-----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, QDhChnC7mjScobCS/eio1DY0ybgx6+Rii2ehslzZAlBtF6dVtFUxmeiRwwL/WUUl NWBg7ZAHRlONlkZY0l3/YA== 0001047469-98-025584.txt : 19980629 0001047469-98-025584.hdr.sgml : 19980629 ACCESSION NUMBER: 0001047469-98-025584 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19980328 FILED AS OF DATE: 19980626 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: SEC FILE NUMBER: 000-15193 FILM NUMBER: 98655500 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-K 1 FORM 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 for the fiscal year ended March 28, 1998 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) 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 $76,536,075 as of June 24, 1998. There were 3,318,264 shares of Common Stock issued and outstanding as of June 24, 1998. - -------------------------------------------------------------------------------- DOCUMENTS INCORPORATED BY REFERENCE (1) Registrant's Annual Report to Stockholders for the fiscal year ended March 28, 1998 (Items 5, 6, 7, 8 and 14 (a)(1)) (2) Proxy Statement for Registrant's Annual Meeting of Stockholders to be held on August 11, 1998 (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 13 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 $35.00, the price at which the Common Stock was last sold on June 24, 1998 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, in after-market automotive audio systems and in multimedia computer environments. 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. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- International Operations" which is included in the Company's 1998 Annual Report which is filed as Exhibit 13 hereto. The Company was organized as a Massachusetts corporation in 1979 by Andrew G. Kotsatos and former CEO, Francis L. Reed, who passed away in November 1996. 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 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, five floor-standing systems currently priced from $700 to $1600 per pair, two three-piece subwoofer/satellite systems currently priced at $400 and $800 per system, and three powered subwoofers priced at $400, $600 and $1200. Additional products for the home theater market include five different center-channel speakers currently ranging in price from $130 to $600 each. The Company also produces magnetically shielded versions of most of its models and produces three indoor/outdoor speaker systems (Voyager-REGISTERED TRADEMARK-, Runabout-REGISTERED TRADEMARK- I, and Runabout 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 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. The Automotive Series consists of 39 models of automotive speakers with prices currently ranging from $60 to $700 per pair. The automotive line includes high-quality full-range replacement speakers, sophisticated component systems, and subwoofers. The component systems permit flexible speaker 1 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 RX Coaxial Series, the Boston Rally RS Subwoofers and Band-Pass enclosure systems, the Boston Rally RM Series, and the premium performance ProSeries Speaker Systems. The Personal Desktop Audio-TM- Series currently consists of three high performance powered subwoofer/satellite speaker systems for computing environments priced from $99.95 to $299.95 per system. New Products During fiscal 1998 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 1998 the Company introduced three models in the VR-REGISTERED TRADEMARK- tower series. Its features include innovative built-in powered subwoofers, and proprietary features and technologies such as the Lynnfield VR tweeter, Magnaguard-REGISTERED TRADEMARK- magnetic shielding, DCD-TM- (Deep Channel Design) bass and Active Bass Contour-TM-. The suggested retail price for the three models range from $700 to $1,600 a pair. During fiscal 1998 the Company introduced the SoundBar-TM- Cinema System. With digital Dolby-REGISTERED TRADEMARK- Pro Logic-REGISTERED TRADEMARK- decoding and Qsound-REGISTERED TRADEMARK- 3D image enhancement technology, it is the first high-performance home theater sound system to eliminate the complexity of conventional systems. The Soundbar module sits on top of the TV, housing the left, center, and right channels, and the system's electronics. The subwoofer and surround speakers round out the layout. The system also includes a universal remote control that can operate the soundbar as well as virtually all brands of TV's, VCR's and cable boxes. The suggested retail price is $799.95. During fiscal 1998 the Company introduced two products in the Personal Desktop Audio Series. The MicroMedia-TM- system was the Company's first three-piece speaker system capable of reproducing the entire bandwidth of sound for music, games and multimedia applications. MicroMedia is a subwoofer/satellite speaker system consisting of a pair of miniature desktop speakers and a separate subwoofer with a three-channel amplifier to power the whole system. The MicroMedia suggested retail price is $149.95. The Company also introduced the MediaTheater-TM- system, the world's first multimedia sound system utilizing Virtual Dolby surround sound technology. MediaTheater creates the effect of a full five-speaker surround sound system--with only two satellite speakers and a subwoofer. The satellites sit by the monitor, and the subwoofer is small enough to fit easily under the desk. The power amplifier and signal processing circuitry are housed within the subwoofer, while system controls are located in one of the satellites. MediaTheater is a high-performance system that takes advantage of new technologies in both digital signal processing and in speaker construction. MediaTheater suggested retail price is $299.95. In June 1996, the Company acquired the business of Snell-REGISTERED TRADEMARK- Acoustics (Snell), a manufacturer of high-quality speaker systems for traditional audio and home theater use. Snell specializes in creating furniture-quality speakers for discriminating customers. During fiscal 1998, Snell enhanced it line of speakers which now include products in four ranges - compact speaker systems, floorstanding systems, in-wall speaker systems and THX home theater systems. Products range from $450 per pair for small bookshelf speakers, to $45,000 per system for a complete 7-speaker THX theater system with state-of-the-art digital room correction. 2 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 50 full-time employees and three outside consultants. During fiscal years 1996, 1997 and 1998 the Company spent approximately $2,497,000, $3,187,000, and $3,513,000, respectively, for engineering and development. Marketing The Company employs 20 salespersons and retains 10 manufacturer's representatives who service the Company's dealer network. Boston Acoustics' loudspeaker systems are distributed in the United States and Canada through approximately 372 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 316 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. The Company's Personal Desktop Audio Series of products are sold through an OEM agreement with a major computer manufacturer and through Boston Acoustics' retailers, as well as a recently launched direct sales program. During the fiscal year ended March 28, 1998 one customer accounted for 34% of net sales. Boston Acoustics' product lines are also exported to dealers in Canada and through exclusive distributors in certain foreign countries, primarily in Western Europe, Asia Pacific and South/Central America. Export sales accounted for approximately 20% of net sales in fiscal 1996, 21% in fiscal 1997, and 19% in fiscal 1998. See also Note 7 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, Home Theater and Audio Video International. During fiscal 1998 the Company spent approximately $1,964,000 (2.4% of net sales) for advertising. Competition The Company competes primarily on the basis of product 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 3 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 Recoton, 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. 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 in certain foreign countries according to Company specifications. The Company purchases materials and component parts from approximately 219 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. The Company does have a written agreement with one of its inventory suppliers, which accounted for more than 10% of the Company's purchases during fiscal year 1998. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- International Operations" which is included in the Company's 1998 Annual Report which is filed as Exhibit 13 hereto. 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 nine United States patents and numerous international patents, which relate to certain speaker technologies, 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-. Trademarks used by the Snell subsidiary include Snell Acoustics, Snell Multimedia, Snell Music & Cinema and Room Ready-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. 4 Significant Customers A significant portion of the Company's sales currently are to Gateway 2000, Inc. ("Gateway") pursuant to contracts that run through June 1999. Since these contracts do not contain schedules with which Gateway must comply in placing orders, orders by Gateway may fluctuate significantly from quarter to quarter over the terms of the contracts. Assuming Gateway places orders under the terms of the contracts by June 1999, a substantial portion of the Company's revenues for fiscal year 1999 is expected to be derived from its contracts with Gateway. 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 operation 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. 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. 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 and its automotive speakers for one year and its multimedia audio speaker systems for a period of three years. Warranty costs during fiscal 1998 were not significant. Employees As of June 24, 1998, the Company had 310 full-time employees who were engaged as follows: 203 in production and materials management; 50 in engineering and development; 36 in marketing and sales support; and 21 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. 5 Executive Officers of the Registrant There is incorporated herein by reference the information concerning Andrew G. Kotsatos, who is Chairman of the Board, Chief Executive Officer and Treasurer of the Company, and Fred E. Faulkner, Jr., who is President and Chief Operating Officer of the Company, from the Company's definitive Proxy Statement for its Annual Meeting of Stockholders to be held on August 11, 1998, under the headings "Proposal No. 1 -- Election of Directors" and "Board of Directors." Information concerning the Company's other executive officers as of June 24, 1998 is set forth below.
Name Age Title Moses A. Gabbay 53 Vice President - Engineering Paul F. Reed 34 Vice President - Administrative Services Debra A. Ricker-Rosato 42 Vice President - Finance Robert L. Spaner 37 Vice President - Sales
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. 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 Paul F. Reed, an executive officer, and Lisa M. Mooney, a director, are brother and sister. 6 Item 2. Properties The Company owns its principal executive offices and manufacturing facilities which sits on 11 acres of land at 300 Jubilee Drive, Peabody, Massachusetts. Snell Acoustics (Snell), a subsidiary of the Company, leases all of the properties used in its business. Snell maintains its principal executive offices and manufacturing facilities at 143 Essex Street, Haverhill, Massachusetts. A total of 65,090 square feet of space is leased from an unrelated party under an operating lease which expires in March 1999. 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 1998. 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 16 in the Registrant's 1998 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 15 in the Registrant's 1998 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 5 through 7 in the Registrant's 1998 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 28, 1998 and notes thereto on pages 8 through 14 in the Registrant's 1998 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 11, 1998 concerning Andrew G. Kotsatos, who is the Chairman of the Board, Chief Executive Officer and Treasurer of the Company, and Fred E. Faulkner, Jr., who is President and Chief Operating Officer 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. Kotsatos and Faulkner, is incorporated by reference to the sections entitled "Proposal No. 1 -- Election of Directors", "Board of Directors" and "Compensation Interlocks and Insider Participation" in the Registrant's definitive Proxy Statement for its Annual Meeting of Stockholders to be held August 11, 1998. 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 11, 1998 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 11, 1998. 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 11, 1998. 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 11, 1998. 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 1998 Annual Report to Stockholders: Report of Independent Public Accountants. Consolidated Balance Sheets as of March 28, 1998 and March 29, 1997. Consolidated Statements of Income for the three years ended March 28, 1998. Consolidated Statements of Shareholders' Equity for the three years ended March 28, 1998. Consolidated Statements of Cash Flows for the three years ended March 28, 1998. 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.A.+ - 1996 Stock Plan adopted by Boston Acoustics, Inc. on February 20, 1996, as amended (3) 10.B.+ - 1986 Incentive Stock Option Plan adopted by Boston Acoustics, Inc. on October 15, 1986, as amended (2) 10.C.*+ - 1997 Stock Plan adopted by Boston Acoustics, Inc. on May 28, 1997. 10.E.# - Purchase Agreement dated March 27, 1997 by and between Gateway 2000, Inc. and Boston Acoustics, Inc. (3) 10.F. - Boston Acoustics, Inc. Warrant naming Gateway 2000, Inc. as registered holder. (3) 10.G.# - Letter of Agreement dated January 14, 1997 by and between Gateway 2000, Inc. and Boston Acoustics, Inc. (3) 10.H. - Loan Agreement dated as of June 13, 1997 between Boston Acoustics, Inc. and State Street Bank and Trust Company. (4) 10.I. - Revolving Credit Note dated as of June 13, 1997 in the amount of $25,000,000 made by Boston Acoustics, Inc. payable to the order of State Street Bank and Trust Company. (5) 10.J. - Stock Redemption Agreement dated as of June 13, 1997 by and among Boston Acoustics, Inc. and Valerie R. Cohen, Lisa M. Mooney and Paul F. Reed as Executors of the Estate of Francis L. Reed and the Estate of Dorothea T. Reed (6) 10.K.^ - Letter of Agreement dated December 22, 1997 by and between Gateway 2000, Inc. and Boston Acoustics, Inc. (7) 10.L.*^ - Letter of Agreement dated May 14, 1998 by and between Gateway 2000, Inc. and Boston Acoustics, Inc. 13. * - 1998 Annual Report to Shareholders 21. - Subsidiaries of the Registrant (3) 23. * - Consent of Independent Public Accountants 27. * - Financial Data Schedule 99. - "Safe Harbor" Statement under Private Securities Litigation Reform Act of 1995 (8)
* Indicates an exhibit which is filed herewith. + Indicates an exhibit which constitutes an executive compensation plan. # Indicates that portions of the exhibit have been omitted pursuant to an order granting a request for confidential treatment. ^ Indicates that portions of the exhibit have been omitted pursuant to a request for confidential treatment. - ------------------- (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 fiscal year ended March 29, 1997. 11 (4) Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for fiscal quarter ended June 28, 1997. (5) Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 1997. (6) Incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 1997. (7) Incorporated by reference to Exhibit 10.A. to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 27, 1997. (8) 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 30, 1996. (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 28, 1998 through the date of this report. 12 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 24th day of June 1998. BOSTON ACOUSTICS, INC. (Registrant) BY: s/Andrew G. Kotsatos ---------------------------- Andrew G. Kotsatos 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/Andrew G. Kotsatos 6/24/98 - ------------------------ Director, Chief Executive ------------ Andrew G. Kotsatos Officer and Treasurer s/Fred E. Faulkner, Jr. 6/24/98 - ------------------------ Director, President and ------------ Fred E. Faulkner, Jr. Chief Operating Officer s/Debra A. Ricker-Rosato 6/24/98 - ------------------------ Vice President and ------------ Debra A. Ricker-Rosato Chief Accounting Officer s/George J. Markos 6/24/98 - ------------------------ Director ------------ George J. Markos s/Lisa M. Mooney 6/24/98 - ------------------------ Director ------------ Lisa M. Mooney s/Gerald Walle 6/24/98 - ------------------------ Director ------------ Gerald Walle
13 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 12, 1998. 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 12, 1998 F-1 SCHEDULE II BOSTON ACOUSTICS, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS
-----------------------------Allowance for Doubtful Accounts---------------------- Balance, Charged to Beginning of Costs and Other Balance, End For the fiscal years ended- Year Expenses Additions(1) Deductions(2) of Year - --------------------------- ------------ ---------- ----------- ------------- ------------ March 28, 1998 $ 411,000 $ 36,000 $ $ (45,000) $ 402,000 ------------ ---------- ----------- ------------- ------------- ------------ ---------- ----------- ------------- ------------- March 29, 1997 $ 307,000 $ 84,000 $ 60,000 $ (40,000) $ 411,000 ------------ ---------- ----------- ------------- ------------- ------------ ---------- ----------- ------------- ------------- March 30, 1996 $ 207,000 $ 134,000 $ $ (34,000) $ 307,000 ------------ ---------- ----------- ------------- ------------- ------------ ---------- ----------- ------------- ------------- (1) Addition arising through the acquisition of Snell Acoustics, Inc. (2) Amounts deemed uncollectible net of recoveries of previously reserved amounts.
