Company introduced the Lynnfield VR Series of home
theater speaker systems. The VR20, VR30 and VR40 video-reference speaker
systems, with suggested retail prices of approximately $550, $800 and $1,400,
respectively, incorporate much of the high-performance technology of the higher-
end Lynnfield Series. The Lynnfield VR Series also includes the VR12 center
channel, the VRS dipole surround speaker and the VR500 powered subwoofer, with
suggested retail prices of $400, $350 and $600, respectively. The VR series
replaced the Company's Tower Series of floor-standing home
4
<PAGE>
speaker systems. During mid-December, the Company introduced the new Compact
Reference (CR) Series of speaker systems. The CR series, which replaced the
HD series, consists of one center channel model at $130 and four bookshelf
models ranging in price from $200 to $420 per pair. CR Series speakers
provide audiophile performance at moderate prices and are magnetically
shielded so they can be used in home theater and multimedia systems.
Increased automotive speaker sales were primarily due to the CX series of
coaxial speakers first introduced in March 1994, as well as the successful
ProSeries .4 and the Rally RC Series of component speakers, both introduced
during the third quarter of fiscal 1994.
The Company's gross margin increased from 42.7% in fiscal 1994 to 43.9%
primarily due to a shift in the sales mix to loudspeaker models with higher
margins, relatively stable raw material prices, and continued efforts to
control overhead expenses.
Income from operations increased as a percentage of net sales from 19.2% in
fiscal 1994 to 20.5% in fiscal 1995. Despite an increase in absolute dollars,
operating expenses remained relatively stable as a percentage of net sales.
Selling and marketing expenses decreased slightly as a percentage of net
sales but increased in absolute dollars due to increased advertising
expenditures, as well as salaries and related expenses associated with
additional personnel. General and administrative expenses increased during
the year due primarily to increased personnel and related expenses, as well
as expenses relating to enhancements made to the Company's in-house computer
systems and the search for new manufacturing and office facilities.
Engineering and development expenses have increased primarily due to
increased salaries and benefits relating to additional personnel, as well as
increased consulting fees and materials and supplies relating to new product
development.
Interest income remained relatively stable during fiscal 1995 due to funds
generated by operations and invested in tax-free municipal bonds and money
market instruments.
The Company's effective income tax rate decreased from 36.0% in fiscal 1994
to 35.3% in fiscal 1995 due primarily to the state effective tax rate
resulting from the favorable tax treatment afforded the Company's foreign
sales corporations and Massachusetts securities corporation.
Net income increased 27%, from approximately $4.7 million to $5.9 million,
while earnings per share increased 25% from $1.10 to $1.38 per share.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal years 1994, 1995, and 1996, the Company financed its growth
with cash generated by operations. As of March 30, 1996, the Company's
working capital was approximately $26,083,000. The Company's cash and cash
equivalents were approximately $4,702,000, short-term investments were
approximately $6,679,000, and long-term investments were approximately
$2,306,000. The Company has a $1,500,000 unsecured bank line of credit. The
Company has had no line of credit borrowings since December 1985.
During fiscal 1995 and 1996 the Company purchased three parcels of land for
approximately $1.4 million. This land was used to construct the Company's new
manufacturing and office facilities. Construction of these facilities began
in June 1995 with occupancy taking place in February 1996. Approximately $6.8
million of cash and investments were used to construct these facilities. As a
result of the new facility construction, the Company expects to realize
certain cost savings, primarily the difference between rent and depreciation,
in future fiscal periods.
On March 28, 1996 the Company signed a letter of intent to acquire Snell
Acoustics, Inc. The closing of the purchase is currently scheduled to occur
in June 1996. Snell Acoustics, Inc. manufactures home entertainment
loudspeaker systems.
On May 17, 1996, the Company announced that its Board of Directors approved a
stock repurchase program under which the Company may repurchase up to 300,000
of its outstanding shares of common stock (4,408,701 shares at May 17, 1996)
for general corporate purposes. The Company may repurchase the stock in open
market transactions, from time to time, depending on the price of its stock.
The funds for the repurchase program will come from internally generated cash
and available working capital. As of June 14, 1996, the Company has
repurchased 44,400 shares under this program at a cost of approximately
$934,000.
