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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 JUNE 24, 1995
OR
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NO. 33-9875
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BOSTON ACOUSTICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-2662473
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR IDENTIFICATION NO.)
ORGANIZATION)
70 BROADWAY
LYNNFIELD, MASSACHUSETTS 01940
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(617) 592-9000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
There were 4,326,704 shares of Common Stock issued and outstanding as of
August 4, 1995.
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Boston Acoustics, Inc.
Index
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Page
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Part I: Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited)-
March 25, 1995 and June 24, 1995 4
Consolidated Statements of Income (Unaudited)-
Three months ended June 25, 1994 and June 24, 1995 6
Consolidated Statements of Cash Flow (Unaudited)-
Three months ended June 25, 1994 and June 24, 1995 7
Notes to Unaudited Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Part II: Other Information
Items 1 through 6 11
Signatures 12
2
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
3
Boston Acoustics, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
Assets
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March 25, 1995 June 24, 1995
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Current Assets:
Cash and cash equivalents $ 3,570,790 $ 3,462,797
Short-term investments 8,132,145 8,620,420
Accounts receivable, net of allowance
for doubtful accounts of approximately
$207,000 and $233,000 respectively 7,759,876 7,816,179
Inventories 8,726,944 9,405,718
Deferred income taxes 585,000 585,000
Prepaid expenses 474,092 719,764
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Total current assets 29,248,847 30,609,878
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Property and Equipment, at cost:
Land 1,164,800 1,419,544
Machinery and equipment 4,740,328 4,833,852
Office equipment and furniture 1,392,176 1,445,140
Leasehold improvements 440,413 440,413
Motor vehicles 345,454 345,454
Construction in Progress --- 217,061
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8,083,171 8,701,464
Less-accumulated depreciation
and amortization 5,252,728 5,490,032
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2,830,443 3,211,432
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Other Assets:
Long-term investment securities, at cost 5,308,601 4,808,776
Other assets 991,129 991,055
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Total other assets 6,299,730 5,799,831
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$38,379,020 $39,621,141
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The accompanying notes are an integral part of these consolidated financial
statements.
4
Boston Acoustics, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
Liabilities and Shareholders' Equity
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March 25, 1995 June 24, 1995
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Current Liabilities:
Accounts payable $ 876,031 $ 1,024,432
Accrued payroll and payroll-
related expenses 941,319 905,304
Dividend payable 540,550 540,838
Other accrued expenses 325,594 412,598
Accrued income taxes 641,558 740,433
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Total current liabilities 3,325,052 3,623,605
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Commitments
Shareholders' Equity:
Common stock, $.01 par value
Authorized -- 6,000,000 shares
Issued -- 4,518,324 at
March 25, 1995 and 4,520,624
shares at June 24, 1995 45,183 45,206
Additional paid-in capital 3,739,101 3,759,491
Retained earnings 31,353,474 32,276,629
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35,137,758 36,081,326
Less-Treasury stock, 193,920 shares,
at cost 83,790 83,790
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Total shareholders' equity 35,053,968 35,997,536
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$38,379,020 $39,621,141
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The accompanying notes are an integral part of these consolidated financial
statements.
5
Boston Acoustics, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Three Months Ended
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June 25, 1994 June 24, 1995
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Net sales $ 8,531,296 $ 9,861,841
Cost of goods sold 4,736,013 5,488,406
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Gross profit 3,795,283 4,373,435
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Selling and marketing expenses 1,009,319 1,307,659
General and administrative expenses 564,541 541,270
Engineering and development expenses 469,125 578,094
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Total expenses 2,042,985 2,427,023
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Income from operations 1,752,298 1,946,412
Interest income 188,853 206,581
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Income before provision for
income taxes 1,941,151 2,152,993
Provision for income taxes 699,000 689,000
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Net income $ 1,242,151 $ 1,463,993
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Net income per common share $ .29 $ .34
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Weighted average number of common
shares outstanding 4,288,396 4,325,061
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Dividends per share $ .10 $ .125
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The accompanying notes are an integral part of these consolidated financial
statements.
6
Boston Acoustics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
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June 25, 1994 June 24, 1995
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Cash flows from operating activities:
Net income $ 1,242,151 $ 1,463,993
Adjustments to reconcile net income
to net cash provided by operating
activities-
Depreciation and amortization 201,076 237,304
Changes in assets and liabilities-
Accounts receivable 67,329 (56,303)
Inventories (364,885) (678,774)
Prepaid expenses (55,461) (245,672)
Accounts payable (111,806) 148,401
Accrued expenses (48,803) 50,989
Accrued income taxes 549,000 98,875
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Net cash provided by
operating activities 1,478,601 1,018,813
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Cash flows from investing activities:
Net additions to property and equipment (215,747) (618,293)
Decrease (increase) in investments (1,080,639) 11,550
Decrease (increase) in other assets (69,925) 74
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Net cash used in investing
activities (1,366,311) (606,669)
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Cash flows from financing activities:
Dividends paid (427,870) (540,550)
Exercise of stock options 16,051 20,413
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Net cash used in financing
activities (411,819) (520,137)
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Decrease in cash and cash equivalents (299,529) (107,993)
Cash and cash equivalents, beginning
of period 5,099,151 3,570,790
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Cash and cash equivalents, end of
period $ 4,799,622 $ 3,462,797
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Items not affecting cash flows:
Dividends payable $ 428,951 $ 540,838
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Supplemental Disclosure:
Cash paid for income taxes $ 150,000 $ 590,125
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The accompanying notes are an integral part of these consolidated financial
statements.
