-----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, RKBWdIQvi8JPHvip/cl+2Znd7XYPGxnCJYkiRy+2N/tdxmdwvuJ9IIQzKe2jDeC8 Yb2mAU5dao/yEKDKXy5g1g== 0001047469-98-004602.txt : 19980211 0001047469-98-004602.hdr.sgml : 19980211 ACCESSION NUMBER: 0001047469-98-004602 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971227 FILED AS OF DATE: 19980210 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-Q SEC ACT: SEC FILE NUMBER: 000-15193 FILM NUMBER: 98529394 BUSINESS ADDRESS: STREET 1: 300 JUBILEE DRIVE STREET 2: P O BOX 6015 CITY: PEABODY STATE: MA ZIP: 01961-6015 BUSINESS PHONE: 5085385000 MAIL ADDRESS: STREET 1: 300 JUBILEE DRIVE STREET 2: P O BOX 6015 CITY: PEABODY STATE: MA ZIP: 01961-6015 10-Q 1 10-Q - ------------------------------------------------------------------------------ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 27, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO __________ COMMISSION FILE NO. 33-9875 ----------------- BOSTON ACOUSTICS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MASSACHUSETTS 04-2662473 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 300 JUBILEE DRIVE 01960 PEABODY, MASSACHUSETTS (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (978) 538-5000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] There were 3,310,964 shares of Common Stock issued and outstanding as of February 3, 1998. - ------------------------------------------------------------------------------ Boston Acoustics, Inc. INDEX
PAGE ---- Part I: Financial Information Item 1. Financial Statements Consolidated Balance Sheets (Unaudited)-March 29, 1997 and December 27, 1997.................................. 4 Consolidated Statements of Income (Unaudited)-Three months and Nine months ended December 28, 1996 and December 27, 1997...................................... 6 Consolidated Statements of Cash Flows (Unaudited)-Nine months ended December 28, 1996 and December 27, 1997... 7 Notes to Unaudited Consolidated Financial Statements...... 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............. 10 Part II: Other Information Items 1 through 6......................................... 13 Signatures................................................ 14
2 PART I: FINANCIAL INFORMATION Item 1: Financial Statements 3 Boston Acoustics, Inc. and Subsidiaries Consolidated Balance Sheets (Unaudited) ASSETS
MARCH 29, 1997 DECEMBER 27, 1997 -------------- ----------------- Current Assets: Cash and cash equivalents.............................. $4,937,232 $ 1,562,830 Short-term investments................................. 2,594,454 255,196 Accounts receivable, net of reserves of approximately $411,000 and $477,000, respectively................... 9,328,881 15,489,514 Inventories............................................ 9,540,757 12,265,860 Deferred income taxes.................................. 791,000 791,000 Prepaid expenses and other current assets.............. 809,761 236,426 ----------- ----------- Total current assets................................. 28,002,085 30,600,826 ----------- ----------- Property and Equipment, at cost: Land................................................... 1,433,365 1,433,365 Building............................................... 7,012,347 7,033,121 Machinery and equipment................................ 7,414,269 7,962,474 Office equipment and furniture......................... 1,597,499 1,794,950 Motor vehicles......................................... 373,177 264,651 ----------- ----------- 17,830,657 18,488,561 Less-accumulated depreciation and amortization.......................................... 6,936,205 7,760,675 ----------- ----------- 10,894,452 10,727,886 ----------- ----------- Other Assets: Long-term investments.................................. 1,022,164 -- Other assets........................................... 2,311,411 1,892,838 ----------- ----------- Total other assets.................................... 3,333,575 1,892,838 ----------- ----------- $42,230,112 $43,221,550 ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these consolidated financial statements. 4 Boston Acoustics, Inc. and Subsidiaries Consolidated Balance Sheets (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY
MARCH 29, 1997 DECEMBER 27, 1997 -------------- ----------------- Current Liabilities: Accounts payable.............................................................. $ 1,020,146 $ 2,715,482 Accrued payroll and payroll-related expenses.................................. 1,210,101 1,270,610 Dividend payable.............................................................. 523,279 413,871 Current maturity of line of credit............................................ -- 2,825,000 Other accrued expenses........................................................ 499,446 1,309,002 Accrued income taxes.......................................................... 68,135 263,774 ------------ ----------- Total current liabilities.............................................. 3,321,107 8,797,739 ------------ ----------- Line of credit (Note 4)....................................................... -- 13,175,000 Commitments Shareholders' Equity: Common stock, $.01 par value Authorized--6,000,000 shares Issued--4,602,954 and 4,620,885 shares at March 29, 1997 and December 27, 1997, respectively........................................... 46,029 46,209 Additional paid-in capital.................................................... 4,973,409 5,741,249 Retained earnings............................................................. 38,322,082 43,806,270 ------------ ----------- 43,341,520 49,593,728 Less-Treasury stock, 416,720 and 1,309,921 shares at March 29, 1997 and December 27, 1997, respectively, at cost.................................... 4,432,515 28,344,917 ------------ ----------- Total shareholders' equity............................................. 38,909,005 21,248,811 ------------ ----------- $42,230,112 $43,221,550 ------------ ----------- ------------ -----------