F-2 EX-10.(C) 2 EXHIBIT 10(C) Exhibit 10(c) BOSTON ACOUSTICS, INC. (MASSACHUSETTS CORPORATION) 1997 STOCK PLAN 1. Purpose. The purpose of this plan (the "Plan") is to secure for Boston Acoustics, Inc. (the "Company") and its shareholders the benefits arising from capital stock ownership by employees, officers and directors and consultants of the Company and its parent and subsidiary corporations who are expected to contribute to the Company's future growth and success. This Plan is intended to provide incentives: (i) to employees, officers, directors and consultants of the Company by providing them with opportunities to purchase shares of the Company's Common Stock, $0.01 par value ("Common Stock"), pursuant to options granted hereunder ("Options") and (ii) to directors of the Company by providing them with the opportunity to purchase shares of Common Stock directly from the Company ("Purchases"). Except where the context otherwise requires, the term "Company" shall include the parent and all present and future subsidiaries of the Company as defined in Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as amended or replaced from time to time (the "Code"). Those provisions of the Plan which make express reference to Section 422 shall apply only to ISOs (as that term is defined in the Plan). 2. Administration and Types of Options. (a) Administration. Except as otherwise provided in Section 24, the Plan shall be administered by a compensation committee (the "Committee") of not less than two directors of the Company appointed by the Board of Directors of the Company (the "Board") each of whom is not an employee of the Company and who qualifies as a "disinterested person" within the meaning of Rule 16b-3(c)(2)(i) promulgated under the Securities Exchange Act of 1934, as amended (the "Act"). Subject to ratification of the grant or authorization of each Option by the Board (if so required by applicable state law), and subject to the terms of the Plan, the Committee, shall have the authority to (i) determine the employees of the Company (from among the class of employees eligible under Section 3 to receive ISOs (as such term is defined below)) to whom ISOs may be granted, and to determine (from among the class of individuals and entities eligible under Section 3 to receive Non-Qualified Options(as such term is defined below)) to whom Non-Qualified Options may be granted; (ii) determine the time or times at which Options may be granted; (iii) determine the option price of shares subject to each Option, which price shall not be less than the minimum price specified in Section 6(a); (iv) determine whether each Option granted shall be an ISO or a Non-Qualified Option; (v) determine (subject to Section 8) the time or times when each Option shall become exercisable and the duration of the exercise period; (vi) determine whether restrictions such as repurchase options are to be imposed on shares subject to Options and the nature of such restrictions, if any, and (vii) interpret the Plan and prescribe and rescind rules and regulations relating to it. If the Committee determines to issue a Non-Qualified Option, it shall take whatever actions it deems necessary, under Section 422 of the Code and the regulations promulgated thereunder, to ensure that such Option is not treated as an ISO. The interpretation and construction by the Committee of any provisions of the Plan or of any Option granted under it shall be final unless otherwise determined by the Board. The Committee may from time to time adopt such rules and regulations for carrying out the Plan as it may deem best. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Option or any Purchase granted under it. (b) Compensation Committee. The Committee may select one of its members as its chairman, and shall hold meetings at such times and places as it may determine. Acts by a majority of the Committee, or acts reduced to or approved in writing by a majority of the members of the Committee, shall be valid acts of the Committee. (c) Applicability of Rule 16b-3. Those provisions of the Plan which make express reference to Rule 16b-3 shall apply only to such persons as are required to file reports under Section 16(a) of the Exchange Act (a "Reporting Person"). (d) Types of Options. Options granted pursuant to the Plan may be either incentive stock options ("ISOs") meeting the requirements of Section 422 of the Code or non-qualified stock options ("Non-Qualified Options") which are not intended to meet the requirements of Section 422 of the Code. 3. Eligibility. (a) Options. ISOs may be granted to any employee of the Company. Those officers and directors of the Company who are not employees of the Company may not be granted ISOs under the Plan. Non-Qualified Options may be granted to any director, officer, employee or consultant of the Company. The Committee may take into consideration a recipient's individual circumstances in determining whether to grant an ISO or a Non-Qualified Option. Granting an Option to any individual or entity shall neither entitle that individual or entity to, nor disqualify him, her or it from, participation in any other grant of an Option. (b) Purchases. Eligibility for Purchases under the Plan shall be determined in accordance with Section 24 of the Plan. 4. Stock Subject to Plan. (a) Options. Subject to adjustment as provided in Section 15 below, the maximum number of shares of Common Stock of the Company which may be issued and sold pursuant to Options issued under the Plan is 300,000 shares. The shares may be authorized, but unissued, or reacquired Common Stock. If an Option granted under the Plan shall expire or terminate for any reason without having been exercised 2 in full, the unpurchased shares subject to such Option shall again be available for subsequent Option grants under the Plan. No shares issued upon exercise of any Option shall be returned to the Plan nor become available under the Plan for future distribution. (b) Purchases. Subject to adjustment as provided in Section 15 below, the maximum number of shares of Common Stock of the Company which may be issued and sold under Section 24 of the Plan is 20,000 shares. The shares may be authorized, but unissued, or reacquired Common Stock. No shares issued and sold under Section 24 of the Plan shall be returned to the Plan nor become available under the Plan for future distribution. 5. Forms of Option Agreements. As a condition to the grant of an Option under the Plan, each recipient of an Option shall execute an option agreement in such form not inconsistent with the Plan as may be approved by the Committee. Such option agreements may differ among recipients. 6. Exercise Price. (a) General. The price per share of stock deliverable upon the exercise of an Option shall be determined by the Committee, but it shall not be less than the par value per share of the stock; provided, that in the case of an ISO, the exercise price shall not be less than 100% of the fair market value of such stock, as determined by the Committee, at the time of grant of such Option, or less than 110% of such fair market value in the case of Options described in Section 11(b). (b) Fair Market Value. If, at the time an Option is granted under the Plan or Common Stock is delivered to the Company, the Company's Common Stock is publicly traded, the "fair market value" shall be determined as of the last business day for which the prices or quotes discussed in this sentence are available prior to the date such Option is granted or Common Stock is delivered to the Company and shall mean (i) the last reported sale price (on that date) of the Common Stock on the principal national securities exchange on which the Common Stock is traded, if the Common Stock is then traded on a national securities exchange; or (ii) the last reported sale price (on that date) of the Common Stock on the NASDAQ National Market System, if the Common Stock is not then traded on a national securities exchange; or (iii) the closing bid price (or average of bid prices) last quoted (on that date) by an established quotation service for over-the-counter securities, if the Common Stock is not reported on the NASDAQ National Market System. However, if the Common Stock is not publicly traded at the time an Option is granted or the Common Stock is delivered, the "fair market value" shall be deemed to be the fair market value of the Common Stock as determined by the Committee after it takes into consideration all factors which it deems appropriate. 3 (c) Payment of Exercise Price. Payment of the exercise price of Options granted under the Plan may be made (i) by delivery of cash or a check to the order of the Company in an amount equal to the exercise price of such Options, (ii) if authorized by the applicable option agreement or at the discretion of the Committee, by delivery to the Company of shares of Common Stock of the Company beneficially owned by the optionee for more than six months and which the optionee may freely transfer having a fair market value equal in amount to the exercise price of the options being exercised, (ii) by any other means (including, without limitation, by delivery of a promissory note of the optionee payable on such terms as are specified by the Committee) which the Committee determines are consistent with the purpose of the Plan and with then applicable laws and regulations (including, without limitation, the provisions of Rule 16b-3, to the extent that the Common Stock is registered under the Exchange Act, and Regulation T promulgated by the Federal Reserve Board) or (iii) by any combination of such methods of payment. The fair market value of any shares of the Company's Common Stock or other non-cash consideration which may be delivered upon exercise of an Option shall be determined by the Committee. 7. Option Period. Each Option and all rights thereunder shall expire on such date as shall be set forth in the applicable option agreement, except that, in the case of an ISO, such date shall not be later than ten years after the date on which the Option is granted and, in all cases, Options shall be subject to earlier termination as provided in the Plan. 8. Exercise of Options. Each Option granted under the Plan shall be exercisable either in full or in installments at such time or times and during such period as shall be set forth in the agreement evidencing such option, subject to the provisions of the Plan. Notwithstanding the foregoing, Options granted under the Plan to the Reporting Persons shall not be exercisable in any part until at least six months after the date of grant. 9. Nontransferability. (a) Nontransferability of Options. ISOs and Non-Qualified Options granted to Reporting Persons shall not be assignable or transferable by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the optionee, shall be exercisable only by the optionee; provided, that Non-Qualified Options held by Reporting Persons may be transferred pursuant to a qualified domestic relations order (as defined in Rule 16b-3). Non-Qualified Options held by persons other than Reporting Persons shall be subject to restrictions on transferability in the Plan or provided in the applicable option agreement. (b) Nontransferability of Rights Under Purchase Elections. Any right under a Purchase Election shall not be assignable or transferable by the director who made such Purchase Election, either voluntarily or by operation of law, except by will or the laws of descent and distribution or pursuant to a qualified domestic relations 4 order (as defined in Rule 16b-3). 10. Effect on Option of Termination of Employment or Other Relationship. Except as provided in Section 11(d) with respect to ISOs, and subject to the provisions of the Plan, the Committee shall determine the period of time during which an optionee may exercise an Option following (i) the termination of the optionee's employment or other relationship with the Company or (ii) the death or disability of the optionee. Such periods shall be set forth in the agreement evidencing such Option. 11. ISOs. Options granted under the Plan which are intended to be ISOs shall be subject to the following additional terms and conditions: (a) Express Designation. All under the Plan shall, at the time of grant, be specifically designated as such in the option agreement covering such ISOs. (b) 10% Shareholder. If any employee to whom an ISO is to be granted under the Plan is, at the time of the grant of such Option, the owner of stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (after taking into account the attribution of stock ownership rules of Section 424(d) of the Code), then the following special provisions shall be applicable to the ISO granted to such individual: (i) the purchase price per share of the Common Stock subject to such ISO shall not be less than 110% of the fair market value of one share of Common Stock at the time of grant; and (ii) the exercise period of such ISO shall not exceed five years from the date of grant. (c) Dollar Limitation. For so long as the Code shall so provide, Options granted to any employee under the Plan (and any other stock option plans of the Company) which are intended to constitute ISOs shall not constitute ISOs to the extent that such options, in the aggregate, become exercisable for the first time in any one calendar year for shares of Common Stock with an aggregate fair market value (determined as of the respective date or dates of grant) of more than $100,000. (d) Termination of Employment, Death or Disability. No ISO may be exercised unless, at the time of such exercise, the optionee is, and has been continuously since the date of grant of his or her Option, employed by the Company, except that: (i) an ISO may be exercised within the period of three months after the date the optionee ceases to be an employee of the 5 Company (or within such lesser period as may be specified in the applicable option agreement); provided that the agreement with respect to such Option may designate a longer exercise period and that the exercise after such three-month period shall be treated as the exercise of a Non-Qualified Option under the Plan; (ii) if the optionee dies while in the employ of the Company, or within three months after the optionee ceases to be such an employee, the ISO may be exercised by the person to whom it is transferred by will or the laws of descent and distribution within the period of one year after the date of death (or within such lesser period as may be specified in the applicable option agreement); and (iii) if the optionee becomes disabled (within the meaning of Section 22(e)(3) of the Code or any successor provision thereto) while in the employ of the Company, the ISO may be exercised within the period of one year after the date the optionee ceases to be such