<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 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO 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 ORGANIZATION) IDENTIFICATION NO.)
300 JUBILEE DRIVE 01960
PEABODY, MASSACHUSETTS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(978) 538-5000
(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 3,310,964 shares of Common Stock issued and outstanding as of
February 3, 1998.
- ------------------------------------------------------------------------------
<PAGE>
Boston Acoustics, Inc.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Part I: Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited)-March 29, 1997
and December 27, 1997.................................. 4
Consolidated Statements of Income (Unaudited)-Three
months and Nine months ended December 28, 1996 and
December 27, 1997...................................... 6
Consolidated Statements of Cash Flows (Unaudited)-Nine
months ended December 28, 1996 and December 27, 1997... 7
Notes to Unaudited Consolidated Financial Statements...... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 10
Part II: Other Information
Items 1 through 6......................................... 13
Signatures................................................ 14
</TABLE>
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 29, 1997 DECEMBER 27, 1997
-------------- -----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents.............................. $4,937,232 $ 1,562,830
Short-term investments................................. 2,594,454 255,196
Accounts receivable, net of reserves of approximately
$411,000 and $477,000, respectively................... 9,328,881 15,489,514
Inventories............................................ 9,540,757 12,265,860
Deferred income taxes.................................. 791,000 791,000
Prepaid expenses and other current assets.............. 809,761 236,426
----------- -----------
Total current assets................................. 28,002,085 30,600,826
----------- -----------
Property and Equipment, at cost:
Land................................................... 1,433,365 1,433,365
Building............................................... 7,012,347 7,033,121
Machinery and equipment................................ 7,414,269 7,962,474
Office equipment and furniture......................... 1,597,499 1,794,950
Motor vehicles......................................... 373,177 264,651
----------- -----------
17,830,657 18,488,561
Less-accumulated depreciation and
amortization.......................................... 6,936,205 7,760,675
----------- -----------
10,894,452 10,727,886
----------- -----------
Other Assets:
Long-term investments.................................. 1,022,164 --
Other assets........................................... 2,311,411 1,892,838
----------- -----------
Total other assets.................................... 3,333,575 1,892,838
----------- -----------
$42,230,112 $43,221,550
----------- -----------
----------- -----------
</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 29, 1997 DECEMBER 27, 1997
-------------- -----------------
<S> <C> <C>
Current Liabilities:
Accounts payable.............................................................. $ 1,020,146 $ 2,715,482
Accrued payroll and payroll-related expenses.................................. 1,210,101 1,270,610
Dividend payable.............................................................. 523,279 413,871
Current maturity of line of credit............................................ -- 2,825,000
Other accrued expenses........................................................ 499,446 1,309,002
Accrued income taxes.......................................................... 68,135 263,774
------------ -----------
Total current liabilities.............................................. 3,321,107 8,797,739
------------ -----------
Line of credit (Note 4)....................................................... -- 13,175,000
Commitments
Shareholders' Equity:
Common stock, $.01 par value
Authorized--6,000,000 shares
Issued--4,602,954 and 4,620,885 shares at March 29, 1997 and
December 27, 1997, respectively........................................... 46,029 46,209
Additional paid-in capital.................................................... 4,973,409 5,741,249
Retained earnings............................................................. 38,322,082 43,806,270
------------ -----------
43,341,520 49,593,728
Less-Treasury stock, 416,720 and 1,309,921 shares at March 29, 1997 and
December 27, 1997, respectively, at cost.................................... 4,432,515 28,344,917
------------ -----------
Total shareholders' equity............................................. 38,909,005 21,248,811
------------ -----------
$42,230,112 $43,221,550
------------ -----------
------------ -----------
</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
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
DECEMBER 28, DECEMBER 27, DECEMBER 28, DECEMBER 27,
1996 1997 1996 1997
------------- ------------- ------------- -------------
Net sales................................... $14,778,732 $27,187,429 $38,029,777 $57,738,674
Cost of goods sold.......................... 8,320,461 16,727,826 21,769,652 34,611,336
---------- ----------- ----------- -----------
Gross profit.............................. 6,458,271 10,459,603 16,260,125 23,127,338
---------- ----------- ----------- -----------
Selling and marketing expenses.............. 2,078,761 2,267,937 5,438,066 6,016,009
General and administrative expenses......... 892,384 1,023,254 2,204,394 3,104,196