The accompanying notes are an integral part of these consolidated financial statements. 5 Boston Acoustics, Inc. and Subsidiaries Consolidated Statements of Income (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED ---------------------------- ---------------------------- DECEMBER 28, DECEMBER 27, DECEMBER 28, DECEMBER 27, 1996 1997 1996 1997 ------------- ------------- ------------- ------------- Net sales................................... $14,778,732 $27,187,429 $38,029,777 $57,738,674 Cost of goods sold.......................... 8,320,461 16,727,826 21,769,652 34,611,336 ---------- ----------- ----------- ----------- Gross profit.............................. 6,458,271 10,459,603 16,260,125 23,127,338 ---------- ----------- ----------- ----------- Selling and marketing expenses.............. 2,078,761 2,267,937 5,438,066 6,016,009 General and administrative expenses......... 892,384 1,023,254 2,204,394 3,104,196 Engineering and development expenses........ 807,389 927,535 2,309,532 2,490,884 ---------- ----------- ----------- ----------- Total expenses............................ 3,778,534 4,218,726 9,951,992 11,611,089 ---------- ----------- ----------- ----------- Income from operations.................... 2,679,737 6,240,877 6,308,133 11,516,249 Interest income............................. 93,068 26,159 356,784 168,772 Interest expense............................ (10,084) (347,676) (21,629) (789,080) ---------- ----------- ----------- ----------- Income before provision for income taxes.. 2,762,721 5,919,360 6,643,288 10,895,941 Provision for income taxes.................. 968,000 2,307,000 2,326,000 4,173,000 ---------- ----------- ----------- ----------- Net income................................ $1,794,721 $ 3,612,360 $ 4,317,288 $ 6,722,941 ---------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- Basic earnings per share.................... $ .42 $ 1.09 $ 1.00 $ 1.90 ---------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- Diluted earnings per share.................. $ .42 $ 1.05 $ 1.00 $ 1.85 ---------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- Weighted average shares outstanding Basic..................................... 4,241,914 3,309,348 4,317,965 3,546,943 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Diluted................................... 4,242,503 3,426,755 4,321,678 3,640,048 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Dividends per share......................... $ .125 $ .125 $ .375 $ .375 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these consolidated financial statements. 6 Boston Acoustics, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)
NINE MONTHS ENDED ------------------------------------ DECEMBER 28, 1996 DECEMBER 27, 1997 ----------------- ----------------- Cash flows from operating activities: Net income............................................................... $ 4,317,288 $ 6,722,941 Adjustments to reconcile net income to net cash provided by operating activities-Depreciation and amortization................................. 1,263,622 1,274,934 Compensation expense related to restricted stock and warrants............ -- 434,227 Changes in assets and liabilities, net of acquisition of Snell Acoustics in Fiscal 1997 Accounts receivable...................................................... (2,322,165) (6,160,633) Inventories.............................................................. (709,194) (2,725,103) Prepaid expenses and other current assets................................ 82,284 573,335 Accounts payable......................................................... 214,244 1,695,336 Accrued payroll and other accrued expenses............................... (224,644) 870,065 Accrued income taxes..................................................... (76,143) 195,639 ----------------- ----------------- Net cash provided by operating activities.............................. 2,545,292 2,880,741 ----------------- ----------------- Cash flows from investing activities: Acquisition of Snell Acoustics........................................... (2,615,675) -- Purchase of property and equipment, net.................................. (1,238,996) (657,904) Purchase of held-to-maturity investments................................. (1,763,980) -- Purchase of available-for-sale investments............................... (250,000) -- Proceeds from sale of available-for-sale investments..................... 1,325,857 -- Proceeds from sale of held-to-maturity investments....................... 5,037,792 3,361,422 Increase in other assets................................................. (55,001) (31,892) ----------------- ----------------- Net cash provided by investing activities.............................. 