an employee because of such disability (or within such lesser period as may be specified in the applicable option agreement). For all purposes of the Plan and any Option granted hereunder, "employment" shall be defined in accordance with the provisions of Section 1.421-7(h) of the Income Tax Regulations (or any successor regulations). Notwithstanding the foregoing provisions, no ISO may be exercised after its expiration date. 12. Additional Option Provisions (a) Additional Option Provisions. The Committee may, in its sole discretion, include additional provisions in Option agreements covering options granted under the Plan, including without limitation restrictions on transfer, repurchase rights, commitments to pay cash bonuses, to make, arrange for or guaranty loans or to transfer other property to optionees upon exercise of Options, or such other provisions as shall be determined by the Committee; provided that such additional provisions shall not be inconsistent with any other term or condition of the Plan and such additional provisions shall not cause any ISO granted under the Plan to fail to qualify as an ISO within the meaning of Section 422 of the Code. (b) Option Acceleration, Extension, Etc. The Committee may, in its sole discretion, (i) accelerate the date or dates on which all or any particular Option or Options granted under the Plan may be exercised or (ii) extend the dates during which all, or any particular, Option or Options granted under the Plan may be exercised; 6 provided that no such extension shall be permitted if it would cause the Plan to fail, to comply with Section 422 of the Code or with Rule 16b-3 as then in effect, to the extent that the Common Stock is registered under the Exchange Act. 13. General Restrictions. (a) Investment Representations. The Company may require any person to whom an Option is granted or shares are to be sold hereunder, as a condition of exercising such Option or purchasing shares pursuant to Section 24, to give written assurances in substance and form satisfactory to the Company to the effect that such person is acquiring the Common Stock for his or her own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effect as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws, or with covenants or representations made by the Company in connection with any public offering of its Common Stock. (b) Compliance with Securities Laws. Each Option shall be subject to the requirement that if, at any time, counsel to the Company shall determine that the listing, registration or qualification of the shares subject to such Option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, or that the disclosure of non-public information or the satisfaction of any other condition is necessary as a condition of, or in connection with, the issuance or purchase of shares thereunder, such Option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval, or satisfaction of such condition shall have been effected or obtained on conditions acceptable to the Committee. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification, or to satisfy such condition. 14. Rights as a Shareholder. Neither a holder of an Option nor a director having made a Purchase Election shall have any rights as a shareholder with respect to any shares covered by the Option or Purchase Election (including, without limitation, any rights to receive dividends or non-cash distributions with respect to shares subject thereto) until the date of issue of a stock certificate to him or her for such shares. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. 15. Adjustment Provisions for Recapitalizations and Related Transactions. (a) Adjustments Relating to Options. If, through or as a result of any merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar transaction, (i) the outstanding shares of Common Stock are increased, decreased or exchanged for a different number or kind of shares or 7 other securities of the Company, or (ii) additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Common Stock or other securities, an appropriate and proportionate adjustment may be made in (x) the maximum number and kind of shares reserved for issuance pursuant to Options issued under the Plan, (y) the number and kind of shares or other securities subject to any then outstanding Options under the Plan, and (z) the price for each share subject to any then outstanding Options, without changing the aggregate purchase price as to which such Options remain exercisable. Notwithstanding the foregoing, no adjustment shall be made pursuant to this Section 15 to the extent such adjustment would cause any ISO issued under the Plan to fail to comply with Section 422 of the Code or the Plan to fail to comply with Rule 16b-3 as then in effect, to the extent that the Common Stock is registered under the Exchange Act. (b) Committee Authority to Make Adjustments. Any adjustments under Section 15(a) will be made by the Committee, whose determination as to what adjustments, if any, will be made and the extent thereof will be final, binding and conclusive. No fractional shares will be issued under the Plan on account of any such adjustments. (c) Adjustments Relating to Purchasers. If, through or as a result of any merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar transaction, (i) the outstanding shares of Common Stock are increased, decreased or exchanged for a different number or kind of shares or other securities of the Company, or (ii) additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Common Stock or other securities, an appropriate and proportionate adjustment may be made in (x) the maximum number and kind of shares reserved for issuance pursuant to Section 24 of the Plan, (y) the number and kind of shares or other securities subject to any then outstanding Purchase Elections, and (z) the price for each share subject to any then outstanding Purchase Election, without changing the aggregate purchase price as to such Purchases which have not yet occurred. Notwithstanding the foregoing, no adjustment shall be made pursuant to this Section 15(c) to the extent such adjustment would cause any ISO issued under the Plan to fail to comply with Section 422 of the Code or the Plan to fail to comply with Rule 16b-3 as then in effect, to the extent that the Common Stock is registered under the Exchange Act. (d) Board Authority to Make Adjustments. Any adjustment under Section 15(c) will be made by the Board, whose determination as to what adjustments, if any, will be made and the extent thereof will be final, binding and conclusive. No fractional shares will be issued under the Plan on account of any such adjustments. 8 16. Merger, Consolidation, Asset Sale, Liquidation, etc. (a) Options. In the event of a consolidation or merger or sale of all or substantially all of the assets of the Company in which outstanding shares of Common Stock are exchanged for securities, cash or other property of any other corporation or business entity or in the event of a liquidation of the Company, the Committee, or the board of directors of any corporation assuming the obligations of the Company may in its discretion, take any one or more of the following actions, as to outstanding Options: (i) provide that such Options shall be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof), provided that any such options substituted for ISOs shall meet the requirements of Section 424(a) of the Code, (ii) upon written notice to the optionees, provide that all unexercised Options will terminate immediately prior to the consummation of such transaction unless exercised by the optionee within a specified period following the date of such notice, (iii) in the event of a merger under the terms of which holders of the Common Stock of the Company will receive upon consummation thereof a cash payment for each share surrendered in the merger (the "Merger Price"), make or provide for a cash payment to the optionees equal to the difference between (A) the Merger Price times the number of shares of Common Stock subject to such outstanding Options (to the extent then exercisable at prices not in excess of the Merger Price) and (B) the aggregate exercise price of all such outstanding Options in exchange for the termination of such options, and (iv) provide that all or any outstanding Options shall become exercisable in full immediately prior to such event; provided that notwithstanding anything to the contrary in this Section 16(a), any action taken by the Committee hereunder shall be in compliance with Rule 16b-3 as in effect at the time of such action and the conditions thereof necessary to maintain qualification of the Plan under Rule 16b-3, to the extent that the Common Stock is registered under the Exchange Act. In the case of any Option which by the terms of the grant thereof (or the agreement or instrument governing such grant) or pursuant to a decision by the Committee under this Section 16(a) provides for such option becoming exercisable in full upon a Change in Control or otherwise under this Section 16, such option shall be deemed vested on the day immediately prior to the day on which such Change in Control occurs and such optionee shall be given prior written notice of such Change in Control sufficient to permit such optionee to exercise such Options. For purposes of this Plan, a "Change in Control" occurs if the Company (i) ceases operations; (ii) merges or consolidates with another entity and is not the surviving entity; (iii) sells or otherwise transfers all or substantially all of its operating assets; or (iv) if more than 50% of the capital stock of the Company is transferred in a single transaction or in a series of related transactions other than a public offering of stock of the Company to a single person, entity or group of persons acting in concert. (b) Substitute Options. The Company may grant Options under the Plan in substitution for options held by employees of another corporation who become employees of the Company, or of a subsidiary of the Company, as the result of a 9 merger or consolidation of the employing corporation with the Company or a subsidiary of the Company, or as a result of the acquisition by the Company, or one of its subsidiaries, of property or stock of the employing corporation. The Company may direct that substitute Options be granted on such terms and conditions as the Committee considers appropriate in the circumstances. (c) Purchases. In the event of a consolidation or merger or sale of all or substantially all of the assets of the Company in which outstanding shares of Common Stock are exchanged for securities, cash or other property of any other corporation or business entity or in the event of a liquidation of the Company, any election to Purchase shares of Common Stock pursuant to Section 24 of the Plan shall automatically be cancelled and any Fee Deductions shall be paid to the appropriate directors promptly, together with interest on such Fee Deductions, calculated in accordance with Section 24(e) of the Plan. 17. No Special Employment Rights. Nothing contained in the Plan or in any Option shall confer upon any optionee any right with respect to the continuation of his or her employment by the Company or interfere in any way with the right of the Company at any time to terminate such employment or to increase or decrease the compensation of the optionee. 18. Other Employee Benefits. Except as to plans which by their terms include such amounts as compensation, the amount of any compensation deemed to be received by an employee as a result of the exercise of an Option or the sale of shares received upon such exercise will not constitute compensation with respect to which any other employee benefits of such employee are determined, including, without limitation, benefits under any bonus, pension, profit-sharing, life insurance or salary continuation plan, except as otherwise specifically determined by the Committee or required by law. 19. Amendment of the Plan. (a) The Board of Directors may at any time, and from time to time, modify or amend the Plan in any respect, except that if at any time the approval of the shareholders of the Company is required under Section 422 of the Code or any successor provision with respect to ISOs, or under Rule 16b-3 as then in effect, to the extent that the Common Stock is registered under the Exchange Act, the Board of Directors may not effect such modification or amendment without such approval. (b) The termination or any modification or amendment of the Plan shall not, without the consent of an optionee, affect his or her rights under an Option previously granted to him or her. With the consent of the optionee affected, the Board of Directors may amend outstanding option agreements in a manner not inconsistent with the Plan. The Board of Directors shall have the right to amend or modify (i) the terms and provisions of the Plan and of any outstanding ISOs granted 10 under the Plan to the extent necessary to qualify any or all such Options for such favorable federal income tax treatment (including deferral of taxation upon exercise) as may be afforded incentive stock options under Section 422 of the Code and (ii) the terms and provisions of the Plan and of any outstanding option to the extent necessary to ensure the qualification of the Plan under Rule 16b-3 as then in effect, to the extent that the Common Stock is registered under the Exchange Act. 20. Withholding. (a) The Company shall have the right to deduct from payments of any kind otherwise due to the optionee any federal, state or local taxes of any kind required by law to be withheld with respect to any shares issued upon exercise of Options under the Plan. Subject to the prior approval of the Company, which may be withheld by the Company in its sole discretion, the optionee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company to withhold shares of Common Stock otherwise issuable pursuant to the exercise of an option or (ii) by delivering to the Company shares of Common Stock already owned by the optionee. The shares so delivered or withheld shall have a fair market value equal to such withholding obligation. The fair market value of the shares used to satisfy such withholding obligation shall be determined by the Company as of the date that the amount of tax to be withheld is to be determined. Such determination of the fair market value shall be made in accordance with Section 6(b). An optionee who has made an election pursuant to this Section 20(a) may only satisfy his or her withholding obligation with shares of Common Stock which are not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements. (b) Notwithstanding the foregoing, in the case of a Reporting Person, no election to use shares for the payment of withholding taxes shall be effective unless made in compliance with any applicable requirements of Rule 16b-3 as then in effect. 