The Company believes that its resources are adequate to meet its requirements
for working capital and capital expenditures through fiscal 1997.
CAUTIONARY STATEMENTS
The Private Securities Litigation Reform Act of 1995 contains certain safe
harbors regarding forward-looking statements. From time to time, information
provided by the Company or statements made by its directors, officers, or
employees may contain "forward-looking" information which involve risk and
uncertainties. Any statements in this report that are not statements of
historical fact are forward-looking statements (including, but not limited
to, statements concerning the characteristics and growth of the Company's
market and customers, the Company's objectives and plans for future
operations, possible acquisitions, and the Company's expected liquidity and
capital resources). Such forward-looking statements are based on a number of
assumptions and involve a number of risks and uncertainties, and accordingly,
actual results could differ materially. Factors that may cause such
differences include, but are not limited to: the continued and future
acceptance of the Company's products, the rate of growth in the audio
industry; the presence of competitors with greater technical marketing and
financial resources; the Company's ability to promptly and effectively
respond to technological change to meet evolving consumer demands; capacity
and supply constraints or difficulties; and the Company's ability to
successfully integrate new operations. For a further discussion of these and
other significant factors to consider in connection with forward-looking
statements concerning the Company, reference is made to Exhibit 99 of the
Company's Annual Report on Form 10-K for fiscal year March 30, 1996.
5
<PAGE>
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF INCOME
ASSETS MARCH 30, 1996 March 25, 1995
- ------------------------------------------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $ 4,702,299 $ 3,570,790
Short-term investments 6,678,735 8,132,145
Accounts receivable, net of reserve of
approximately $307,000 and $207,000,
respectively 8,401,038 7,759,876
Inventories 8,458,593 8,726,944
Deferred income taxes 730,000 585,000
Prepaid expenses 343,066 474,092
- ------------------------------------------------------------------------------
Total current assets 29,313,731 29,248,847
- ------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, AT COST:
Land 1,433,365 1,164,800
Building 6,762,323 --
Machinery and equipment 6,344,220 4,740,328
Office equipment and furniture 1,448,950 1,392,176
Leasehold improvements -- 440,413
Motor vehicles 373,177 345,454
- ------------------------------------------------------------------------------
16,362,035 8,083,171
Less--Accumulated depreciation and
amortization 5,665,178 5,252,728
- ------------------------------------------------------------------------------
10,696,857 2,830,443
OTHER ASSETS:
Long-term investments 2,305,992 5,308,601
Other assets 807,012 991,129
- ------------------------------------------------------------------------------
Total other assets 3,113,004 6,299,730
- ------------------------------------------------------------------------------
$43,123,592 $38,379,020
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,167,933 $ 876,031
Accrued payroll and payroll-related expenses 1,078,186 941,319
Dividends payable 551,088 540,550
Other accrued expenses 350,031 325,594
Accrued income taxes 83,617 641,558
- ------------------------------------------------------------------------------
Total current liabilities 3,230,855 3,325,052
- ------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock, $.01 Par value--
authorized -- 6,000,000 shares
issued -- 4,602,621 shares at March 30, 1996
and 4,518,324 shares at march 25, 1995 46,026 45,183
Additional paid-in capital 4,966,918 3,739,101
Retained earnings 34,963,583 31,353,474
- ------------------------------------------------------------------------------
39,976,527 35,137,758
Less--Treasury stock, 193,920 shares, at
cost 83,790 83,790
- ------------------------------------------------------------------------------
Total shareholders' equity 39,892,737 35,053,968
- ------------------------------------------------------------------------------
$43,123,592 $38,379,020
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
6
<PAGE>
For the Years Ended
-------------------------------------------------
MARCH 30, 1996 March 25, 1995 March 26, 1994
- -------------------------------------------------------------------------------
NET SALES $46,324,791 $41,045,703 $34,488,132
COST OF GOODS SOLD 26,468,207 23,015,685 19,775,049
- -------------------------------------------------------------------------------
Gross profit 19,856,584 18,030,018 14,713,083
- -------------------------------------------------------------------------------
SELLING AND MARKETING EXPENSES 5,833,300 5,080,559 4,397,594
GENERAL AND ADMINISTRATIVE
EXPENSES 2,552,389 2,475,894 1,947,101
