-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q0vMcZIy7X3y6En7cWiWbxiAiBi6BDCkVODWvTECqpdUn+KXgj42jx1mibB86IHs StW4IyOm7kk9KE1YCFhcDg== /in/edgar/work/20000808/0000912057-00-035237/0000912057-00-035237.txt : 20000921 0000912057-00-035237.hdr.sgml : 20000921 ACCESSION NUMBER: 0000912057-00-035237 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000624 FILED AS OF DATE: 20000808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOSTON ACOUSTICS INC CENTRAL INDEX KEY: 0000805268 STANDARD INDUSTRIAL CLASSIFICATION: [3651 ] IRS NUMBER: 042662473 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15193 FILM NUMBER: 688106 BUSINESS ADDRESS: STREET 1: 300 JUBILEE DRIVE STREET 2: P O BOX 6015 CITY: PEABODY STATE: MA ZIP: 01961-6015 BUSINESS PHONE: 5085385000 MAIL ADDRESS: STREET 1: 300 JUBILEE DRIVE STREET 2: P O BOX 6015 CITY: PEABODY STATE: MA ZIP: 01961-6015 10-Q 1 a10-q.txt 10-Q - -------------------------------------------------------------------------------- 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 JUNE 24, 2000 OR [] TRANSITION REPORT PURSUANT SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ COMMISSION FILE NO. 33-9875 ----------------- BOSTON ACOUSTICS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MASSACHUSETTS 04-2662473 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR IDENTIFICATION NO.) ORGANIZATION) 300 JUBILEE DRIVE PEABODY, MASSACHUSETTS 01960 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (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 4,908,245 shares of Common Stock issued and outstanding as of August 7, 2000. - -------------------------------------------------------------------------------- Boston Acoustics, Inc. INDEX
PAGE ----- Part I: Financial Information Item 1. Financial Statements Consolidated Balance Sheets (Unaudited)- March 25, 2000 and June 24, 2000 4 Consolidated Statements of Income (Unaudited)- Three months ended June 26, 1999 and June 24, 2000 6 Consolidated Statements of Cash Flows (Unaudited)- Three months ended June 26, 1999 and June 24, 2000 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
2 PART I: FINANCIAL INFORMATION Item 1: Financial Statements 3 Boston Acoustics, Inc. and Subsidiaries Consolidated Balance Sheets (Unaudited)
ASSETS MARCH 25, 2000 JUNE 24, 2000 -------------- ------------- Current Assets: Cash and cash equivalents $ 1,506,741 $ 1,632,826 Accounts receivable, net of reserve of approximately $345,000 and $335,000, respectively 12,632,632 11,599,958 Inventories 19,333,515 21,417,769 Deferred income taxes 1,545,000 1,545,000 Prepaid expenses and other current assets 1,151,536 1,111,145 ----------- ----------- Total current assets 36,169,424 37,306,698 ----------- ----------- Property and Equipment, at cost: Land 1,815,755 1,815,755 Building and improvements 7,925,701 8,697,769 Machinery and equipment 13,517,432 14,387,494 Office equipment and furniture 4,131,718 4,338,919 Motor vehicles 259,319 244,040 ----------- ----------- 27,649,925 29,483,977 Less-accumulated depreciation and amortization 12,035,891 12,797,086 ----------- ----------- 15,614,034 16,686,891 ----------- ----------- Other Assets 1,080,569 1,082,018 ----------- ----------- $52,864,027 $55,075,607 =========== ===========
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
MARCH 25, 2000 JUNE 24, 2000 -------------- -------------- Current Liabilities: Accounts payable $ 6,002,158 $ 7,043,815 Accrued payroll and payroll- related expenses 2,148,272 2,228,650 Dividends payable 417,201 417,201 Other accrued expenses 1,171,200 1,156,114 Accrued income taxes -- 691,134 Current maturity of line of credit 1,602,287 1,533,499 ----------- ----------- Total current liabilities 11,341,118 13,070,413 ----------- ----------- Line of credit, net of current portion 4,850,000 4,600,000 ----------- ----------- Shareholders' Equity: Common stock, $.01 par value - Authorized -- 8,000,000 shares Issued -- 5,080,764 shares 50,807 50,807 Additional paid-in capital 918,534 918,534 Retained earnings 38,131,912 38,864,197 ----------- ----------- 39,101,253 39,833,538 Less-Treasury stock, 172,500 shares, at cost 2,428,344 2,428,344 ----------- ----------- Total shareholders' equity 36,672,909 37,405,194 ----------- ----------- $52,864,027 $55,075,607 =========== ===========