21. Cancellation and New Grant of Options, etc. The Board of Directors shall have the authority to effect, at any time and from time to time, with the consent of the affected optionees, (i) the cancellation of any or all outstanding Options under the Plan or the Company's 1986 Incentive Stock Option Plan and the grant in substitution therefor of new Options under the Plan covering the same or different numbers of shares of Common Stock and having an exercise price per share which may be lower or higher than the exercise price per share of the cancelled Options or (ii) the amendment of the terms of any and all outstanding Options under the Plan to provide an exercise price per share which is higher or lower than the then current exercise price per share of such outstanding Options. 22. Effective Date and Duration of the Plan. (a) Effective Date. The Plan shall become effective when adopted by the Board of Directors, but no ISO granted under the Plan shall become exercisable unless 11 and until the Plan shall have been approved by the Company's shareholders. If such shareholder approval is not obtained within twelve months after the date of the Board's adoption of the Plan, no Options previously granted under the Plan shall be deemed to be ISOs and no ISOs shall be granted thereafter. Amendments to the Plan not requiring shareholder approval shall become effective when adopted by the Board of Directors; amendments requiring shareholder approval (as provided in Section 19) shall become effective when adopted by the Board of Directors, but no ISO granted after the date of such amendment shall become exercisable (to the extent that such amendment to the Plan was required to enable the Company to grant such ISO to a particular optionee) unless and until such amendment shall have been approved by the Company's shareholders. If such shareholder approval is not obtained within twelve months of the Board's adoption of such amendment, any ISOs granted on or after the date of such amendment shall terminate to the extent that such amendment to the Plan was required to enable the Company to grant such Option to a particular optionee. Subject to this limitation, Options may be granted under the Plan at any time after the effective date and before the date fixed for termination of the Plan. (b) Termination. Unless sooner terminated in accordance with Section 16, the Plan shall terminate, with respect to ISOs, upon the earlier of (i) the close of business on the day next preceding the tenth anniversary of the date of its adoption by the Board of Directors, or (ii) the date on which all shares available for issuance pursuant to Options issued under the Plan shall have been issued pursuant to the exercise or cancellation of Options granted under the Plan. Unless sooner terminated in accordance with Section 16, the Plan shall terminate with respect to Non-Qualified Options on the date specified in (ii) above and with respect to Purchases on the date on which all shares available for issuance pursuant to Section 24 of the Plan shall have been issued. If the date of termination is determined under (i) above, then Options outstanding on such date shall continue to have force and effect in accordance with the provisions of the instruments evidencing such Options. 23. Provision for Foreign Participants. The Board of Directors may, without amending the Plan, modify awards or options granted to participants who are foreign nationals or employed outside the United States to recognize differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters. 24. Purchases of Stock by Directors Who are not Officers or Employees. (a) The Company will issue shares of Common Stock on the last day of the fiscal year (the "Purchase Date") to any director of the Company who is not an officer or an employee of the Company (an "Eligible Director") and has made a then effective Purchase Election pursuant Section 24(b). (b) An Eligible Director may elect to purchase shares (a "Purchase Election") by 12 submitting an election form to the Vice President-Finance on or before the 20th of August in the fiscal year in which he or she intends to participate. On such election form, a director shall (i) state the percentage to be deducted from the fee earned by such Eligible Director for service as a director of the Company (a "Fee"), (ii) authorize the purchase of Common Stock for him or her in accordance with the terms of the Plan, (iii) agree to hold any shares of Common Stock purchased pursuant to this Section 24 for at least six months from the date of acquisition and (iv) consent to the placement of a stop order on the books of the Company with regard to such shares for a period of at least six months from the date of acquisition. (c) Unless an Eligible Director files a new election form which either changes the rate of deduction from his or her Fee or indicates his or her withdrawal from the Plan, his or her deductions and purchases will continue at the same rate, provided he or she remains an Eligible Director. During a fiscal year, an Eligible Director may change the rate of deduction from his or her Fee or withdraw from the Plan at any time prior to the last Saturday in September. Any change or withdrawal indicated on a new election form received by the Vice President-Finance on or after the last Saturday in September will be effective as of the first day of the following fiscal year. (d) On the date on which cash payments of Fees are made, or would have been made (the "Deduction Date"), the Company will deduct from cash payments of Fees to each Eligible Director such amount indicated on his or her then effective Purchase Election, if any (a "Fee Deduction"). Any Fee Deduction made pursuant to this Section 24 will be held in the general funds of the Company. The maximum amount an Eligible Director may have deducted in a fiscal year is $8,500. (e) All Fee Deductions shall accrue interest at the prime rate reported in the Wall Street Journal at the Deduction Date from the Deduction Date through the last day of the Company's fiscal year. (f) Each Eligible Director who has elected to participate pursuant to a then effective Purchase Election and is a director of the Company as of the last day of the fiscal year shall acquire from the Company such whole number of shares of Common Stock which his or her Fee Deductions during the fiscal year and interest accrued thereon will purchase at the Purchase Price (as such term is defined below). Any balance of the Fee Deductions and interest accrued thereon will be refunded to the Eligible Director promptly. (g) The purchase price (the "Purchase Price") of Common Stock to be issued to any Eligible Director pursuant to this Section 24 shall be the fair market value of the Common Stock on the Purchase Date. "Fair market value" shall mean (i) the last reported sale price of the Common Stock on the Purchase Date on the principal national securities exchange on which the Common Stock is traded, if the 13 Common Stock is then traded on a national securities exchange; or (ii) the last reported sale price on the Purchase Date of the Common Stock on the NASDAQ National Market System, if the Common Stock is not then traded on a national securities exchange; or (iii) the closing bid price (or average of bid prices) last quoted on the Purchase Date by an established quotation service for over-the-counter securities, if the Common Stock is not reported on the NASDAQ National Market System. If no prices or quotes discussed in the preceding sentence are available on the Purchase Date, such quotes or prices shall be determined as of the last business day for which such prices or quotes are available prior to the Purchase Date. However, if the Common Stock is not publicly traded at the Purchase Date, the "fair market value" shall be deemed to be the fair market value of the Common Stock as determined by the Board of Directors after it takes into consideration all factors which it deems appropriate. (h) Purchases pursuant to this Section 24 shall be generally administered by the Board of Directors. The provisions of this Section 24 are to be construed as a "formula plan" as defined by Rule 16b-3. As such, the provision of Section 24 shall not be amended more than once every six (6) months, other than to comply with changes in the Code, the Employee Retirement Income Security Act, or the rules thereunder. Adopted by the Board of Directors on May 28, 1997 14 EX-10.(L) 3 EXHIBIT 10(L) Exhibit 10(l) *= THE MATERIAL HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND SUCH MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. [GATEWAY 2000, INC. LETTERHEAD] May 14, 1998 Michael Chass Boston Acoustics 300 Jubilee Dr. Peabody, MA 01960 This Letter of Agreement ("LOA") will confirm the understanding and intent of Boston Acoustics and Gateway 2000, Inc., and it's subsidiaries and affiliates ("Gateway"), to enter into an Agreement for the provision of services and products by Boston Acoustics to Gateway worldwide. The agreement will be established under terms and conditions set forth in the signed definitive written agreement dated March 17, 1997. This LOA supersedes the previous LOA in regards to the BA 635 product dated December 22nd, 1997. If Boston Acoustics makes a change to BA 635, Gateway reserves the right to upgrade to that change with no liability to Gateway as long as there is a program in effect with Boston Acoustic to cover like volumes and both parties agree to new pricing based on the change. Gateway hereby agrees to commit to purchase, worldwide, from Boston Acoustics the stated products at the stated quantity over a 12 month delivery schedule:
Description Quantity Price - ----------- -------- ----- BA 635 for first * $ * BA 635 for next * $ * BA 635 for next * $ * BA 635 for next * $ *
This commitment is conditional upon the following: 1. Gateway's specification being met 2. The agreed upon delivery dates being met 3. Gateway is responsible for * and * 4. Gateway will pay * in * cost. Boston Acoustics and Gateway acknowledge, that while this LOA sets forth their intentions, this LOA does not contain all matters upon which agreement must be reached in order to proceed. All other items and conditions as specified in the Purchase Order to be issued by Gateway will remain intact. All information exchanged to date and hereafter between the parties is proprietary to the party submitting the information and shall be held in the strictest confidence between the parties. Please indicate your acceptance of and agreement to this letter of Agreement by Signing below. ACCEPTED AND AGREED: ACCEPTED AND AGREED Boston Acoustics Gateway 2000 By: /s/ Andy Kotsatos By: /s/ Dave Russell ------------------------------- ------------------------------- Name: Andy Kotsatos Name: Dave Russell ----------------------------- ----------------------------- Title: CEO Title: Director ---------------------------- ---------------------------- Date: 5/14/98 Date: 5/14/98 ----------------------------- ----------------------------- EX-13 4 EXHIBIT 13 Boston Acoustics 1998 ANNUAL REPORT
NET SALES (Amounts in Thousands) '94 '95 '96 '97 '98 $34,488 $41,046 $46,325 $50,309 $82,399 NET INCOME (Amounts in Thousands) '94 '95 '96 '97 '98 $4,682 $5,949 $6,631 $5,485 $9,576
[PHOTO OMITTED] Andrew G. Kotsatos Chairman and Chief Executive Officer [PHOTO OMITTED] Fred E. Faulkner, Jr. President and Chief Operating Officer - -------------------------------------------------------------------------------- TO THE SHAREHOLDERS: - -------------------------------------------------------------------------------- Fiscal 1998 was our nineteenth straight year of record sales, and a year of record earnings as well. Net sales for the year increased 64%--from $50.3 million to $82.4 million. Net income increased 75%--from $5.5 million to $9.6 million. Earnings per diluted share increased by 112%, from $1.23 to $2.61. It was a very good year. In the face of tough times for the consumer electronics business, we posted modest increases in all our traditional product categories and we did well internationally. The big story, however, was our success in an audio market that didn't even exist a few years ago--multimedia speakers. PERSONAL DESKTOP AUDIO(TM) Two and a half years ago, we set out to develop and implement a strategy that would bring the company to $100 million and beyond. Expanding the distribution network for our core products was one possibility, but we felt it would be counter-productive to our long-term growth strategies. Finding new markets for new products offered much greater potential. Our acquisition of Snell Acoustics was a first step. While it has not yet turned profitable, Snell offers us the opportunity to address a new segment of our core business markets--high-end audiophile systems. Computer audio was another possibility. More than 75 million personal computers were sold in 1997; virtually all of them capable of producing high- quality sound--with the right speakers. Computer audio has become a very big, and growing, market. [GRAPHIC OMITTED] By sticking with what we do best--producing high quality audio systems at value-driven prices--we felt we could do well in the multimedia audio market. Our strategic partnership with Gateway was the initial result. Gateway has been unique among computer makers in its commitment to high quality sound. - -- 2 - -- The partnership put us in the multimedia audio business and introduced us to the highly competitive and very demanding OEM world. [PHOTO OMITTED] [CAPTION: MICROMEDIA] We've responded very well to the new set of challenges. Since we began shipments in the first quarter of the fiscal year, we have successfully met Gateway's delivery, reliability and quality goals. Our initial OEM product, the MicroMedia(TM), received rave reviews, enhancing Gateway's multimedia leadership. We followed MicroMedia with MediaTheater(TM), the world's first multimedia sound system utilizing Virtual Dolby(R) surround sound technology. MediaTheater creates the effect of a full five-speaker surround sound system--with only two satellite speakers and a subwoofer. The satellites sit by the monitor, and the subwoofer is small enough to fit easily under the desk. The power amplifier and signal processing circuitry are housed in the subwoofer; system controls are located in one of the satellites. MediaTheater is a high performance system that takes advantage of new technologies in both digital signal processing and in speaker construction. It is available through Gateway and from retailers, at a suggested retail price of $299.95. A NEW FLAGSHIP LINE [PHOTO OMITTED] [CAPTION: VR2000] While we are entering new markets and exploring new ways of selling new