ENGINEERING AND DEVELOPMENT
EXPENSES 2,496,523 2,046,087 1,733,980
- -------------------------------------------------------------------------------
Total expenses 10,882,212 9,602,540 8,078,675
- -------------------------------------------------------------------------------
Income from operations 8,974,372 8,427,478 6,634,408
INTEREST INCOME 777,204 763,944 681,446
- -------------------------------------------------------------------------------
Income before provision
for income taxes 9,751,576 9,191,422 7,315,854
PROVISION FOR INCOME TAXES 3,121,000 3,242,000 2,634,000
- -------------------------------------------------------------------------------
Net income $6,630,576 $5,949,422 $4,681,854
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE $1.52 $1.38 $1.10
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 4,353,032 4,299,196 4,249,652
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
DIVIDENDS PER SHARE $.50 $.425 $.40
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------------
Additional Total
Number of $.01 par paid-in Retained Treasury Shareholders'
Shares Value Capital Earnings Stock Equity
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 27, 1993 4,430,290 44,303 3,065,785 24,254,011 (83,790) 27,280,309
Exercise of stock options 51,334 513 365,220 -- -- 365,733
Dividends -- -- -- (1,702,661) -- (1,702,661)
Net income -- -- -- 4,681,854 -- 4,681,854
- ----------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 26, 1994 4,481,624 44,816 3,431,005 27,233,204 (83,790) 30,625,235
Exercise of stock options 36,700 367 308,096 -- -- 308,463
Dividends -- -- -- (1,829,152) -- (1,829,152)
Net income -- -- -- 5,949,422 -- 5,949,422
- ----------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 25, 1995 4,518,324 $45,183 $3,739,101 $31,353,474 (83,790) $35,053,968
Exercise of stock options 124,400 1,244 1,189,819 -- -- 1,191,063
Purchase and retirement of
treasury stock (40,103) (401) (60,818) (840,485) -- (901,704)
Income tax benefits of
stock options -- -- 98,816 -- -- 98,816
Dividends -- -- -- (2,179,982) -- (2,179,982)
Net income -- -- -- 6,630,576 -- 6,630,576
BALANCE, MARCH 30, 1996 4,602,621 $46,026 $4,966,918 $34,963,583 $(83,790) $39,892,737
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
7
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For the Years Ended
-------------------------------------------------
MARCH 30, 1996 March 25, 1995 March 26, 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $6,630,576 $5,949,422 $4,681,854
Adjustments to reconcile net
income to net cash provided
by operating activities--
Depreciation and amortization 1,195,993 899,681 803,900
Changes in assets and liabilities--
Accounts receivable (641,162) (1,191,431) (887,711)
Inventories 268,351 (2,754,323) 893,992
Deferred tax asset 18,000 (290,000) (68,000)
Prepaid expenses 131,026 (169,854) (56,481)
Accounts payable 291,902 196,722 7,499
Accrued expenses 161,304 341,924 13,298
Accrued income taxes (557,941) 400,400 98,303
- --------------------------------------------------------------------------------------
Net cash provided by operating
activities 7,498,049 3,382,541 5,486,654
- --------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (9,062,407) (2,302,217) (1,030,079)
Purchase of investments (4,193,876) (7,180,359) (7,597,195)
Proceeds from sale and maturity of
investments 8,649,895 6,138,712 4,236,745
Decrease (increase) in other assets 21,117 (159,029) (192,018)
- --------------------------------------------------------------------------------------
Net cash used in investing
activities (4,585,271) (3,502,893) (4,582,547)
- --------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options 1,191,063 308,463 365,733
Income tax benefit from stock options 98,816 -- --
Purchase and retirement of treasury
stock (901,704) -- --
Dividends paid (2,169,444) (1,716,472) (1,698,428)
- --------------------------------------------------------------------------------------
Net cash used in financing
activities (1,781,269) (1,408,009) (1,332,695)
- --------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,131,509 (1,528,361) (428,588)
- --------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 3,570,790 5,099,151 5,527,739
- --------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $4,702,299 $3,570,790 $5,099,151
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
ITEMS NOT AFFECTING CASH FLOWS:
Dividends payable $ 551,088 $ 540,550 $ 427,870
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for income taxes $3,562,125 $3,198,600 $2,714,091
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 30,1996
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Boston Acoustics, Inc. (the Company) engineers, manufactures and markets
home loudspeakers and automotive speakers. The Company's products are
principally marketed in the United States, Canada, Europe and Asia through
selected audio and audio-video specialty dealers and through distributors.