7
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-month period ended June 24,
1995 are not necessarily indicative of results to be expected for the full
fiscal year.
(2) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following:
March 25, 1995 June 24, 1995
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Raw materials and work-in process $ 5,288,966 $ 4,488,869
Finished goods 3,437,978 4,916,849
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$ 8,726,944 $ 9,405,718
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Work-in-process and finished goods inventories consist of materials,
labor and manufacturing overhead.
(3) Net Income Per Common Share
Net income per common share is computed using the weighted average number
of shares of common stock outstanding during each period. Common equivalent
shares (stock options) have not been considered in the calculation of earnings
per share as their effect would not be significant. Fully diluted earnings per
share have not been presented as the amounts would not differ significantly from
primary earnings per share.
8
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
period ended June 25, 1994 and June 24, 1995 expressed as percentages of net
sales.
Three Months Ended
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June 25, 1994 June 24, 1995
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Net sales 100.0% 100.0%
Cost of goods sold 55.5 55.7
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Gross profit 44.5 44.3
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Selling and marketing expenses 11.8 13.3
General & administrative expenses 6.6 5.5
Engineering & development expenses 5.5 5.8
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23.9 24.6
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Income from operations 20.6 19.7
Interest income 2.2 2.1
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Income before provision for
income taxes 22.8 21.8
Provision for income taxes 8.2 7.0
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Net income 14.6% 14.8%
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Net sales increased 16 percent, from approximately $8,531,000 during the first
quarter of fiscal 1995 to $9,862,000 during the first quarter of fiscal 1996.
During the quarter, the Company completed its introduction of the Boston Rally
- -TM- Coaxial Series of automotive products. The four models, the RX57, RX67,
RX87 and RX97, with suggested retail prices ranging from $140 to $200 per pair,
have been very well received. In addition, increases reflected in the home and
automotive categories of loudspeakers, both
9
domestically and to International distributors, contributed to the overall sales
increase during the three-month period ended June 24, 1995.
The Company's gross margin as a percentage of net sales remained relatively
stable during the three-month period ended June 24, 1995. Increases in labor
related expenses, as well as scrap and rework costs, were offset by increased
sales of loudspeaker models with higher margins.
Total operating expenses increased from 23.9% of net sales for the first quarter
of fiscal 1995 to 24.6% during the same quarter of fiscal 1996. Selling and
marketing expenses have increased due to increased advertising expenditures.
General and administrative expenses have decreased from 6.6% of net sales during
the first quarter of fiscal 1995 to 5.5% of net sales for the same quarter of
fiscal 1996. The decrease is due to non-recurring legal costs, primarily
attributed to costs expensed during the first quarter of fiscal 1995 and
associated with the Company's search for office and manufacturing space.
Engineering and development expenses have increased primarily due to increased
salaries and related expenses relating to additional personnel, as well as
materials and supplies relating to new product development.
Interest income remained relatively stable during the first quarter of fiscal
1996 due to funds generated by operations and invested in tax-free municipal
bonds and money market instruments.
The Company's effective tax rate decreased from 36% in fiscal 1995 to 32% in
fiscal 1996, primarily due to a lower state effective tax rate resulting from
the favorable tax treatment afforded the Company's foreign sales corporation and
Massachusetts securities corporation, as well as tax credits relating to capital
expenditures.
Net income for the quarter increased 18%, from approximately $1,242,000 in
fiscal 1995 to $1,464,000 in fiscal 1996. Earnings per share increased from
$.29 to $.34, a gain of 17%.
Liquidity and Capital Resources
During the first quarter of fiscal 1996, the Company financed its growth with
cash generated by operations. As of June 24, 1995 the Company's working capital
was approximately $26,986,000. The Company's cash and cash equivalents were
approximately $3,463,000, short-term investments were approximately $8,620,000,
and long-term investments were approximately $4,809,000. The Company also has a
$1,500,000 unsecured bank line of credit. The Company has had no borrowings
under any line of credit since December 1985.
During 1995, the Company purchased two parcels of land for approximately $1.2
million. In April 1995, the Company purchased a third parcel of land for
approximately $255,000. The Company will use this land to construct its new
manufacturing and office facility. Construction began in June 1995 and
occupancy should occur by the end of fiscal 1996. The Company intends to use
approximately $6 million of its available working capital to construct this
facility.
The Company believes that its resources are adequate to meet its requirements
for working capital and capital expenditures through fiscal 1996.
10
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
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None
Item 2. Changes in Securities
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None
Item 3. Defaults Upon Senior Securities
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None
Item 4. Submission of Matters to a Vote of Security Holders
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None
Item 5. Other Information
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None
Item 6. Exhibits and Reports on Form 8-K
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a) List of Exhibits
Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K
No reports were filed during the quarter ended June 24, 1995.
11
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.
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Registrant
Date: August 4, 1995 By: s/Francis L. Reed
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Francis L. Reed
Director, Chief Executive Officer
and Treasurer (Principal Financial
Officer)
Date: August 4, 1995 By: s/Andrew G. Kotsatos
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Andrew G. Kotsatos
Director, President and
Assistant Clerk
12
INDEX TO EXHIBIT
Exhibit 27 - Financial Data Schedule