products, we have not lost sight of the importance of our home and auto core markets, or of the quality-conscious dealers who sell our products. We will continue to develop new products for these markets and to do all we can to maintain the best of relationships with the dealers who serve them. In that context, we introduced a new flagship line of high-performance floor-standing speaker systems in Fiscal 98. Designed to satisfy the most demanding music and video fans, the new Lynnfield VR(R) Series builds on technologies that previously proved their worth in our VR Series. Its features include innovative built-in powered subwoofers, and proprietary features and technologies such as the Lynnfield VR tweeter, MagnaGuard(R) magnetic shielding, DCD(TM) (Deep Channel Design) bass and Active Bass Contour(TM). The suggested retail prices for the three models in the series range from $700 to $1,600 a pair. The top of the line VR970 received a prestigious Innovations `98 award for outstanding design and engineering at the Consumer Electronics Show in Las Vegas. THE SOUNDBAR(TM) CINEMA The SoundBar Cinema System is another innovation introduced in Fiscal 1998. With digital Dolby Pro Logic(R) decoding and QSound(R) 3D image enhancement technology, it is the first high-performance home theater sound system to eliminate the complexity of conventional systems. It's simple, easy to set up and use, and it takes up little space. The SoundBar module sits on top of the TV, housing the left, center and right channels, and the system's electronics. The subwoofer and surround speakers round out the layout. The system also includes a universal remote control that operates the SoundBar as well as virtually all brands of TVs, VCRs and cable boxes. Suggested retail price is $799.95. [PHOTO OMITTED] [CAPTION: VR970 WITH INTEGRATED POWERED SUBWOOFER] MORE AWARDS The Innovations `98 award for the VR970 was just one of many we accumulated during the year. Once again, we enjoyed -- 3 -- favorable recognition from reviewers and audio professionals. For example, we received more Hi-Fi Grand Prix Awards than any other US speaker maker in AudioVideo International's 19th annual competition. Our home audio products were honored in seven categories: Full-Size Floorstanding Speakers; Under 12" Subwoofers; A/V Surround Speaker Systems (THX); 3-piece Sub/sat Speaker Systems; Surround Satellite Speakers; In-Wall Speakers; and Outdoor Speakers. Our auto products took honors in six of AudioVideo International's AutoSound Grand Prix 98 competition categories. They included AutoSound Grand Prix awards for 6"x 9" Speakers, Flush Mount Speakers, Tweeters, and Midrange/Midbass Speaker Separates; and special recognition in the Speaker Boxes/Passive Subwoofers, and Component Speaker Systems categories. PRODUCTS IN THE PIPELINE Our long-term success has been based on our ability to replace existing products when they've passed their peak, and to develop new products using new technology to create new capabilities for new as well as existing markets. As communication and entertainment media converge, more and more resources are needed to create innovations. The world is changing, and we are changing with it. Anticipating new realities, electronic engineers are playing increasingly important roles in our product development programs. The unique qualities of the powered MediaTheater, the SoundBar and the Lynnfield VR. Series are examples of the results. In Fiscal 1999, we'll be introducing more innovative new products. We've already started with the three-piece BA635 system that sells for only $99.95. It's a computer speaker that offers full range performance not previously possible at such a low price. In the first quarter of Fiscal 1999, we plan to introduce a new ProSeries .5 line of component loudspeakers and subwoofers for high-end automotive applications. In their sound quality, ease of installation and looks, they'll break new ground in auto sound component systems. We also expect to augment our popular Designer Series in-wall and in-ceiling speakers with models designed to meet growing demands for home theater and multi-room systems. Buyers will be able to configure high performance, decor-friendly sound systems for any application. OUR ONLINE STORE Appropriately, we'll be selling our Personal Desktop Audio(TM) systems on the Worldwide Web. By logging on to our new online store at www.bostondirect.com, shoppers can order MediaTheater, MicroMedia or BA635 systems. We'll also be selling these systems by direct mail and by toll-free telephone at 1-877-333-4001. THE YEAR AHEAD While it will be difficult to duplicate this year's growth percentages, we anticipate that Fiscal 1999 will be another excellent year. With new and established products for both our core markets and for personal desktop audio, we should see continued growth. [PHOTO OMITTED] 3 [CAPTION: PROSERIES 6.4 SYSTEM] Sincerely, /s/ Andrew G. Kotsatos Andrew G. Kotsatos Chairman and Chief Executive Officer /s/ Fred E. Faulkner, Jr. Fred E. Faulkner, Jr. President and Chief Operating Officer - -- 4 - -- - -------------------------------------------------------------------------------- MANAGEMENT'S DICUSSION 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 28, 1998, March 29, 1997, and March 30, 1996 expressed as percentages of sales.
For the Year Ended March 28, March 29, March 30, 1998 1997 1996 (53 wks) - -------------------------------------------------------------------------------- Net Sales 100.0% 100.0% 100.0% Cost of goods sold 61.1 57.4 57.1 - -------------------------------------------------------------------------------- Gross profit 38.9 42.6 42.9 Selling and marketing expenses 9.9 14.4 12.6 General & administrative expenses 4.8 5.9 5.5 Engineering & development expenses 4.3 6.3 5.4 - -------------------------------------------------------------------------------- 19.0 26.6 23.5 - -------------------------------------------------------------------------------- Income from operations 19.9 16.0 19.4 Interest income(expense), net (1.0) .8 1.7 - -------------------------------------------------------------------------------- Income before provision for income taxes 18.9 16.8 21.1 Provision for income taxes 7.3 5.9 6.8 - -------------------------------------------------------------------------------- Net income 11.6% 10.9% 14.3% - --------------------------------------------------------------------------------
FISCAL 1998 COMPARED WITH FISCAL 1997 Net sales increased 64% from approximately $50.3 million to $82.4 million. The overall sales increase was primarily due to OEM sales of the Company's MicroMedia(TM) and MediaTheater(TM) speaker systems to Gateway. Continued sales growth within our traditional home, Designer Series and automotive speaker business also contributed to the sales increase during the fiscal year ended March 28, 1998. During the fiscal year, the Company launched two products in the Personal Desktop Audio(TM) category of speaker systems. The MicroMedia system was the Company's first three-piece powered sub/satellite speaker system capable of reproducing the entire bandwidth of sound for music, games and multimedia applications. The suggested retail price of the MicroMedia is $149.95. The MediaTheater system was the first multimedia sound system utilizing Virtual Dolby(R) surround sound technology. MediaTheater creates the effect of a full five-speaker surround sound system with only two satellite speakers and a subwoofer. The suggested retail price of the MediaTheater is $299.95. Additionally, the Company introduced its new top-of-the-line VR Tower speaker line. The VR950, VR960 and VR970 are floorstanding loudspeakers incorporating technology from the previous VR Series with added features like the powered subwoofers found in the VR960 and VR970 models. Suggested retail prices are $700, $1,000, and $1,600 per pair, respectively. During the fiscal year, the Company introduced the SoundBar(TM) Cinema Home Theater System. It is the first high-performance home theater sound system to eliminate the complexity of conventional systems. The SoundBar uses just three components, connected by three wires, to reproduce the movie soundtrack. It has a suggested retail price of $799.95. The Company's gross margin increased in absolute dollars from approximately $21,433,000 to $32,055,000 but decreased from 42.6% to 38.9% as a percentage of net sales due primarily to a shift in the sales mix to loudspeaker models with slightly lower margins, particularly OEM sales of the Company's multimedia speaker systems. Total operating expenses increased in absolute dollars from approximately $13,372,000 to $15,645,000 but decreased as a percentage of net sales from 26.6% to 19.0% during Fiscal 1998. Selling and marketing expenses have increased in absolute dollars primarily due to increased salaries and benefits relating to additional personnel. General and administrative expenses increased in absolute dollars due primarily to costs associated with the operating results of the Snell Acoustics subsidiary. Engineering and development expenses increased in absolute dollars primarily due to increased salaries and benefits relating to additional personnel, as well as increased expenses relating to new product development. Net interest income of a year ago was replaced by net interest expense during the twelve-month period ended March 28, 1998 primarily due to the utilization of working capital and borrowings under the Company's line of credit in conjunction with the common stock repurchase in June 1997. The Company's effective income tax rate increased from 35.3% in Fiscal 1997 to 38.5% in Fiscal 1998 primarily due to (1) the Company being subject to a higher tax rate (35%), (2) a decrease in tax-free instruments held by the Company and (3) a smaller proportion of the Company's income being derived outside the US thereby reducing the tax benefits associated with the Company's foreign sales corporation. Net income increased 75% from approximately $5.5 million to $9.6 million, while diluted earnings per share increased 112% from $1.23 to $2.61. The increase in net income is primarily the result of the increased sales growth, which was offset by the decrease in interest income and the operating loss by the Snell Acoustics (Snell) subsidiary included in the consolidated results of operations. The Company's financial results for the twelve-month period ended March 28, 1998 includes significant OEM sales of multimedia speaker systems to Gateway. These sales are pursuant to various contracts that currently run through June 1999. Since these contracts do not contain schedules with which Gateway must comply in placing orders, orders by Gateway may fluctuate significantly from quarter to quarter over the terms of the contracts. Assuming Gateway places orders in the quantities required under the terms of the contracts by June 1999, a substantial portion of the Company's revenues for Fiscal 1999 is expected to be derived from its contracts with Gateway. FISCAL 1997 COMPARED WITH FISCAL 1996 Operating results for Fiscal 1997 represented 52 weeks of sales and earnings compared to 53 weeks during Fiscal 1996. Fiscal 1997 included the results of operations of Snell since June 1, 1996 as a result of the acquisition of the business of Snell, a manufacturer of high-end loudspeaker systems. -- 5 -- Net sales increased 9% from approximately $46.3 million to $50.3 million. New product introductions in both the home and automotive loudspeaker categories contributed to the overall sales increase during the twelve-month period ended March 29, 1997. Leading the increase in home sales was the introduction of the MicroReference (Micro) category of products, replacements for the SubSat Series. The models include the Micro80 and Micro90, 3-piece systems with suggested retails of $400 and $800, respectively, and the Micro90t, a 4-piece theater system with a suggested retail of $1,000. The Company also introduced two new THX-certified front speaker systems. The Lynnfield VR35 front tower speaker and the Lynnfield VRl4 horizontal center channel, with suggested retails of $650 and $600, respectively, can be used in many combinations to fit a variety of applications. The Company continued to extend its offering of automotive products. The ProSeries 6.4^3 system is a premium performance three-way component speaker system with a suggested retail of $700. The Boston Rally(TM) RX47 is a 4-inch two-way coaxial speaker system retailing for $139.95 per pair. During the fourth quarter of Fiscal 1997 the Company launched the Boston Rally RM Series of component speakers and four new Boston Rally Balanced Band-Pass Subwoofer Systems. The RM9 and RM6 have suggested retails of $299.95 and $249.95, respectively, and the RS1l0B, RS112, RS208B, and RS2lOB have suggested retails ranging from $299.95 to $499.95 per system. The Company's gross margin decreased slightly from 42.9% to 42.6% primarily due to production inefficiencies associated with new product introductions, increased freight costs associated with raw material purchases and lower margins corresponding with products sold by the Company's subsidiary, Snell. Total operating expenses increased both in absolute dollars and as a percentage of net sales during Fiscal 1997. Selling and marketing expenses have increased from 12.6% of net sales to 14.4% of net sales primarily due to increased advertising and literature expenditures associated with new product introductions and increased international sales related expenses. General and administrative expenses have increased due primarily to costs associated with the acquisition of Snell, and the related amortization of goodwill acquired. Engineering and development expenses have increased primarily due to increased salaries and benefits relating to additional personnel, as well as increases in the cost of materials and supplies relating to new product development. Interest income has decreased in both absolute dollars and as a percentage of net sales because of the utilization of certain investments for the construction of the Company's new facility during Fiscal 1996, the repurchase of 222,800 shares of the Company's common stock under its Common Stock Repurchase Program and the acquisition of the business of Snell during Fiscal 1997. The Company's effective income tax rate increased from 32% in Fiscal 1996 to 35.3% in Fiscal 1997 primarily as a result of non-recurring tax credits realized in Fiscal 1996 in connection with capital expenditures. Net income decreased 17% to $5.5 million from $6.6 million and earnings per share decreased 19% from $1.52 per share to $1.23 per share. LIQUIDITY AND CAPITAL RESOURCES During Fiscal 1996 and 1997, the Company financed, its growth primarily with cash generated from operations. During Fiscal 1998, the Company financed