The accompanying consolidated financial statements reflect the operations
of the Company and its wholly owned subsidiaries. All significant
intercompany amounts have been eliminated in consolidation.
The accompanying consolidated financial statements reflect the application
of the following significant accounting policies.
A. REVENUE RECOGNITION
Revenue is recognized when products are shipped to customers.
B. CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments with remaining maturities of three
months or less at the time of acquisition to be cash equivalents.
C. SHORT-TERM AND LONG-TERM INVESTMENTS
The Company accounts for its investments in accordance with Statement of
Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Accordingly, at March 30, 1996,
the Company's
8
<PAGE>
investments are classified as held-to-maturity (recorded at amortized cost)
and as available-for-sale (recorded at fair market value).
D. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following:
March 30, 1996 March 25, 1995
- -----------------------------------------------------------------------
Raw materials and work-in-process $4,518,656 $5,288,966
- -----------------------------------------------------------------------
Finished goods 3,939,937 3,437,978
- -----------------------------------------------------------------------
$8,458,593 $8,726,944
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
Work-in-process and finished goods inventories consist of materials, labor
and manufacturing overhead.
E. DEPRECIATION AND AMORTIZATION
The Company provides for depreciation and amortization, using both
straight-line and accelerated methods, by charges to operations in amounts
estimated to allocate the cost of the assets over their estimated useful
lives as follows:
ASSET CLASSIFICATION ESTIMATED USEFUL LIFE
- -----------------------------------------------------------------------
Building 39 Years
Machinery and equipment 3-5 Years
Office equipment and furniture 5 Years
Motor vehicles 3 Years
F. WARRANTY COSTS
Warranty costs are recorded when incurred by the Company. During the three
years in the period ended March 30, 1996, warranty costs were not
significant, and future warranty costs are not expected to be significant.
G. INCOME TAXES
The Company provides for income taxes in accordance with SFAS No. 109,
ACCOUNTING FOR INCOME TAXES. SFAS No. 109 requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences
of temporary differences between the financial reporting and tax bases of
assets and liabilities.
H. NET INCOME PER COMMON SHARE
Net income per common share is computed using the weighted average number
of shares of common stock and common stock equivalents (stock options)
outstanding during each year when dilutive. Fully diluted earnings per share
have not been presented, as the amounts would not differ significantly from
primary earnings per share.
I. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The Company has no obligation for postretirement or postemployment benefits.
J. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
K. CONCENTRATION OF CREDIT RISK
SFAS No. 105, DISCLOSURE OF INFORMATION ABOUT FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK AND FINANCIAL INSTRUMENTS WITH CONCENTRATION OF CREDIT
RISK, requires disclosure of any significant off-balance-sheet and credit
risk concentrations. The Company has no significant off-balance-sheet
concentration of credit risk such as foreign exchange contracts, option
contracts or other foreign hedging arrangements. The Company maintains the
majority of cash balances with three financial institutions. The Company's
accounts receivable credit risk is not concentrated within any geographic
area and does not represent a significant credit risk to the Company. During
fiscal 1996, one customer represented 11% of the Company's net sales. No
single customer accounted for 10% or more of the Company's net sales for
fiscal 1995 and 1994.
L. FINANCIAL INSTRUMENTS
SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS,
requires disclosure about fair value of financial instruments. Financial
instruments consist of cash equivalents, marketable securities and accounts
receivable. The estimated fair value of these financial instruments
approximates their carrying value and, except for accounts receivable, is
based primarily on market quotes. The Company's cash equivalents and
marketable securities are generally obligations of the federal government or
investment-grade corporate or municipal issuers. The Company, by policy,
limits the amount of credit exposure to any one financial institution.
2. INVESTMENTS
The Company's portfolio of investments consists of marketable securities
classified as available-for-sale and held-to-maturity. Investments held at
March 30, 1996 and March 25, 1995 are presented below.