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 ------------------ JUNE 26, 1999 JUNE 24, 2000 ------------ ------------ Net sales $ 21,845,332 $ 22,823,028 Cost of goods sold 14,805,224 15,558,859 ------------ ------------ Gross profit 7,040,108 7,264,169 ------------ ------------ Selling and marketing expenses 2,521,173 2,708,739 General and administrative expenses 1,099,823 1,254,393 Engineering and development expenses 1,400,131 1,375,650 ------------ ------------ Total operating expenses 5,021,127 5,338,782 ------------ ------------ Income from operations 2,018,981 1,925,387 Interest income 24,316 19,217 Interest expense (195,854) (105,120) ------------ ------------ Income before provision for income taxes 1,847,443 1,839,484 Provision for income taxes 708,000 690,000 ------------ ------------ Net income $ 1,139,443 $ 1,149,484 ============ ============ Net income per share Basic $ .23 $ .23 ============ ============ Diluted $ .21 $ .23 ============ ============ Weighted average common shares outstanding Basic 5,012,689 4,908,245 Diluted 5,348,744 4,914,654 Dividends per share $ .085 $ .085 ============ ============
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 ------------------ JUNE 26, 1999 JUNE 24, 2000 ------------- ------------- Cash flows from operating activities: Net income $ 1,139,443 $ 1,149,484 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization 747,409 762,200 Changes in assets and liabilities, net of acquisition-- Accounts receivable 702,459 1,032,674 Inventories 356,378 (2,084,254) Prepaid expenses and other current assets 80,713 40,391 Accounts payable 448,246 1,041,657 Accrued payroll and other accrued expenses (6,003) 65,292 Accrued income taxes (179,818) 691,134 ----------- ----------- Net cash provided by operating activities 3,288,827 2,698,578 ----------- ----------- Cash flows from investing activities: Purchases of property and equipment, net (1,263,159) (1,834,052) Increase in other assets (229,827) (2,452) ----------- ----------- Net cash used in investing activities (1,492,986) (1,836,504) ----------- ----------- Cash flows from financing activities: Dividends paid (425,968) (417,201) Repayments of line of credit (2,055,555) (318,788) Proceeds from exercise of stock options 126,667 -- ----------- ----------- Net cash used in financing activities (2,354,856) (735,989) ----------- ----------- Increase (decrease) in cash and cash equivalents (559,015) 126,085 Cash and cash equivalents, beginning of period 2,096,246 1,506,741 ----------- ----------- Cash and cash equivalents, end of period $ 1,537,231 $ 1,632,826 =========== =========== Supplemental Disclosure of NonCash Financing Activities: Dividends payable $ 426,843 $ 417,201 =========== =========== Supplemental Disclosure of Cash Flow Information: Cash paid for income taxes $ 880,500 $ -- =========== =========== Cash paid for interest $ 194,426 $ 111,887 =========== ===========
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, 2000 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 25, 2000. (2) Inventories Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following:
MARCH 25, 2000 JUNE 24, 2000 -------------- ------------- Raw materials and work-in process $10,547,363 $12,070,530 Finished goods 8,786,152 9,347,239 -------------- -------------- $19,333,515 $21,417,769 ============== ==============
Work-in-process and finished goods inventories consist of materials, labor and manufacturing overhead. (3) Net Income Per Common Share The Company follows the provisions of 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. 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). For the three-month period ended June 24, 2000, there were 510,140 shares that have been excluded from the weighted average number of common and dilutive potential shares outstanding as their effect would be anti-dilutive. For the three-month period ended June 26, 1999, there were 208,600 antidilutive shares that have been excluded for purposes of earnings per share. 8 A reconciliation of the number of shares used in the calculation of basic and diluted income per share, is as follows:
FOR THE THREE MONTHS ENDED JUNE 26, 1999 JUNE 24, 2000 Basic weighted average common shares outstanding 5,012,689 4,908,245 Dilutive effect of assumed exercise of stock options and warrant 336,055 6,409 --------- --------- Weighted average common shares outstanding assuming dilution 5,348,744 4,914,654 ========= =========
(4) Segment Reporting The Company has two reportable segments: 1) Core, and 2) Original Equipment Manufacturer (OEM) and Multimedia. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company does not allocate operating expenses between its two reportable segments. Accordingly, the Company's measure of profit for each reportable segment is based on gross profit.