Engineering and development expenses........ 807,389 927,535 2,309,532 2,490,884
---------- ----------- ----------- -----------
Total expenses............................ 3,778,534 4,218,726 9,951,992 11,611,089
---------- ----------- ----------- -----------
Income from operations.................... 2,679,737 6,240,877 6,308,133 11,516,249
Interest income............................. 93,068 26,159 356,784 168,772
Interest expense............................ (10,084) (347,676) (21,629) (789,080)
---------- ----------- ----------- -----------
Income before provision for income taxes.. 2,762,721 5,919,360 6,643,288 10,895,941
Provision for income taxes.................. 968,000 2,307,000 2,326,000 4,173,000
---------- ----------- ----------- -----------
Net income................................ $1,794,721 $ 3,612,360 $ 4,317,288 $ 6,722,941
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Basic earnings per share.................... $ .42 $ 1.09 $ 1.00 $ 1.90
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Diluted earnings per share.................. $ .42 $ 1.05 $ 1.00 $ 1.85
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Weighted average shares outstanding
Basic..................................... 4,241,914 3,309,348 4,317,965 3,546,943
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted................................... 4,242,503 3,426,755 4,321,678 3,640,048
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Dividends per share......................... $ .125 $ .125 $ .375 $ .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
------------------------------------
<S> <C> <C>
DECEMBER 28, 1996 DECEMBER 27, 1997
----------------- -----------------
Cash flows from operating activities:
Net income............................................................... $ 4,317,288 $ 6,722,941
Adjustments to reconcile net income to net cash provided by operating
activities-Depreciation and amortization................................. 1,263,622 1,274,934
Compensation expense related to restricted stock and warrants............ -- 434,227
Changes in assets and liabilities, net of acquisition of Snell Acoustics in
Fiscal 1997
Accounts receivable...................................................... (2,322,165) (6,160,633)
Inventories.............................................................. (709,194) (2,725,103)
Prepaid expenses and other current assets................................ 82,284 573,335
Accounts payable......................................................... 214,244 1,695,336
Accrued payroll and other accrued expenses............................... (224,644) 870,065
Accrued income taxes..................................................... (76,143) 195,639
----------------- -----------------
Net cash provided by operating activities.............................. 2,545,292 2,880,741
----------------- -----------------
Cash flows from investing activities:
Acquisition of Snell Acoustics........................................... (2,615,675) --
Purchase of property and equipment, net.................................. (1,238,996) (657,904)
Purchase of held-to-maturity investments................................. (1,763,980) --
Purchase of available-for-sale investments............................... (250,000) --
Proceeds from sale of available-for-sale investments..................... 1,325,857 --
Proceeds from sale of held-to-maturity investments....................... 5,037,792 3,361,422
Increase in other assets................................................. (55,001) (31,892)
----------------- -----------------
Net cash provided by investing activities.............................. 439,997 2,671,626
----------------- -----------------
Cash flows from financing activities:
Dividends paid........................................................... (1,631,163) (1,348,162)
Purchase of treasury stock............................................... (4,348,725) (23,912,402)
Proceeds from line of credit............................................. -- 21,125,000
Payments on line of credit............................................... -- (5,125,000)
Proceeds from exercise of stock options.................................. -- 333,795
----------------- -----------------
Net cash used in financing activities.................................. (5,979,888) (8,926,769)
----------------- -----------------
Decrease in cash and cash equivalents...................................... (2,994,599) (3,374,402)
Cash and cash equivalents, beginning of period............................. 4,702,299 4,937,232
----------------- -----------------
Cash and cash equivalents, end of period................................... $ 1,707,700 $ 1,562,830
----------------- -----------------
----------------- -----------------
Supplemental Disclosure of NonCash Financing Activities:
Dividends payable........................................................ $ 523,238 $ 413,871
----------------- -----------------
----------------- -----------------
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes............................................... $ 2,378,320 $ 4,003,599
----------------- -----------------
----------------- -----------------
Cash paid for interest................................................... $ 21,629 $ 789,080
----------------- -----------------
----------------- -----------------
</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 27, 1997 are not necessarily indicative
of results to be expected for the full fiscal year. These financial
statements should be read in conjunction with the Company's Annual Report
included in its Form 10-K for fiscal year ended March 29, 1997.