MARCH 30, 1996 March 25, 1995
-------------------------------------------------
AMORTIZED MARKET Amortized Market
COST VALUE Cost Value
- ------------------------------------------------------------------------------
Short-term investments:
Available-for-sale-
Money market and equity
securities $1,274,734 $1,274,734 $1,000,024 $1,000,024
Held-to-maturity-
U.S. Treasury Notes and
state and municipal
generalobligation and
revenue bonds 5,404,001 5,421,311 7,132,121 7,118,919
- -------------------------------------------------------------------------------
Total short-term
investments $6,678,735 $6,696,045 $8,132,145 $8,118,943
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Long-term investments
(one- to three-year
maturity):
Available-for-sale-
Mutual funds -- -- $1,477,175 $1,477,175
Held-to-maturity-
State and municipal
general obligation and
revenue bonds 2,305,992 2,311,928 3,831,426 3,835,944
- -------------------------------------------------------------------------------
Total long-term investments $2,305,992 $2,311,928 $5,308,601 $5,313,119
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
9
<PAGE>
Realized gains and losses on sales of marketable securities for each of
the three years in the period ended March 30, 1996 were not material to the
Company's results of operations.
3. INCOME TAXES
The components of deferred tax assets consist of temporary differences
between the financial reporting and tax bases of assets and liabilities. A
valuation allowance has not been provided, as the Company expects to realize
all deferred tax amounts.
The approximate tax effect of each temporary difference is as follows:
MARCH 30, 1996 March 25, 1995
- --------------------------------------------------------------------------
Current deferred tax assets-
Nondeductible accruals $262,000 $221,000
Receivable reserves 228,000 185,000
Inventory reserves 240,000 179,000
- --------------------------------------------------------------------------
730,000 585,000
Noncurrent deferred tax assets-
Depreciation 267,000 430,000
- --------------------------------------------------------------------------
Total deferred tax assets $997,000 $1,015,000
The noncurrent deferred income taxes are included in other assets in the
accompanying consolidated balance sheets.
The components of the provision for income taxes shown in the accompanying
consolidated statements of income consist of the following:
MARCH 30, March 25, March 26,
1996 1995 1994
- --------------------------------------------------------------------------
Current-
Federal $2,800,000 $2,796,000 $2,125,000
State 303,000 736,000 615,000
- --------------------------------------------------------------------------
3,103,000 3,532,000 2,740,000
- --------------------------------------------------------------------------
Deferred-
Federal 23,000 (231,000) (84,000)
State (5,000) (59,000) (22,000)
- --------------------------------------------------------------------------
18,000 (290,000) (106,000)
- --------------------------------------------------------------------------
Provision for
income taxes $3,121,000 $3,242,000 $2,634,000
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
The effective income tax rate varies from the amount computed using the
statutory U.S. income tax rate as follows:
MARCH 30, March 25, March 26,
1996 1995 1994
- --------------------------------------------------------------------------
Federal statutory rate 34.0% 34.0% 34.0%
Increase in taxes resulting
from state income taxes,
net of federal income tax
benefit 2.0 4.9 5.1
Municipal bond interest (1.7) (2.2) (2.4)
Foreign sales corporation (2.2) (1.7) (1.2)
Other (.1) .3 .5
- --------------------------------------------------------------------------
32.0% 35.3% 36.0%
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
4. EMPLOYEE STOCK OPTIONS
The Company maintains an incentive stock option plan (the Plan)
administered by the Board of Directors. Options are granted at not less than
the fair market value of the Company's common stock on the date of grant. At
March 30, 1996, the Company had 59,198 shares available for future grants
under the Plan. The Plan expires in October 1996. In February 1996, the Board
of Directors approved a new incentive stock option plan covering 200,000
shares subject to stockholder approval.