439,997 2,671,626 ----------------- ----------------- Cash flows from financing activities: Dividends paid........................................................... (1,631,163) (1,348,162) Purchase of treasury stock............................................... (4,348,725) (23,912,402) Proceeds from line of credit............................................. -- 21,125,000 Payments on line of credit............................................... -- (5,125,000) Proceeds from exercise of stock options.................................. -- 333,795 ----------------- ----------------- Net cash used in financing activities.................................. (5,979,888) (8,926,769) ----------------- ----------------- Decrease in cash and cash equivalents...................................... (2,994,599) (3,374,402) Cash and cash equivalents, beginning of period............................. 4,702,299 4,937,232 ----------------- ----------------- Cash and cash equivalents, end of period................................... $ 1,707,700 $ 1,562,830 ----------------- ----------------- ----------------- ----------------- Supplemental Disclosure of NonCash Financing Activities: Dividends payable........................................................ $ 523,238 $ 413,871 ----------------- ----------------- ----------------- ----------------- Supplemental Disclosure of Cash Flow Information: Cash paid for income taxes............................................... $ 2,378,320 $ 4,003,599 ----------------- ----------------- ----------------- ----------------- Cash paid for interest................................................... $ 21,629 $ 789,080 ----------------- ----------------- ----------------- -----------------
The accompanying notes are an integral part of these consolidated financial statements. 7 BOSTON ACOUSTICS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION The unaudited consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and include, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of interim period results. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Company believes, however, that its disclosures are adequate to make the information presented not misleading. The results for the three and nine-month periods ended December 27, 1997 are not necessarily indicative of results to be expected for the full fiscal year. These financial statements should be read in conjunction with the Company's Annual Report included in its Form 10-K for fiscal year ended March 29, 1997. (2) INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following:
MARCH 29, 1997 DECEMBER 27,1997 -------------- ---------------- Raw materials and work-in process.............................................. $ 5,889,305 $ 6,810,458 Finished goods................................................................. 3,651,452 5,455,402 ----------- ----------- $ 9,540,757 $12,265,860 ----------- ----------- ----------- -----------
Work-in-process and finished goods inventories consist of materials, labor and manufacturing overhead. (3) NET INCOME PER COMMON SHARE On March 31, 1997, the Financial Accounting Standards Board issued SFAS No. 128, Earnings per Share. SFAS No. 128 establishes standards for computing and presenting earnings per share (EPS) and applies to entities with publicly held common stock or potential common stock. During the three-month period ending December 27, 1997 the Company adopted SFAS No. 128 and is now required to report both basic and diluted earnings per share. Basic EPS is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution from common stock equivalents (stock options and warrants). The Company has restated earnings per share for the comparative periods for fiscal 1997 as required by SFAS No. 128. (4) REDEMPTION OF COMMON STOCK AND LINE OF CREDIT On June 13, 1997, the Company repurchased an aggregate of 898,201 shares of its common stock from the estates of its co-founder, Francis L. Reed, and his wife Dorothea T. Reed. The shares were repurchased at $26 5/8 per share or a total of approximately $23,915,000. Funds to complete the repurchase were obtained from an unsecured $25 million revolving line of credit agreement with a bank. At December 27, 1997 the Company's balance under this line of credit was approximately $16 million. 8 (5) STOCK OPTIONS The following is a summary of stock option activity for the nine months ended December 27, 1997:
WEIGHTED NUMBER OF PRICE AVERAGE OPTIONS RANGE PRICE ----------- ----------------- ----------- Outstanding at March 29, 1997........................................... 158,667 $ 17.00--$19.50 $ 18.55 Options granted......................................................... 100,000 $ 22.00 $ 22.00 Options exercised....................................................... (17,931) $ 17.00-$19.50 $ 18.74 Options canceled........................................................ (2,000) $ 17.50-$19.50 $ 18.50 ------- ----------------- --------- Outstanding at December 27, 1997........................................ 238,736 $ 17.00--$22.00 $ 19.99 ------- ----------------- --------- ------- ----------------- --------- Exercisable at December 27, 1997........................................ 51,815 $ 18.50--$22.00 $ 20.74 ------- ----------------- --------- ------- ----------------- ---------
9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth the results of operations for the three-month and nine-month periods ended December 28, 1996 and December 27, 1997 expressed as percentages of net sales.