(2) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following:
<TABLE>
<CAPTION>
MARCH 29, 1997 DECEMBER 27,1997
-------------- ----------------
<S> <C> <C>
Raw materials and work-in process.............................................. $ 5,889,305 $ 6,810,458
Finished goods................................................................. 3,651,452 5,455,402
----------- -----------
$ 9,540,757 $12,265,860
----------- -----------
----------- -----------
</TABLE>
Work-in-process and finished goods inventories consist of materials, labor
and manufacturing overhead.
(3) NET INCOME PER COMMON SHARE
On March 31, 1997, the Financial Accounting Standards Board issued SFAS
No. 128, Earnings per Share. SFAS No. 128 establishes standards for computing
and presenting earnings per share (EPS) and applies to entities with publicly
held common stock or potential common stock. During the three-month period
ending December 27, 1997 the Company adopted SFAS No. 128 and is now required
to report both basic and diluted earnings per share. Basic EPS is computed by
dividing net income by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution from
common stock equivalents (stock options and warrants). The Company has
restated earnings per share for the comparative periods for fiscal 1997 as
required by SFAS No. 128.
(4) REDEMPTION OF COMMON STOCK AND LINE OF CREDIT
On June 13, 1997, the Company repurchased an aggregate of 898,201 shares
of its common stock from the estates of its co-founder, Francis L. Reed, and
his wife Dorothea T. Reed. The shares were repurchased at $26 5/8 per share
or a total of approximately $23,915,000. Funds to complete the repurchase
were obtained from an unsecured $25 million revolving line of credit
agreement with a bank. At December 27, 1997 the Company's balance under this
line of credit was approximately $16 million.
8
<PAGE>
(5) STOCK OPTIONS
The following is a summary of stock option activity for the nine months
ended December 27, 1997:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF PRICE AVERAGE
OPTIONS RANGE PRICE
----------- ----------------- -----------
<S> <C> <C> <C>
Outstanding at March 29, 1997........................................... 158,667 $ 17.00--$19.50 $ 18.55
Options granted......................................................... 100,000 $ 22.00 $ 22.00
Options exercised....................................................... (17,931) $ 17.00-$19.50 $ 18.74
Options canceled........................................................ (2,000) $ 17.50-$19.50 $ 18.50
------- ----------------- ---------
Outstanding at December 27, 1997........................................ 238,736 $ 17.00--$22.00 $ 19.99
------- ----------------- ---------
------- ----------------- ---------
Exercisable at December 27, 1997........................................ 51,815 $ 18.50--$22.00 $ 20.74
------- ----------------- ---------
------- ----------------- ---------
</TABLE>
9
<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 28, 1996 and December 27, 1997 expressed
as percentages of net sales.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
DECEMBER 28, DECEMBER 27, DECEMBER 28, DECEMBER 27,
1996 1997 1996 1997
--------------- --------------- --------------- ---------------
Net sales............................. 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.................... 56.3 61.5 57.2 59.9
----- ----- ----- -----
Gross profit......................... 43.7 38.5 42.8 40.1
----- ----- ----- -----
----- ----- ----- -----
Selling and marketing expenses....... 14.1 8.3 14.3 10.4
General & administrative expenses..... 6.0 3.8 5.8 5.4
Engineering & development expenses.... 5.5 3.4 6.1 4.3
----- ----- ----- -----
25.6 15.5 26.2 20.1
----- ----- ----- -----
Income from operations............... 18.1 23.0 16.6 20.0
Interest income (expense), net........ 0.6 (1.2) 0.9 (1.1)
----- ----- ----- -----
Income before provision for income
taxes.............................. 18.7 21.8 17.5 18.9
Provision for income taxes............ 6.6 8.5 6.1 7.3
----- ----- ----- -----
Net income........................... 12.1% 13.3% 11.4% 11.6%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
Net sales increased 84 percent, from approximately $14,779,000 during the
third quarter of fiscal 1997 to approximately $27,187,000 during the third
quarter of fiscal 1998. For the nine months ended December 27, 1997 net sales
increased 52% from approximately $38,030,000 to approximately $57,739,000.
