-----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, Gvvvm/GRgDe34DewmMzC/CJo4ZeCO9jD/5SO0Awq2uoXqE0PS4YIIgt2OzLESZSX foX5Yp3WMF6fqiQzJYaAdA== 0000912057-96-013398.txt : 19960701 0000912057-96-013398.hdr.sgml : 19960701 ACCESSION NUMBER: 0000912057-96-013398 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960330 FILED AS OF DATE: 19960628 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOSTON ACOUSTICS INC CENTRAL INDEX KEY: 0000805268 STANDARD INDUSTRIAL CLASSIFICATION: HOUSEHOLD AUDIO & VIDEO EQUIPMENT [3651] IRS NUMBER: 042662473 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15193 FILM NUMBER: 96587883 BUSINESS ADDRESS: STREET 1: 70 BROADWAY CITY: LYNNFIELD STATE: MA ZIP: 01940 BUSINESS PHONE: 5085385000 MAIL ADDRESS: STREET 1: 70 BROADWAY CITY: LYNNFIELD STATE: MA ZIP: 01940 10-K 1 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- 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. - -------------------------------------------------------------------------------- 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) 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- 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 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. 2 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 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 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 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 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 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 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 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. 10 (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 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 __________ 12 BOSTON ACOUSTICS, INC. AND SUBSIDIARIES INDEX TO SCHEDULE Report of Independent Public Accountants on Schedule Schedule II - Valuation and Qualifying Accounts F-1 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 BOSTON ACOUSTICS, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS ---------------------------------------------------------- BALANCE, CHARGED TO BEGINNING OF COSTS AND BALANCE, YEAR EXPENSES DEDUCTIONS (1) END OF YEAR 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 ---------- ---------- ---------- ----------
(1) AMOUNTS DEEMED UNCOLLECTIBLE AND RECOVERIES OF PREVIOUSLY RESERVED AMOUNTS. F-3 EX-13 2 EXHIBIT 13 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.] 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 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 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 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 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 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
COMMON STOCK ------------------------ Additional Total Number of $.01 par paid-in Retained Treasury Shareholders' Shares Value Capital Earnings Stock Equity - ---------------------------------------------------------------------------------------------------------------- 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 - ---------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 7 CONSOLIDATED STATEMENTS OF CASH FLOW
For the Years Ended ------------------------------------------------- MARCH 30, 1996 March 25, 1995 March 26, 1994 - -------------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------
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 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 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 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)
1996 1995 1994 1993 1992 - ----------------------------------------------------------------------------------------- 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
QUARTERLY FINANCIAL DATA (Amounts In Thousands Except Per Share Data)
First Second Third Fourth Quarter Quarter Quarter Quarter Year - ----------------------------------------------------------------------------------------- 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
11 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 EX-21 3 EXHIBIT 21 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 EX-23.1 4 EXHIBIT 23.1 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 EX-27 5 EXHIBIT 27 - FINANCIAL DATA SCHEDULE
5 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. 0000805268 BOSTON ACOUSTICS, INC. YEAR MAR-30-1996 MAR-30-1996 4702299 6678735 8401038 307000 8458593 29313731 16362035 5665178 43123592 3230855 0 0 0 46026 39930501 43123592 46324791 46324791 26468207 10882212 0 0 0 9751576 3121000 6630576 0 0 0 6630576 1.52 0
EX-99 6 EXHIBIT 99 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. 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. -----END PRIVACY-ENHANCED MESSAGE-----