The following is a summary of stock option activity:
Number of
Options Price Range
- --------------------------------------------------------------------------
Outstanding at March 27, 1993 212,434 $6.50 - $9.90
Options exercised (51,334) 6.50 - 9.00
- --------------------------------------------------------------------------
Outstanding at March 26, 1994 161,100 8.125 - 9.90
Options granted 10,000 17.00
Options exercised (36,700) 8.125 - 9.00
- --------------------------------------------------------------------------
Outstanding at March 25, 1995 134,400 8.875 - 17.00
Options granted 62,000 18.50 - 19.50
Options exercised (124,400) 8.875 - 9.90
- --------------------------------------------------------------------------
Outstanding at March 30, 1996 72,000 $17.00 - $19.50
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Exercisable at March 30, 1996 3,322 $17.00
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
5. LINE OF CREDIT
The Company has a $1,500,000 unsecured line of credit with a bank
available for letters of credit, bankers' acceptances and direct advances.
Interest on letters of credit and bankers' acceptances is based on the
prevailing rate (1.5% at March 30, 1996). Direct advances accrue interest at
the bank's commercial base rate (8.25% at March 30, 1996). No amounts were
outstanding under the line of credit at March 30, 1996 and March 25, 1995.
6. EXPORT SALES
Export sales (primarily to Europe, Asia and Canada) accounted for
approximately 20% of net sales during fiscal 1996, and 22% during fiscal 1995
and 1994.
7. EMPLOYEE BENEFIT PLAN
On March 1, 1995, the Company established the Boston Acoustics, Inc.
401(k) Retirement Plan (the 401(k) Plan). The 401(k) Plan is a defined
contribution plan established under the provisions of Section 401(k) of the
Internal Revenue Code. The Company may make a matching contribution of 25% of
each participant's contribution, up to 5% of a participant's compensation for
the plan year. The Company contributed approximately $55,000 and $4,000 to
the 401(k) Plan for the year ended March 30, 1996 and March 25, 1995,
respectively.
8. SUBSEQUENT EVENT
On March 28, 1996 the Company signed a letter of intent to acquire Snell
Acoustics, Inc. Terms of the purchase are currently being negotiated. Snell
Acoustics manufactures home entertainment loudspeaker systems.
10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO BOSTON ACOUSTICS, INC.:
We have audited the accompanying consolidated balance sheets of Boston
Acoustics, Inc. (a Massachusetts corporation) and subsidiaries as of March
30, 1996 and March 25, 1995, and the related consolidated statements of
income, shareholders' equity and cash flows for each of the three years in
the period ended March 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Boston Acoustics, Inc.
and subsidiaries as of March 30, 1996 and March 25, 1995, and the results of
their operations and their cash flows for each of the three years in the
period ended March 30, 1996, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 10, 1996
FIVE YEAR SELECTED FINANCIAL DATA (Amounts In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net Sales $46,325 $41,046 $34,488 $32,603 $32,583
Net Income 6,631 5,949 4,682 4,772 4,933
Net Income Per Common Share 1.52 1.38 1.10 1.10 1.14
Weighted Average Number of
Common Shares Outstanding 4,353 4,299 4,250 4,333 4,319
Dividends Per Share $ .50 $ .425 $ .40 $ .30 $ .20
BALANCE SHEET DATA
Working Capital $ 26,083 $25,924 $22,723 $19,532 $20,248
Total Assets $43,124 38,379 32,899 29,430 25,651
Total Debt -- -- -- -- --
Shareholders' Equity 39,893 35,054 30,625 27,280 23,589
</TABLE>
QUARTERLY FINANCIAL DATA (Amounts In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED MARCH 30, 1996
Net Sales $9,862 $11,648 $13,558 $11,257 $46,325
Gross Profit 4,373 5,048 5,807 4,629 19,857
Net Income 1,464 1,790 2,120 1,257 6,631
Net Income per Common Share .34 .41 .49 .28 1.52
- -----------------------------------------------------------------------------------------
Year Ended March 25, 1995
Net Sales $8,531 $9,507 $12,126 $10,882 $41,046
Gross Profit 3,795 4,240 5,385 4,610 18,030
Net Income 1,242 1,339 1,873 1,495 5,949
Net Income per Common Share .29 .31 .44 .34 1.38
</TABLE>
11
<PAGE>
SHAREHOLDER INFORMATION
Boston Acoustics, Inc. encourages investors to become informed about its
business. Additional information, copies of this report and the Company's
Form 10-K filed with the Securities and Exchange Commission may be obtained
by writing to Debra A. Ricker-Rosato, VICE PRESIDENT -- FINANCE.