its growth with cash generated from operations and bank borrowings. As of March 28, 1998, the Company's working capital was approximately $20,319,000, a decrease of approximately $4,362,000 since the end of Fiscal 1997. The decrease in working capital was primarily due to the repurchase of common stock in June 1997 and increased expenses related to increased sales in the Company's OEM business. At March 28, 1998 the Company's accounts receivables and inventory increased by approximately $2,110,000 and $3,076,000, respectively, compared to March 29, 1997 levels. Cash and cash equivalents and short-term investments decreased by approximately $1,067,000 and $2,594,000, respectively, compared to levels at the end of Fiscal 1997. Current indebtedness increased by approximately $5,774,000 to approximately $9,095,000 primarily as a result of increases in accounts payable and outstanding amounts maturing under one of its credit facilities. The Company has two lines of credit with two banking institutions totaling $26,500,000. At March 28, 1998 the Company had borrowings totaling $12,500,000 under one line of credit. At June 24, 1998, the Company had $8,000,000 outstanding under its $25 million revolving credit agreement. Net cash increased (decreased) in Fiscal 1998, 1997 and 1996 by ($1,067,000), $235,000 and $1,132,000, respectively. Net cash provided by operating activities in Fiscal 1998, l997 and 1996 was approximately $9,710,000, $5,174,000 and $7,498,000, respectively. Differences in cash flows from operating activities over this three-year period were primarily related to significant year-to-year changes in accounts receivable, inventories and accounts payable. Net cash flows from investing activities for Fiscal 1998, 1997 and 1996 were approximately $2,002,000, $1,558,000 and ($4,585,000), respectively. Net cash provided by investing activities in Fiscal 1998 and 1997 was primarily the result of the sale of investments held to maturity. In Fiscal 1997, net cash provided by investing activities was partially offset by the purchase of Snell Acoustics. In Fiscal 1996, net cash used by investing activities was primarily the result of the construction of the Company's principal executive offices and manufacturing facilities. Net cash used in financing activities in Fiscal 1998, 1997 and 1996 was approximately $12,779,000, $6,497,000 and $1,781,000, respectively, and was primarily the result of the repurchase of common stock and the payment of dividends. In Fiscal 1998, net cash used in financing activities was partially offset by borrowings under one of the Company's credit facilities incurred in connection with the repurchase of common stock, a portion of which was repaid within the fiscal year. - -- 6 - -- On June 13, 1997 the Company announced the redemption of an aggregate of 898,201 shares of its common stock from the estates of its co-founder, Francis L. Reed, and his wife, Dorothea T. Reed. The shares were repurchased at $26 5/8 per share. Funds to complete the redemption were obtained from an unsecured $25.0 million revolving credit agreement with a bank. The Company believes that its current resources are adequate to meet its requirements for working capital and capital expenditures through Fiscal 1999. SIGNIFICANT CUSTOMERS A significant portion of the Company's sales are currently to Gateway 2000, Inc. ("Gateway") pursuant to contracts that run through June 1999. Since these contracts do not contain schedules with which Gateway must comply in placing orders, orders by Gateway may fluctuate significantly from quarter to quarter over the terms of the contracts. Assuming Gateway places orders under the terms of the contracts by June 1999, a substantial portion of the Company's revenues for Fiscal 1999 is expected to be derived from its contracts with Gateway. 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 operation 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. INTERNATIONAL OPERATIONS Export sales accounted for approximately 19%, 21% and 20% of the Company's net sales during fiscal 1998, 1997 and 1996, respectively, with sales concentrations in Europe, Asia and Canada. The Company also distributes its products through a foreign subsidiary. The Company obtains a substantial supply of inventory from manufacturers located in foreign countries. The Company has no long-term, fixed price contracts or arrangements for inventory supplied by such foreign manufacturers. The Company could readily obtain such inventory from other sources, but there can be no assurance that it would not be at some delay. Any substantial delay in obtaining inventory from another supplier could have an adverse effect on the Company's business, results of operation and financial condition. A number of factors beyond the control of the Company, including, but not limited to, changes in world politics, unstable governments in foreign customer and manufacturer nations and inflation, may affect the operations or financial condition of the Company's foreign customers and manufacturers, as well as the timing of orders and deliveries of Boston Acoustics' products by such customers and manufacturers. See Note 7 to the Notes to Consolidated Financial Statements. YEAR 2000 COMPLIANCE The Company is in the process of updating its computer systems to ensure that they are Year 2000 compliant and to improve the Company's overall manufacturing, planning and inventory related systems. In Fiscal 1999, the Company plans to invest in its computer systems and applications to ensure that the Company is Year 2000 compliant. The Company believes that the Company's computer system will be Year 2000 compliant. The financial impact to the Company of its Year 2000 compliance programs has not been and is not anticipated to be material to its financial position or results of operations in any given year. While the Company does not believe it will suffer any major effects from the Year 2000 issue, it is possible that such effects could materially impact future financial results, or cause reported financial information not to be necessarily indicative of future operating results or future financial condition. In addition, if any of the Company's significant customers or suppliers do not successfully and timely achieve Year 2000 compliance, the Company's business could be materially affected. NEW ACCOUNTING STANDARDS In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income. SFAS No. 130 requires disclosure of all components of comprehensive income on an annual and interim basis. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997. The Company will adopt this statement for its fiscal year ending March 1999. In July 1997, the FASB issued SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information. SFAS No. 131 requires certain financial and supplementary information to be disclosed on an annual and interim basis for each reportable segment of an enterprise. SFAS No. 131 is effective for fiscal years beginning after December 15, 1997. Unless impracticable, companies would be required to restate prior period information upon adoption. The Company will adopt this statement for its fiscal year ending March 1999. INFLATION Inflation has not had a material adverse impact on the Company's cost of doing business. Management attempts to protect the Company by adjusting prices where market conditions permit and by reviewing and improving production processes where possible. There can be no assurance that the Company's business will not be affected by inflation. 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). 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. -- 7 -- CONSOLIDATED BALANCE SHEETS - --------------------------------------------------------------------------------
ASSETS March 28, 1998 March 29, 1997 - ---------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents $ 3,870,569 $ 4,937,232 Short-term investments -- 2,594,454 Accounts receivable, net of reserve of approximately $402,000 and $411,000, respectively 11,439,178 9,328,881 Inventories 12,617,077 9,540,757 Deferred income taxes 1,092,000 791,000 Prepaid expenses and other current assets 395,087 809,761 - ---------------------------------------------------------------------------------------- Total current assets 29,413,911 28,002,085 - ---------------------------------------------------------------------------------------- Property and Equipment, at cost: Land 1,433,365 1,433,365 Building and improvements 7,061,479 7,012,347 Machinery and equipment 8,667,671 7,414,269 Office equipment and furniture 1,847,326 1,597,499 Motor vehicles 288,948 373,177 - ---------------------------------------------------------------------------------------- 19,298,789 17,830,657 Less--Accumulated depreciation and amortization 8,005,621 6,936,205 - ---------------------------------------------------------------------------------------- 11,293,168 10,894,452 Other Assets: Long-term investments -- 1,022,164 Other assets, net 1,792,125 2,311,411 - ---------------------------------------------------------------------------------------- Total other assets 1,792,125 3,333,575 - ---------------------------------------------------------------------------------------- $42,499,204 $42,230,112 ======================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY - ---------------------------------------------------------------------------------------- Current Liabilities: - ---------------------------------------------------------------------------------------- $ 3,224,208 $ 1,020,146 Accrued payroll and payroll-related expenses 1,392,171 1,210,101 Dividends payable 414,287 523,279 Other accrued expenses 922,216 499,446 Accrued income taxes 142,075 68,135 Current maturity of line of credit 3,000,000 -- - ---------------------------------------------------------------------------------------- Total current liabilities 9,094,957 3,321,107 - ---------------------------------------------------------------------------------------- Line of Credit, net of current portion 9,500,000 -- Commitments (note 9) Shareholders Equity: Common stock, $.01 par value- Authorized - 6,000,000 shares Issued - 4,624,218 and 4,602,954 shares in 1998 and 1997, respectively 46,242 46,029 Additional paid-in capital 5,854,845 4,973,409 Retained earnings 46,245,277 38,322,082 - ---------------------------------------------------------------------------------------- 52,146,364 43,341,520 Less--Treasury stock, 1,309,921 and 416,720 shares in 1998 and 1997, respectively, at cost 28,242,117 4,432,515 - ---------------------------------------------------------------------------------------- Total shareholders' equity 23,904,247 38,909,005 - ---------------------------------------------------------------------------------------- $42,499,204 $42,230,112 ========================================================================================
The accompanying notes are an integral part of these consolidated financial statements. - -- 8 - -- CONSOLIDATED STATEMENTS OF INCOME - --------------------------------------------------------------------------------
For the Years Ended March 28, 1998 March 29, 1997 March 30, 1996 -------------------------------------------------- Net Sales $82,399,284 $50,308,962 $46,324,791 Cost of Goods Sold 50,344,605 28,875,471 26,468,207 - --------------------------------------------------------------------------------------------- Gross profit 32,054,679 21,433,491 19,856,584 - --------------------------------------------------------------------------------------------- Selling and Marketing Expenses 8,144,786 7,219,881 5,833,300 General and Administrative Expenses 3,986,437 2,965,267 2,552,389 Engineering and Development Expenses 3,513,321 3,187,131 2,496,523 - --------------------------------------------------------------------------------------------- Total expenses 15,644,544 13,372,279 10,882,212 - --------------------------------------------------------------------------------------------- Income from operations 16,410,135 8,061,212 8,974,372 Interest Income 220,430 438,509 777,204 Interest Expense (1,059,330) (21,629) - --------------------------------------------------------------------------------------------- Income before provision for income taxes 15,571,235 8,478,092 9,751,576 Provision for Income Taxes 5,995,000 2,993,000 3,121,000 - --------------------------------------------------------------------------------------------- Net income $9,576,235 $5,485,092 $6,630,576 ============================================================================================= Net Income per Share Basic $2.75 $1.28 $1.52 ============================================================================================= Diluted $2.61 $1.23 $1.52 ============================================================================================= Weighted Average Common Shares Outstanding (Note 2): Basic 3,488,287 4,284,974 4,353,032 ============================================================================================= (Note 2): Diluted 3,674,786 4,456,182 4,354,630 ============================================================================================= Dividends per Share $.50 $.50 $.50 =============================================================================================
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 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 common 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 Exercise of stock options 333 3 6,491 -- -- 6,494 Purchase of 222,800 shares of common stock -- -- -- -- (4,348,725) (4,348,725) Dividends -- -- -- (2,126,593) -- (2,126,593) Net income -- -- -- 5,485,092 -- 5,485,092 - -------------------------------------------------------------------------------------------------------------------------- Balance, March 29, 1997 4,602,954 46,029 4,973,409 38,322,082 (4,432,515) 38,909,005 Exercise of stock options 21,264 213 397,436 -- -- 397,649 Purchase of 898,201 shares of common stock -- -- -- -- (23,914,602) (23,914,602) Issuance of restricted common stock -- -- -- -- 105,000 105,000 Dividends -- -- -- (1,653,040) -- (1,653,040) Issuance of common stock warrants -- -- 484,000 -- -- 484,000 Net income -- -- -- 9,576,235 -- 9,576,235 - -------------------------------------------------------------------------------------------------------------------------- Balance, March 28, 1998 4,624,218 $ 46,242 $ 5,854,845 $ 46,245,277 $(28,242,117) $ 23,904,247 ==========================================================================================================================
-- 9 -- CONSOLIDATED STATEMENTS OF CASH FLOWS - --------------------------------------------------------------------------------