The overall sales increase was primarily due to the OEM sales of our
MicroMedia-TM- and MediaTheater-TM- speaker systems to Gateway 2000, Inc.
Continued sales growth in our international business also contributed to the
overall sales increase. During the quarter, the Company completed the rollout
of the new top-of-the-line VR Tower speaker line in the U.S. The VR950, VR960
and VR970 are floorstanding loudspeakers incorporating technology from our
previous VR Series with added features like the powered subwoofers found in
the VR960 and VR970 models. Suggested retail prices are $700, $1,000, and
$1,600 per pair, respectively.
10
<PAGE>
The Company's gross margin for the three-month and nine-month period
ended December 27, 1997 increased in absolute dollars but decreased as a
percentage of net sales due primarily to a shift in the sales mix to
loudspeaker models with slightly lower margins, particularly OEM sales of our
multimedia speaker systems.
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 27, 1997. Selling and marketing expenses have increased in
absolute dollars primarily due to increased salaries and benefits relating to
additional personnel. General and administrative expenses have increased in
absolute dollars for both the three-month and nine-month periods due
primarily to costs associated with the operating results of the Snell
Acoustics subsidiary. Engineering and development expenses have increased in
absolute dollars for both the three-month and nine-month periods primarily
due to increased salaries and benefits relating to additional personnel, as
well as increased expenses relating to new product development.
Interest income of a year ago was replaced by net interest expense during
the three-month and nine-month periods ended December 27, 1997 primarily due
to the utilization of working capital and borrowings under the Company's line
of credit in conjunction with the common stock repurchase in June 1997.
The Company's effective income tax rate increased from 35% for both the
three-month and nine-month periods ended December 28, 1996 to 39% and 38% for
the three-month period and nine-month period ended December 27, 1997,
respectively. The increase is primarily due to (1) the Company being subject
to a higher tax rate (35%), (2) a decrease in tax-free instruments held by
the Company and (3) a smaller proportion of the Company's income being
derived outside the U.S. thereby reducing the tax benefits associated with
the Company's foreign sales corporation.
Net income for the third quarter increased 101%, from approximately
$1,795,000 in fiscal 1997 to approximately $3,612,000 in fiscal 1998 while
diluted earnings per share increased 150% from $.42 to $1.05 per share. Net
income for the nine-month period ended December 27, 1997 increased 56% from
approximately $4,317,000 in fiscal 1997 to approximately $6,723,000 in fiscal
1998, while diluted earnings per share for the nine-month period increased
85% from $1.00 per share to $1.85 per share. The increase in net income for
the three and nine-month periods ended December 27, 1997 is primarily the
result of the increased sales growth, which was offset by the decrease in
interest income and the operating loss by the Snell subsidiary included in
the consolidated results of operations.
The Company's financial results for the three-month and nine-month
periods ending December 27, 1997 include significant OEM sales of Multimedia
speaker systems to Gateway 2000, Inc. These sales are pursuant to various
contracts that currently run through June 1999. Since these contracts do not
contain schedules with which Gateway must comply in placing orders, orders by
Gateway may fluctuate significantly from quarter to quarter over the terms of
the contracts. Assuming Gateway places orders in the quantities required
under the terms of the contracts by June 1999, a substantial portion of the
Company's revenues for the current fiscal year and fiscal year 1999 is
expected to be derived from its contracts with Gateway.
LIQUIDITY AND CAPITAL RESOURCES
As of December 27, 1997 the Company's working capital was approximately
$21,803,000. The Company's cash and cash equivalents were approximately
$1,563,000, and short-term investments were approximately $255,000. The
Company's cash and cash equivalents at December 27, 1997 decreased by
approximately $3,374,000 from March 29, 1997 primarily as a result of the
repurchase of common stock during June 1997 and the increase in inventory and
accounts receivable relating to the Company's OEM business. The Company has
two lines of credit with two banking institutions totaling $26,500,000. At
December 27, 1997 the Company had borrowings totaling $16,000,000 under one
line of credit.
11
<PAGE>
The Company believes that its resources are adequate to meet its
requirements for working capital and capital expenditures through the next
twelve months.
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.
12
<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
Exhibit 10.A.#--Letter of Agreement dated December 22, 1997 by and
between Gateway 2000, Inc. and Boston Acoustics, Inc.