OEM AND THREE MONTHS ENDED JUNE 24, 2000 CORE MULTIMEDIA TOTAL - -------------------------------- -------------- ------------ ----------- Net Sales $ 13,411,332 $ 9,411,696 $22,823,028 ============== ============ =========== Gross profit $ 4,825,776 $ 2,438,393 $ 7,264,169 ============== ============ ===========
OEM AND THREE MONTHS ENDED JUNE 26, 1999 CORE MULTIMEDIA TOTAL - -------------------------------- -------------- ------------ ----------- Net Sales $ 12,907,480 $ 8,937,852 $21,845,332 ============== ============ =========== Gross profit $ 5,184,637 $ 1,855,471 $ 7,040,108 ============== ============ ===========
9 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 26, 1999 and June 24, 2000 expressed as percentages of net sales.
THREE MONTHS ENDED ------------------ JUNE 26, 1999 JUNE 24, 2000 ------------- ------------- Net sales 100.0 % 100.0 % Cost of goods sold 67.8 68.2 ------- ------- Gross profit 32.2 31.8 ------- ------- Selling and marketing expenses 11.6 11.9 General & administrative expenses 5.0 5.5 Engineering & development expenses 6.4 6.0 ------- ------- 23.0 23.4 ------- ------- Income from operations 9.2 8.4 Interest income, net (.8) (.4) ------- ------- Income before provision for income taxes 8.4 8.0 Provision for income taxes 3.2 3.0 ------- ------- Net income 5.2 % 5.0 % ======= =======
Net sales increased approximately 5 percent, from $21,845,342 during the first quarter of Fiscal 2000 to $22,823,028 during the first quarter of Fiscal 2001. The overall sales increase during the three-month period ended June 24, 2000 was primarily due to increases in both the Core and Multimedia segments of our business. During the quarter the Company introduced the BA265, the Company's first entry-level speaker system for computers. The BA265 is a powered two-piece speaker system that offers performance similar to Boston's more expensive multimedia products but at an entry-level price and is currently available through our OEM customer, Gateway, Inc. ("Gateway"). Core sales for the three-month period ended June 24, 2000 were stimulated by the increasing sales of DVD players and the success of new products introduced during the last fiscal year which have been received very well, and as a result, the Company ended the quarter with $1.2 million in backorders. The Company's gross margin for the three-month period ended June 24, 2000 decreased as a percentage of net sales from 32.2% to 31.8% due primarily to increased manufacturing overhead expenses for the Company's core products compared to the same period a year ago, including higher personnel costs, scrap and rework, incoming air freight, overtime and temporary warehouse costs. The increase in the OEM and 10 Multimedia gross profit this year reflects the contribution of the Company's Multimedia retail sales versus high start-up expenses a year ago for new OEM products. Total operating expenses increased in absolute dollars while remaining relatively stable as a percentage of net sales during the three-month period ended June 24, 2000 as compared to the corresponding period a year ago. Selling and marketing expenses have increased primarily due to increased salaries and benefits relating to additional personnel and increased corporate advertising expenses compared to the same period a year ago. General and administrative expenses have also increased slightly due to increased salaries and benefits relating to additional personnel compared to the same three-month period a year ago. Engineering and development expenses have remained relatively stable in absolute dollars while decreasing as a percentage of net sales primarily due to lower consulting and outside service expenses during the period ended June 24, 2000. Net interest expense has decreased in absolute dollars during the three-month period ended June 24, 2000 primarily due to a reduction in the Company's line of credit borrowings from $6.25 million to $6.0 million. The Company's effective income tax rate decreased from 38.3% for the three-month period ended June 26, 1999 to 37.5% for the three-month period ended June 24, 2000 due to lower state income taxes. Net income for the three-month