THREE MONTHS ENDED NINE MONTHS ENDED -------------------------------- -------------------------------- DECEMBER 28, DECEMBER 27, DECEMBER 28, DECEMBER 27, 1996 1997 1996 1997 --------------- --------------- --------------- --------------- Net sales............................. 100.0% 100.0% 100.0% 100.0% Cost of goods sold.................... 56.3 61.5 57.2 59.9 ----- ----- ----- ----- Gross profit......................... 43.7 38.5 42.8 40.1 ----- ----- ----- ----- ----- ----- ----- ----- Selling and marketing expenses....... 14.1 8.3 14.3 10.4 General & administrative expenses..... 6.0 3.8 5.8 5.4 Engineering & development expenses.... 5.5 3.4 6.1 4.3 ----- ----- ----- ----- 25.6 15.5 26.2 20.1 ----- ----- ----- ----- Income from operations............... 18.1 23.0 16.6 20.0 Interest income (expense), net........ 0.6 (1.2) 0.9 (1.1) ----- ----- ----- ----- Income before provision for income taxes.............................. 18.7 21.8 17.5 18.9 Provision for income taxes............ 6.6 8.5 6.1 7.3 ----- ----- ----- ----- Net income........................... 12.1% 13.3% 11.4% 11.6% ----- ----- ----- ----- ----- ----- ----- -----
Net sales increased 84 percent, from approximately $14,779,000 during the third quarter of fiscal 1997 to approximately $27,187,000 during the third quarter of fiscal 1998. For the nine months ended December 27, 1997 net sales increased 52% from approximately $38,030,000 to approximately $57,739,000. The overall sales increase was primarily due to the OEM sales of our MicroMedia-TM- and MediaTheater-TM- speaker systems to Gateway 2000, Inc. Continued sales growth in our international business also contributed to the overall sales increase. During the quarter, the Company completed the rollout of the new top-of-the-line VR Tower speaker line in the U.S. The VR950, VR960 and VR970 are floorstanding loudspeakers incorporating technology from our previous VR Series with added features like the powered subwoofers found in the VR960 and VR970 models. Suggested retail prices are $700, $1,000, and $1,600 per pair, respectively. 10 The Company's gross margin for the three-month and nine-month period ended December 27, 1997 increased in absolute dollars but decreased as a percentage of net sales due primarily to a shift in the sales mix to loudspeaker models with slightly lower margins, particularly OEM sales of our multimedia speaker systems. Total operating expenses increased in absolute dollars but decreased as a percentage of net sales during both the three-month and nine-month periods ended December 27, 1997. Selling and marketing expenses have increased in absolute dollars primarily due to increased salaries and benefits relating to additional personnel. General and administrative expenses have increased in absolute dollars for both the three-month and nine-month periods due primarily to costs associated with the operating results of the Snell Acoustics subsidiary. Engineering and development expenses have increased in absolute dollars for both the three-month and nine-month periods primarily due to increased salaries and benefits relating to additional personnel, as well as increased expenses relating to new product development. Interest income of a year ago was replaced by net interest expense during the three-month and nine-month periods ended December 27, 1997 primarily due to the utilization of working capital and borrowings under the Company's line of credit in conjunction with the common stock repurchase in June 1997. The Company's effective income tax rate increased from 35% for both the three-month and nine-month periods ended December 28, 1996 to 39% and 38% for the three-month period and nine-month period ended December 27, 1997, respectively. The increase is primarily due to (1) the Company being subject to a higher tax rate (35%), (2) a decrease in tax-free instruments held by the Company and (3) a smaller proportion of the Company's income being derived outside the U.S. thereby reducing the tax benefits associated with the Company's foreign sales corporation. Net income for the third quarter