Exhibit 27.--Financial Data Schedule
b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
December 27, 1997.
- --------------------
# Indicates that portions of the exhibit have been omitted pursuant to a
request for confidential treatment.
13
<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 3, 1998
By: s/Andrew G. Kotsatos
---------------------
Andrew G. Kotsatos
Director, Chief Executive Officer
and Treasurer
Date: February 3, 1998
By: s/Fred E.Faulkner, Jr.
----------------------
Fred E.Faulkner, Jr.
President and Chief
Operating Officer
14
<PAGE>
Exhibit 10.A
* = THE MATERIAL HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND SUCH MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
GATEWAY 2000
610 Gateway Drive
P.O. Box 2000
North Sioux City, SD 57049-2000
Phone: 605-232-2000
Toll Free: 800-846-2000
Fax: 605-232-2023
December 22nd, 1997
Bob Spaner
Boston Acoustics
300 Jubilee Dr.
Peabody, MA 01960
Dear Mr. Spaner:
This Letter of Agreement ("LOA") will confirm the understanding and intent of
Boston Acoustics, Inc. ("BA") and Gateway 2000, Inc., and its subsidiaries
and affiliates ("Gateway"), to enter into an Agreement for the provision of
services and products by BA to Gateway worldwide. The Agreement will be
established under terms and conditions to be set forth in a signed definitive
written agreement dated March 17th, 1997.
Gateway hereby agrees to commit to purchase, worldwide, the following number
of systems during the timeframes as set forth below:
* for the life of the product - 14-18 months
Up to * in * costs
This commitment is in no way inclusive of the number of systems Gateway may
purchase.
This commitment is conditional upon the following:
1. Receipt of * speakers for delivery to Gateway's customers, based
upon the * schedule, no later than May 1st, 1998. The parties
understand that Gateway expects to receive product for sale prior
to these dates.
2. The agreed upon cost by both parties for the:
* as follows:
December - all products shipped to GW2K*.
January cost - $*
February cost - $*
March cost - $*
April cost - $*
*:
$* US, Net *
3. Gateway's specification, support for Redbook audio, DVD, and all
testing (compatibility, regulatory, etc.) and product schedule
being met.
4. GW2K is now responsible for *.
<PAGE>
5. Acceptance and compliance with Definitive Agreement, once executed.
BA and Gateway acknowledge, that while this LOA sets forth their intentions,
this LOA does not contain all masters upon which agreement must be reached in
order to proceed.
All information exchanged to date and hereafter between the parties is
proprietary to the party submitting the information and shall be held in the
strictest confidence between the parties.
Please indicate your acceptance of and agreement to this Letter of Agreement
by signing below.
Sincerely,
Dave Russell
Director
ACCEPTED AND AGREED ACCEPTED AND AGREED
Boston Acoustics Gateway 2000, Inc.
By: /s/ Andrew G. Kotsatos By: /s/ Dave Russell
------------------------------- ------------------------------
Name: Andrew G. Kotsatos Name: Dave Russell
Title: CEO Title: Director
Date: 12/23/97 Date: 12/22/97
<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 10Q FOR THE
QUARTERLY PERIOD ENDED DECEMBER 27, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000805268
<NAME> BOSTON ACOUSTICS, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-28-1998
<PERIOD-END> DEC-27-1997
<CASH> 1562830
<SECURITIES> 255196
<RECEIVABLES> 15489514
<ALLOWANCES> 477000
<INVENTORY> 12265860
<CURRENT-ASSETS> 30600826
<PP&E> 18488561
<DEPRECIATION> 7760675
<TOTAL-ASSETS> 43221550
<CURRENT-LIABILITIES> 8797739
<BONDS> 13175000
0
0
<COMMON> 46209
<OTHER-SE> 49547519
<TOTAL-LIABILITY-AND-EQUITY> 43221550
<SALES> 57738674
<TOTAL-REVENUES> 57738674
<CGS> 34611336
<TOTAL-COSTS> 11611089
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 789080
<INCOME-PRETAX> 10895941
<INCOME-TAX> 4173000
<INCOME-CONTINUING> 6722941
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6722941
<EPS-PRIMARY> 1.90
<EPS-DILUTED> 1.85
</TABLE>