period ended June 24, 2000 increased slightly from approximately $1,139,000 to $1,149,000 while diluted earnings per share increased from $.21 to $.23 per diluted share. The increase was primarily the result of the modest sales increase, as compared to the same period a year ago. Liquidity and Capital Resources During the first three months of Fiscal 2001, the Company financed its growth with cash generated by operations. As of June 24, 2000 the Company's working capital was approximately $24,236,000, a decrease of $592,000 since the end of Fiscal 2000. The decrease in working capital was primarily due to the repayment made on the Company's line of credit borrowings, as well as increases in accounts payable relating to inventory purchases. The Company's cash and cash equivalents were approximately $1,633,000 at June 24, 2000, an increase of $126,000 since March 25, 2000. Current liabilities increased by approximately $1,729,000 due to increases in accounts payable relating to the timing of payments and increased accrued income taxes. The Company has two lines of credit with two banking institutions totaling $26,500,000. At June 24, 2000 the Company had borrowings totaling $6,000,000 under its $25 million revolving credit agreement. The Company believes that its current resources are adequate to meet its requirements for working capital and capital expenditures through Fiscal 2001. Significant Customers The Company's financial results for the three-month period ending June 24, 2000 include significant OEM sales of multimedia speaker systems to Gateway. The terms of these sales are governed by a Master Supply Agreement between Gateway and the Company dated July 19, 1999. This Master Supply Agreement with Gateway does not contain minimum or scheduled purchase requirements; therefore, purchase orders by Gateway may fluctuate significantly from quarter to quarter over the terms of the agreement. Based on information currently available from our OEM customer, the Company anticipates that our OEM sales should increase slightly during the fiscal year ending March 31, 2001. The loss of Gateway as a customer or any significant portion of orders from Gateway could have a material adverse affect on the Company's business, results of operations and financial condition. In addition, the Company also could be materially adversely affected by any substantial work stoppage or interruption of production at Gateway or if Gateway were to reduce or cease conducting operations. 11 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, and the Company's expected liquidity and capital resources and the Company's ability and the Company's suppliers' and customers' ability to replace, modify or upgrade computer programs in ways to adequately address the Year 2000 issue). 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. The words "believe," "expect," "anticipate," "intend" and "plan" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. 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 Form 8-K filed on July 18, 1996. 12 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 27. - Financial Data Schedule b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended June 24, 2000. 13 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: August 7, 2000 By: s/ANDREW G. KOTSATOS -------------------- Andrew G. Kotsatos Director, Chief Executive Officer and Treasurer Date: August 7, 2000 By: s/MOSES A. GABBAY ----------------- Moses A. Gabbay Director and Chief Operating Officer Date: August 7, 2000 By: s/DEBRA A. RICKER-ROSATO ------------------------ Debra A. Ricker-Rosato Vice President and Chief Accounting Officer 14 EX-27 2 ex-27.txt EXHIBIT 27
5 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 JUNE 24, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000805268 BOSTON ACOUSTICS, INC. 1,000 3-MOS MAR-31-2001 JUN-24-2000 1,632,826 0 11,599,958 335,000 21,417,769 37,306,698 29,483,977 12,797,086 55,075,607 13,070,413 4,600,000 0 0 50,807 39,782,731 55,075,607 22,823,028 22,823,028 15,558,859 5,338,782 0 0 85,903 1,839,484 690,000 1,149,484 0 0 0 1,149,484 .23 .23
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