For the Years Ended -------------------------------------------------------- March 28,1998 March 29, 1997 March 30, 1996 - -------------------------------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities: Net income $ 9,576,235 $ 5,485,092 $ 6,630,576 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization 1,779,143 1,377,766 1,195,993 Deferred income taxes (345,000) (37,000) 18,000 Compensation expense related to issuance of restricted stock and warrants 589,000 -- -- Changes in assets and liabilities, net of acquisition of Snell Acoustics in 1997-- Accounts receivable (2,110,297) (585,615) (641,162) Inventories (3,076,320) (540,047) 268,351 Prepaid expenses and other current assets 414,674 (365,693) 131,026 Accounts payable 2,204,062 (373,461) 291,902 Accrued payroll and other accrued expenses 604,840 228,070 161,304 Accrued income taxes 73,940 (15,482) (557,941) - -------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 9,710,277 5,173,630 7,498,049 - -------------------------------------------------------------------------------------------------------------------------- Cash Flows from Investing Activities: Acquisition of Snell Acoustics -- (2,818,925) -- Purchases of property and equipment, net (1,578,291) (1,240,356) (9,062,407) Purchase of held-to-maturity investments -- (2,012,856) (3,793,876) Purchase of available-for-sale investments -- -- (400,OO0) Proceeds from sale of available-for-sale investments -- 1,274,734 1,202,465 Proceeds from sale of held-to-maturity investments 3,616,618 6,106,231 7,447,430 Decrease (increase) in other assets (36,282) 249,108 21,117 - -------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) investing activities 2,002,045 1,557,936 (4,585,271) - -------------------------------------------------------------------------------------------------------------------------- Cash Flows from Financing Activities: Proceeds from exercise of stock options 397,649 6,494 1,191,063 Income tax benefit from stock options -- -- 98,816 Proceeds from line of credit 21,675,000 -- -- Repayments of line of credit (9,175,000) -- -- Purchase of treasury stock (23,914,602) (4,348,725) (901,704) Dividends paid (1,762,032) (2,154,402) (2,169,444) - -------------------------------------------------------------------------------------------------------------------------- Net cash used in financing activities (12,778,985) (6,496,633) (1,781,269) - -------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents (1,066,663) 234,933 1,131,509 Cash and Cash Equivalents, beginning of year 4,937,232 4,702,299 3,570,790 - -------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents, end of year $ 3,870,569 $ 4,937,232 $ 4,702,299 ========================================================================================================================== Supplemental Disclosure of NonCash Financing Activities: Dividends payable $ 414,287 $ 523,279 $ 551,088 ========================================================================================================================== Supplemental Disclosure of Cash Flow Information: Cash paid for income taxes $ 6,265,799 $ 3,045,742 $ 3,562,125 ========================================================================================================================== Cash paid for interest $ 1,059,330 $ 21,629 $ -- ==========================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. - -- 10 - -- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 28, 1998 - -------------------------------------------------------------------------------- OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES Boston Acoustics, Inc. and subsidiaries (the Company) engineers, manufactures and markets home loudspeakers, [Illegible] speakers and speakers for multimedia environments. The Company's products are principally marketed in the United States, Canada, Europe and Asia through selected audio and audio-video specialty dealers and distributors. The accompanying consolidated financial statements reflect the operations of the Company and its wholly owned subsidiaries, BA Acquisition Corp. d/b/a Snell Acoustics, Boston Acoustics Securities Corporation (a Massachusetts securities corporation), Boston Acoustics Foreign Sales Corporation and Boston Acoustics Italia, SRL (an Italian corporation). All significant intercompany amounts have been [Illegible] in consolidation. The accompanying consolidated financial statements reflect the application of the following significant accounting policies. Revenue Recognition Revenue is recognized when products are shipped to customers. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Short-Term and Long-Term Investments The Company accounts for its investments in accordance with Statement of Financial Accounting Standards (SFAS) No. [Illegible] , Accounting for Certain Investments in Debt and Equity Securities. As of March 28, 1998, the Company has no short-term or long-term investments. As of March 29, 1997, the Company's Investments were classified as held-to-maturity (recorded at amortized cost) and as available-for-sale (recorded fair market value). Inventories Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following: March 28, 1998 March 29. 1997 - -------------------------------------------------------------------------------- Raw materials and work-in-process $7,473,368 $5,889,305 Finished goods 5,143,709 3,651,452 - -------------------------------------------------------------------------------- $12,617,077 $9,540,757 ================================================================================ Work-in-process and finished goods inventories consist of materials, labor and manufacturing overhead. Depreciation and Amortization The Company provides for depreciation and amortization using both the 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 - -------------------------------------------------------------------------------- [Illegible] and improvements 39 years Machinery and equipment 3-5 years [Illegible] equipment and furniture 3-5 years F. Warranty Costs Warranty costs are recorded when incurred by the Company. During the three-year period ended March 28, 1998, warranty costs were not significant, and future warranty costs are not expected to be significant. G. Foreign Currency Translation Boston Acoustics Italia, SRL, the Company's wholly owned subsidiary, is an Italian corporation that distributes product for the Company in Italy. In accordance with SFAS No. 52, Foreign Currency Translation, the Company has determined that the functional currency of this entity is the U.S. dollar. Accordingly, all monetary assets and liabilities for that entity are translated at year-end exchange rates while non-monetary items are translated at historical rates. Income and expense accounts are translated at the average rates in effect during the year, except for depreciation and cost of product sales, which are translated at historical rates. Gains or losses from changes in exchange rates are recognized in consolidated income in the year of occurrence. H. 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. 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 Concentrations 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 its 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 1998 and 1997, one customer represented 34% and 11%, respectively, of the Company's net sales. As of March 28, 1998 four customers represented 20%, 15%, 12% and 12% of -- 11 -- 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, accounts receivable, accounts payable and debt. The estimated fair value of these financial instruments approximates their carrying value and, except for accounts receivable and accounts payable, 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. M. Impairment of Long-Lived Assets The Company follows the provisions of SFAS No. 121. Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of SFAS No. 121 addresses accounting and reporting requirements for impairment of long-lived assets based on their fair market values. The carrying value of intangible assets, principally goodwill, is periodically reviewed by the Company based on the expected future undiscounted operating cash flows of the related business unit. Based on its most recent analysis, the Company believes that no material impairment of intangible assets exists as of March 28, 1998. N. Recently Issued Accounting Standards In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 130, Reporting Comprehensive Income, and SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information. Both SFAS No. 130 and 131 are effective for Fiscal years beginning after December 15, 1997. The Company believes that the adoption of these new accounting standards will not have a material impact on the Company's financial statements. 2. NET INCOME PER SHARE In February 1997, the FASB issued SFAS No. 128, Earnings per Share. This standard is effective for Fiscal periods ending after December 15, 1997 and requires presentation of both basic and diluted earnings per share on the face of the statements of income. These financial statements have been prepared and presented based on the new standard. Prior period amounts have been restated to conform to the current year presentation. For the year ended March 28. 1998, 1,286 antidilutive shares have been excluded from the weighted average number of common and dilutive potential shares outstanding. For the years ended March 29, 1997 and March 30. 1996, no antidilutive shares have been excluded from the weighted average number of common and dilutive potential common shares outstanding. Basic and diluted income per share, as required by SFAS No. 128, is as follows: For The Years Ended March 28, March 29, March 30, 1998 1997 1996 ------------------------------------- Net Income $9,576,235 $5,485,092 $6,630,57 ================================================================================ Basic weighted average common shares outstanding 3,488,287 4,284,974 4,353,03 - -------------------------------------------------------------------------------- Dilutive effect of assumed exercise of stock options and warrant 186,499 171,208 1,598 - -------------------------------------------------------------------------------- Weighted average common shares outstanding assuming dilution 3,674,786 4,456,182 4,354,63 ================================================================================ Basic net income per share $2.75 $1.28 $1.52 ================================================================================ Diluted net income per share $2.61 $1.23 $1.52 ================================================================================ 3. INVESTMENTS The Company's portfolio of investments at March 29, 1997 consists of marketable securities classified as available for-sale and held-to-maturity. The Company held no investments in debt or equity securities at March 28, 1998. Investments held at March 29, 1997 are presented below.
March 29, 1997 -------------------------------- Amortized Market Cost Value - -------------------------------------------------------------------------------- Short-term Investments-- Available-for-sale-- Money market and equity securities $ -- $ -- Held-to-maturity-- U.S. Treasury Notes and state and municipal general obligation and revenue bonds 2,594,454 2,595,400 - -------------------------------------------------------------------------------- Total short-term Investments $2,594,454 $2,595,400 ================================================================================ Long-term Investments (one-to-two-year maturity-- Held-to-maturity-- State and municipal general Obligation and revenue bonds $1,022,164 $1,021,543 ================================================================================ Realized gains and losses on sales of marketable securities for each of the three years in the period ended March 28, 1998 were not material to the Company's results of operations. 4. INCOME TAXES The components of deferred tax assets consist of the tax effects 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 28, 1998 March 29, 1997 - -------------------------------------------------------------------------------- Current deferred tax assets- Accruals not currently deductible $ 363,000 $ 320,000 Receivable reserves 404,000 286,000 Inventory reserves 325,000 185,000 - -------------------------------------------------------------------------------- 1,092,000 791,000 Noncurrent deferred tax assets- Depreciation 237,000 243,000 - -------------------------------------------------------------------------------- Total deferred tax assets $1,379,000 $1,034,000 ================================================================================
The noncurrent deferred income taxes are included in other assets in the accompanying consolidated balance sheet. - -- 12 - -- The components of the provision for income taxes shown the accompanying consolidated statements of income consist of the following:
March 28, March 29, March 30, 1998 1997 1996 - -------------------------------------------------------------------------------- Current Federa1 $4,776,000 $2,402,000 $2,800,000 State 1,564,000 628,000 303,000 - -------------------------------------------------------------------------------- $6,340,000 $3,030,000 $3,103,000 ================================================================================ Deferred Federa1 (297,000) (29,000) 23,000 State (48,000) (8,000) (5,000) - -------------------------------------------------------------------------------- (345,000) (37,000) 18,000 - -------------------------------------------------------------------------------- Provision for Income taxes $5,995,000 $2,993,000 $3,121,000 ================================================================================
The effective income tax rate varies from the amount computed using the statutory U.S. income tax rate as follows:
March 28, March 29, March 30, 1998 1997 1996 - -------------------------------------------------------------------------------- Federal statutory rate 34.3% 34.0% 34.0% [Illegible] in taxes resulting from State income taxes, net of Federal income tax benefit 5.0 4.9 2.0 Municipal bond interest (.2) (1.3) (1.7) Foreign sales corporation (1.5) (2.7) (2.2) [Illegible] .9 .4 (.1) - -------------------------------------------------------------------------------- 38.5% 35.3% 32.0% ================================================================================