DIVIDEND POLICY
In August of 1992 the Company authorized a 50% increase in its annual
dividend rate from $.20 to $.30 per share. In February 1993 the Company
authorized an increase to $.40 per share and a further increase to $.50 per
share was authorized in February 1995. Dividends are declared and paid
quarterly. Four quarterly dividends totaling $.50 were declared during fiscal
1996.
STOCK MARKET ACTIVITY
The common stock of Boston Acoustics, Inc. has been listed on the NASDAQ
National Market System under the symbol BOSA since its initial public
offering on December 12, 1986. The following table sets forth high and low
closing prices by quarter reported by NASDAQ:
Fiscal 1996 High Low
- -----------------------------------
First Quarter 19 1/4 17
Second Quarter 21 18 1/4
Third Quarter 24 3/4 19 3/4
Fourth Quarter 23 18 1/4
Fiscal 1995 High Low
- -----------------------------------
First Quarter 20 1/4 15 3/4
Second Quarter 16 1/4 13 3/4
Third Quarter 19 14 3/4
Fourth Quarter 20 1/4 17
There were 161 shareholders of record as of March 30, 1996. Shareholders
who beneficially own common stock held in nominee of street name are not
included in the number of shareholders of record.
BOARD OF DIRECTORS
FRANCIS L. REED
CHAIRMAN, CHIEF EXECUTIVE OFFICER
AND TREASURER
Boston Acoustics,Inc.
ANDREW G. KOTSATOS
PRESIDENT AND ASSISTANT CLERK
Boston Acoustics, Inc.
FRED E. FAULKNER, JR.
VICE PRESIDENT OF ENGINEERING
Millipore Products Division
Millipore Corporation
JOHN G. MARKOS
PRESIDENT
Yell-O-Glow Corporation
LISA M. REED
EXECUTIVE OFFICERS
FRANCIS L. REED
CHAIRMAN, CHIEF EXECUTIVE OFFICER
AND TREASURER
ANDREW G. KOTSATOS
PRESIDENT AND ASSISTANT CLERK
ROBERT A. CLARK
VICE PRESIDENT -- MANUFACTURING
IRA S. FRIEDMAN
VICE PRESIDENT -- MARKETING
MOSES A. GABBAY
VICE PRESIDENT -- ENGINEERING
PAUL F. REED
VICE PRESIDENT -- ADMINISTRATIVE SERVICES
DEBRA A. RICKER-ROSATO
VICE PRESIDENT -- FINANCE
ROBERT L. SPANER
VICE PRESIDENT -- SALES
CORPORATE INFORMATION
CORPORATE HEADQUARTERS
Boston Acoustics, Inc.
300 Jubilee Drive
Peabody, MA 01960
Telephone: (508) 538-5000
Fax: (508) 538-5091
AUDITORS
Arthur Andersen LLP
Boston, Massachusetts
LEGAL COUNSEL
Peabody & Arnold
Boston, Massachusetts
TRANSFER AGENT
The First National Bank of Boston
Boston, Massachusetts
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
------------------------------
NAME JURISDICTION
---- ------------
Boston Acoustics Export Sales Corp. U.S. Virgin Islands
Boston Acoustics Securities Corp. Massachusetts
BA Acquisition Corp. Massachusetts
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated May 10, 1996, by reference in this Annual Report on Form
10-K into the Company's previously filed Registration Statements File, No.'s
33-18793 and 33-36630.