SHAREHOLDERS' EQUITY Stock Options The Company maintained an incentive stock option plan (the 1986 Plan), which expired in October 1996. The Company has 43,069 options outstanding under the 1986 Plan of March 28, 1998. In February 1996, the Board of Directors approved a new incentive stock option plan (the 1996 Plan) authorizing options for 200,000 shares of common stock. The 1996 Plan is administered by the Board of Directors, and Options are granted at not less than the fair market value of the Company's common stock on the date of grant. In July 1996, the Board of Directors amended the 1996 Plan to permit the granting of nonqualified stock options and to allow the purchase of up to 20,000 shares of common stock by a director who is not an officer or employee of the Company. As of March 28, 1998, the Company has 192,000 options outstanding under the 1996 Plan. In May 1997, the Board of Directors approved a new stock option plan (the 1997 Plan) authorizing options for 300,000 shares of common stock. The 1997 Plan permits the granting of nonqualified stock options and incentive stock options. As of March 28, 1998, the Company has 99,500 options outstanding under the 1997 Plan. The following is a summary of all stock option activity:
Weighted Average Number of Price Exercise Options Range Price - -------------------------------------------------------------------------------- Outstanding at March 25, 1995 134,400 $8.875 - $17.00 $10.11 Granted 62,000 18.50 - 19.50 19.32 Exercised (124,400) 8.875 - 9.90 9.57 - -------------------------------------------------------------------------------- Outstanding at March 30, 1996 72,000 17.00 - 19.50 19.00 Granted 98,000 17.50 - 19.25 18.21 Exercised (333) 19.50 19.50 Canceled (11,000) 17.00 - 19.50 18.36 - -------------------------------------------------------------------------------- Outstanding at March 29. 1997 158,667 17.00 - 19.50 $18.55 Granted 202,500 22.00 - 29.84 24.73 Exercised (21,264) 17.00 - 19.50 18.70 Canceled (5,334) 17.50 - 19.50 18.50 - -------------------------------------------------------------------------------- Outstanding at March 28, 1998 334,569 $17.00 - $29.84 $22.28 - -------------------------------------------------------------------------------- Exercisable at March 28, 1998 75,813 $17.00 - $22.00 $19.89 ================================================================================
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based Compensation, which requires the measurement of the fair value of stock options and warrants to be included in the statement of income or disclosed in the notes to the financial statements. The Company has determined that it will continue to account for stock-based compensation for employees under Accounting Principles Board Opinion No.25 and elect the disclosure-only alternative under SFAS No. 123 for options granted after January 1, 1996 using the Black-Scholes option pricing model prescribed by SFAS No. 123. The weighted average assumptions are as follows:
March 28, March 29, March 30, 1998 1997 1996 - -------------------------------------------------------------------------------- Risk-free interest rate 6.15% 6.33% 6.38% Expected dividend yield, per share $.50 $.50 $.50 Expected lives, in years 5-10 5 5 Expected volatility 26% 42% 42%
The weighted average grant date fair value of options granted during the years ended March 28, 1998, March 29, 1997 and March 30, 1996 under these plans is $8.58, $5.26 and $6.76, respectively. As of March 28, 1998, March 29, 1997 and March 30, 1996, the weighted average remaining contractual life of outstanding options under these plans is 7.25, 7.21 and 4.36 years, respectively. -- 13 -- Had compensation cost for these plans been determined consistent with SFAS No. 123, the Company's net income and basic net income per share would have been reduced to the following pro forma amounts:
March 28, March 29, March 30, 1998 1997 1996 - -------------------------------------------------------------------------------- Net income-- As reported $9,576,235 $5,485,092 $6,630,576 Pro forma 9,031,049 5,438,212 6,469,619 Net income per share. as reported-- Basic $2.75 $1.28 $1.52 Diluted 2.61 1.23 1.52 Net income per share pro formal-- Basic $2.59 $1.27 $1.49 Diluted 2.46 1.22 1.49
B. Warrant In connection with a supply agreement entered into in March 1997, the Company granted a customer a warrant to purchase up to 100,000 shares of common stock at an exercise price of $17.50 per share, which is fully exercisable at March 28. 1998. The Company has the right to purchase any or all of the unexercised warrants at a price of $7.00 per warrant if at any time after March 1999 the price of the Company's common stock exceeds $25.00 per share. The warrants expire in March 2000. In accordance with SFAS 123, the Company has calculated the value of these warrants at $484,000, which was charged to operations during Fiscal 1998 as product was shipped to the customer. C. Issuance of Restricted Stock In July 1997, the Company issued 5,000 shares of restricted stock to an officer at no cost. The shares vested immediately. The Company recorded the issuance of the restricted stock as a charge to operations in Fiscal 1998. D. Purchase of Common Stock On June 13, 1997, the Company entered into an agreement with the estates of its founder and former Chief Executive Officer and his spouse. Under the terms of the agreement, the Company acquired approximately 898,000 shares of the Company's common stock owned by the estate for approximately $23,915,000. The Company has obtained a $25,000,000 unsecured line of credit with a bank to finance this transaction (see Note 6). 6. LINE OF CREDIT In June 1997, the Company entered into an unsecured revolving loan agreement with a bank for $25,000,000. The loan matures on July 1, 2002. Interest is charged at the LIBOR rate on the first day of the interest period plus a fixed rate spread based on certain financial ratios (7.38% as of March 28, 1998). As of March 28, 1998, $12,500,000 was outstanding under this revolving loan agreement, of which $3,000,000 has been classified as short-term as the Company expects to repay this amount during Fiscal 1999. In connection with this agreement, the Company must comply with certain of profitability. As of March 28, 1998, the Company was in compliance with all covenants. The Company also has a $1,500,000 unsecured line of credit with another 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 28, 1998). Direct advances accrue interest at the bank's commercial base rate (8.5% at March 28, 1998) No amounts were outstanding under the line of credit at March 28, 1998 and March 29, 1997. 7. EXPORT SALES Export sales (primarily to Europe, Asia and Canada) accounted for approximately 19%, 21% and 20% of net sales during Fiscal 1998, 1997 and 1996, respectively. 8. EMPLOYEE BENEFIT PLAN The Company has a 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 maximum of 5% of a participant's compensation for the plan year. The Company contributed approximately $58,000, $53,000 and $55,000 to the 401(k) Plan during Fiscal 1998, 1997 and 1996, respectively. 9. COMMITMENTS The Company leases a facility, which is occupied by a subsidiary, under an operating lease agreement that expires in Fiscal 1999. The lease requires annual payments of approximately $143,000 through 1999. Rent expense for Fiscal 1998, 1997 and 1996 was $142,916, $130,972 and $892,708, respectively. 10. ACQUISITION OF SNELL ACOUSTICS, INC. Effective June 1, 1996, the Company acquired all of the assets and the business and assumed certain liabilities of Snell Acoustics, Inc. (Snell). Snell manufactures high-end home loudspeaker systems for the audiophile market. The acquisition, which was financed with available cash, was accounted for as a purchase. Accordingly, the results of Snell since June 1, 1996 are included in the accompanying consolidated statements of income. The aggregate purchase price of $3,098,000 (which consisted of $720,000 in cash, approximately $2,300,000 of assumed liabilities and $78,000 of direct acquisition costs) was allocated based on the fair value of the tangible and intangible assets acquired as follows:
Current assets $ 988,000 Property and equipment 228,000 Goodwill 1,882,000 - -------------------------------------------------------------------------------- $ 3,098,000 ================================================================================
The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill and will be charged to operations over four years. Pro forma results of operations to reflect the Snell acquisition have not been presented, as they are not materially different from the - -- 14 - -- 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 28, 1998 and March 29, 1997, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended March 28, 1998. 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 28, 1998 and March 29, 1997, and the results of their operations and their cash flows for each of the three years in the period ended March 28, 1998, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Boston Massachusetts May 12, 1998 FIVE YEAR SELECTED FINANCIAL DATA (Amounts In Thousands Except Per Share Data) - --------------------------------------------------------------------------------
1998 1997 1996 1995 1994 - ---------------------------------------------------------------------------------------- Income Statement Data Net Sales $82,399 $50,309 $46,325 $41,046 $34,488 Net Income 9,576 5,485 6,631 5,949 4,682 Basic Earnings Per Share 2.75 1.28 1.52 1.38 1.10 Diluted Earnings Per Share 2.61 1.23 1.52 1.37 1.09 Weighted Average Shares Outstanding Basic 3,488 4,285 4,353 4,299 4,250 Diluted 3,675 4,456 4,355 4,350 4,301 Dividends Per Share $ .50 $ .50 $ .50 $ .425 $ .40 Balance Sheet Data Working Capital $20,319 $24,681 $26,083 $25,924 $22,723 Total Assets 42,499 42,230 43,124 38,379 32,899 Shareholders' Equity 23,904 38,909 39,893 35,054 30,625
QUARTERLY FINANCIAL DATA (Amounts In Thousands Except Per Share Data) - --------------------------------------------------------------------------------
First Second Third Fourth Quarter Quarter Quarter Quarter Year - -------------------------------------------------------------------------------------------- Year Ended March 28, 1998 Net Sales $ 12,415 $ 18,136 $ 27,187 $ 24,661 $ 82,399 Gross Profit 5,441 7,227 10,460 8,927 32,055 Net Income 1,134 1,976 3,613 2,853 9,576 Basic Earnings Per Share .28 .60 1.09 .86 2.75 Diluted Earnings Per Share .27 .58 1.05 .82 2.61 - -------------------------------------------------------------------------------------------- Year Ended March 29, 1997 - -------------------------------------------------------------------------------------------- Net Sales $ 11,052 $ 12,199 $ 14,779 $ 12,279 $ 50,309 Gross Profit 4.775 5.027 6,458 5,173 21,433 Net Income 1,319 1,203 1,795 1,168 5,485 Basic Earnings Per Share .30 .28 .42 .28 1.28 Diluted Earnings Per Share .30 .28 .42 .27 1.23
-- 15 -- 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. 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 1998. 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 1998 High Low - -------------------------------------------------------------------------------- First Quarter 26 1/2 22 1/4 Second Quarter 24 1/4 21 Third Quarter 34 1/4 26 1/4 Fourth Quarter 31 30/32 25 7/8 Fiscal 1997 High Low - -------------------------------------------------------------------------------- First Quarter 26 18 1/4 Second Quarter 23 3/4 19 1/2 Third Quarter 21 3/4 16 3/4 Fourth Quarter 30 3/4 16 3/4
There were 126 shareholders of record as of March 28, 1998. 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 Andrew G. Kotsatos Chairman, Chief Executive Officer and Treasurer Boston Acoustics, Inc. Fred E. Faulkner, Jr. President and Chief Operating Officer Boston Acoustics, Inc. George J. Markos Senior Vice President and General Counsel Yell-O-Glow Corporation Lisa M. Mooney George Walle Vice President and General Manager Millipore Corporation, Microelectronics Divisions EXECUTIVE OFFICERS Andrew G. Kotsatos Chairman, Chief Executive Officer and Treasurer Fred E. Faulkner, Jr. President and Chief Operating Officer 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: (978) 538-5000 Fax: (978) 538-5091 Website: www.bostonacoustics.com Auditors Arthur Andersen LLP Boston, Massachusetts Legal Counsel Peabody & Arnold LLP Boston, Massachusetts Transfer Agent Bank of Boston c/o Boston EquiServe, LP Boston, Massachusetts EX-23 5 EXHIBIT 23 Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our reports dated May 12, 1998 included in this annual report on Form 10-K, into the Company's previously filed Registration Statement No. 33-18793. ARTHUR ANDERSEN LLP Boston, Massachusetts June 26, 1998 EX-27.1 6 EXHIBIT 27.1
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 28, 1998 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 YEAR MAR-28-1998 MAR-28-1998 3870569 0 11439178 402000 13617077 29413911 19298789 8005621 42499204 9094957 9500000 0 0 46242 52100122 42499204 82399284 82399284 50344605 15644544 0 0 938900 15571235 5995000 9576235 0 0 0 9576235 2.75 2.61
EX-27.2 7 EX. 27.2
5 0000805268 BOSTON ACOUSTICS, INC. 3-MOS 6-MOS 9-MOS YEAR MAR-28-1998 MAR-28-1998 MAR-28-1998 MAR-28-1997 JUN-28-1998 SEP-27-1997 DEC-27-1997 MAR-29-1997 2856796 980144 1562830 4937232 2587186 675553 255196 2594454 9351773 12916770 15489514 9328881 409080 430000 477000 411000 11260974 13352407 12265860 9540757 27205038 29078479 30600826 28002085 17889502 18334092 18488561 17830657 7121335 7445385 7760675 6936205 40792906 42007556 43221550 42230112 6946264 8799115 8797739 3321107 18000000 15475000 13175000 0 0 0 0 0 0 0 0 0 46063 46226 46209 46029 44147696 46032182 49547519 43295491 40792906 42007556 43221550 42230112 12415276 30551245 57738674 50308962 12415276 30551245 57738674 50308962 6974138 17883510 34611336 28875471 3697974 7392363 11611089 13372279 0 0 0 0 0 0 0 0 66844 441404 789080 21629 1773234 4976581 10895941 8478092 639000 1866000 4173000 2993000 1134234 3110581 6722941 5485092 0 0 0 0 0 0 0 0 0 0 0 0 1134234 3110581 6722941 5485092 .28 .85 1.90 1.28 .27 .83 1.85 1.23
EX-27.3 8 EX. 27.3
5 0000805268 BOSTON ACOUSTICS, INC. 3-MOS 6-MOS 9-MOS YEAR MAR-29-1997 MAR-29-1997 MAR-29-1997 MAR-30-1996 JUN-29-1996 SEP-28-1996 DEC-28-1996 MAR-30-1996 3,170,091 2,517,939 1,707,700 4,702,299 4,924,005 4,848,705 3,243,480 6,678,735 8,356,465 9,102,819 11,076,157 8,401,038 296,000 366,000 435,000 307,000 9,282,797 9,203,635 9,709,904 3,458,593 26,914,360 26,876,964 26,840,323 29,313,731 17,105,937 17,518,262 17,829,297 16,362,035 6,010,210 6,450,660 6,846,731 5,665,178 43,794,362 42,640,057 41,864,755 43,123,592 4,061,368 4,003,753 3,606,767 3,230,855 0 0 0 0 0 0 0 0 0 0 0 0 46,026 46,026 46,026 46,026 40,704,308 41,372,993 42,644,477 39,930,501 43,794,362 42,640,057 41,864,755 43,123,592 11,051,857 23,251,045 38,029,777 46,324,791 6,276,741 13,449,191 21,769,652 26,468,207 2,886,381 6,173,458 9,951,992 10,882,212 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2,030,345 3,880,567 6,643,288 9,751,576 711,000 1,358,000 2,326,000 3,121,000 1,319,345 2,522,567 4,317,288 6,630,576 0 0 0 0 0 0 0 0 0 0 0 0 1,319,345 2,522,567 4,317,283 6,630,576 .30 .58 1.00 1.52 .30 .58 1.00 1.52
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