ARTHUR ANDERSEN LLP
Boston Massachusetts
June 24, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS IN ITS ANNUAL REPORT TO SHAREHOLDERS FOR FISCAL
YEAR ENDED MARCH 30, 1996, WHICH ARE INCORPORATED BY REFERENCE INTO THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR SUCH FISCAL YEAR, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000805268
<NAME> BOSTON ACOUSTICS, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-END> MAR-30-1996
<CASH> 4702299
<SECURITIES> 6678735
<RECEIVABLES> 8401038
<ALLOWANCES> 307000
<INVENTORY> 8458593
<CURRENT-ASSETS> 29313731
<PP&E> 16362035
<DEPRECIATION> 5665178
<TOTAL-ASSETS> 43123592
<CURRENT-LIABILITIES> 3230855
<BONDS> 0
0
0
<COMMON> 46026
<OTHER-SE> 39930501
<TOTAL-LIABILITY-AND-EQUITY> 43123592
<SALES> 46324791
<TOTAL-REVENUES> 46324791
<CGS> 26468207
<TOTAL-COSTS> 10882212
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9751576
<INCOME-TAX> 3121000
<INCOME-CONTINUING> 6630576
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6630576
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99
"SAFE HARBOR" STATEMENT UNDER PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
Forward-looking statements made by or on behalf of the Company represent
the Company's reasonable judgement on the future and are subject to risks and
uncertainties. Actual results may differ materially from those projected in
the forward-looking statements. Such risks and uncertainties include, among
others:
DISCRETIONARY CONSUMER SPENDING; SEASONALITY. Purchases of home
entertainment and automotive audio products are discretionary for consumers.
The success of the Company is influenced by a number of economic factors
affecting disposable consumer income, such as employment levels, business
conditions, interest rates and taxation rates. Adverse changes in these
economic factors, among others, may restrict consumer spending, thereby
negatively affecting the Company's sales and profitability.
The Company's business is highly seasonal due to consumer spending
patterns which tend to result in significantly stronger home speaker sales in
the period of October through March and automotive speaker sales in the
period of April through October. It is unlikely that this pattern will
change significantly in the future. Although the Company believes that the
seasonality of its business is primarily the result of the timing of consumer
demand for its products, fluctuations in operating results can also result
from other factors affecting the Company and its competitors, including new
product developments or introductions, availability of components for resale,
competitive pricing pressures, changes in product mix and pricing and product
reviews and other media coverage. Due to the seasonality of its business,
the Company's results for interim periods are not necessarily indicative of
its results for the year.
HIGHLY COMPETITIVE INDUSTRY. The market for home and automotive speaker
systems is served by many companies, both foreign and domestic, and is
fragmented and highly competitive. Some of these competitors have
significantly greater financial, marketing, manufacturing and technological
resources than the Company and may offer lower product prices on competing
products.
Competition in the design and manufacture of new and innovative speakers
is intense. There can be no assurance that the Company will be able to
continue to compete successfully by introducing products or performance
features on a timely basis or by adding new features to its products while
limiting increases in prices. Furthermore, in recent years many retailers of
non-proprietary audio components have regularly lowered prices, and the
Company expects these pricing pressures to continue. These pricing pressures
may adversely affect the Company's operating results.
<PAGE>
DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a large
extent upon the efforts and abilities of its co-founders, Francis L. Reed,
Director, Chief Executive Officer and Treasurer, and Andrew G. Kotsatos,
President and Assistant Clerk. The loss of either of these key managers
could have a material adverse effect on the Company. The Company does not
have key man insurance policies on the lives of Messrs. Reed and Kotsatos.
In addition, the Company is dependent in part on its ability to hire and
retain qualified managerial personnel. Although the Company to date has been
able to hire and retain such personnel, there can be no assurance that the
Company will be successful in recruiting and retaining such personnel in the
future. There are no employment agreements between the Company and any of
its key employees.
MANAGEMENT OF ACQUISITION OF SNELL ACOUSTICS. The Company has agreed in
principle to purchase the business of Snell Acoustics, Inc., a manufacturer
of home entertainment loudspeaker systems. The business of Snell Acoustics
has recently been operating at a loss. There can be no assurance that the
Company will be able to manage the business of Snell Acoustics profitably or
that its operation of the business of Snell Acoustics will not have a
detrimental effect on the consolidated operations of the Company.
CONTROL BY MANAGEMENT STOCKHOLDERS. The Company's officers, directors
and related persons own, of record and beneficially, 49.2% of the outstanding
shares of the Common Stock (not including shares issuable upon exercise of
outstanding options). As a result, such persons, if they act in concert, may
have the ability to control the Company and direct its affairs and business
and to determine the outcome of corporate actions requiring stockholder
approval. This control by existing stockholders may have the effect of
delaying or preventing a change in control of the Company and could result in
the denial to minority stockholders of a premium price for their stock in a
change in control.