increased 101%, from approximately $1,795,000 in fiscal 1997 to approximately $3,612,000 in fiscal 1998 while diluted earnings per share increased 150% from $.42 to $1.05 per share. Net income for the nine-month period ended December 27, 1997 increased 56% from approximately $4,317,000 in fiscal 1997 to approximately $6,723,000 in fiscal 1998, while diluted earnings per share for the nine-month period increased 85% from $1.00 per share to $1.85 per share. The increase in net income for the three and nine-month periods ended December 27, 1997 is primarily the result of the increased sales growth, which was offset by the decrease in interest income and the operating loss by the Snell subsidiary included in the consolidated results of operations. The Company's financial results for the three-month and nine-month periods ending December 27, 1997 include significant OEM sales of Multimedia speaker systems to Gateway 2000, Inc. These sales are pursuant to various contracts that currently run through June 1999. Since these contracts do not contain schedules with which Gateway must comply in placing orders, orders by Gateway may fluctuate significantly from quarter to quarter over the terms of the contracts. Assuming Gateway places orders in the quantities required under the terms of the contracts by June 1999, a substantial portion of the Company's revenues for the current fiscal year and fiscal year 1999 is expected to be derived from its contracts with Gateway. LIQUIDITY AND CAPITAL RESOURCES As of December 27, 1997 the Company's working capital was approximately $21,803,000. The Company's cash and cash equivalents were approximately $1,563,000, and short-term investments were approximately $255,000. The Company's cash and cash equivalents at December 27, 1997 decreased by approximately $3,374,000 from March 29, 1997 primarily as a result of the repurchase of common stock during June 1997 and the increase in inventory and accounts receivable relating to the Company's OEM business. The Company has two lines of credit with two banking institutions totaling $26,500,000. At December 27, 1997 the Company had borrowings totaling $16,000,000 under one line of credit. 11 The Company believes that its resources are adequate to meet its requirements for working capital and capital expenditures through the next twelve months. CAUTIONARY STATEMENTS The Private Securities Litigation Reform Act of 1995 contains certain safe harbors regarding forward-looking statements. From time to time, information provided by the Company or statements made by its directors, officers, or employees may contain "forward-looking" information which involve risk and uncertainties. Any statements in this report that are not statements of historical fact are forward-looking statements (including, but not limited to, statements concerning the characteristics and growth of the Company's market and customers, the Company's objectives and plans for future operations, possible acquisitions, and the Company's expected liquidity and capital resources). Such forward-looking statements are based on a number of assumptions and involve a number of risks and uncertainties, and accordingly, actual results could differ materially. Factors that may cause such differences include, but are not limited to: the continued and future acceptance of the Company's products, the rate of growth in the audio industry; the presence of competitors with greater technical marketing and financial resources; the Company's ability to promptly and effectively respond to technological change to meet evolving consumer demands; capacity and supply constraints or difficulties; and the Company's ability to successfully integrate new operations. For a further discussion of these and other significant factors to consider in connection with forward-looking statements concerning the Company, reference is made to Exhibit 99 of the Company's Annual Report on Form 10-K for fiscal year March 30, 1996. 12 PART II: OTHER INFORMATION Item 1. LEGAL PROCEEDINGS None Item 2. CHANGES IN SECURITIES None Item 3. DEFAULTS UPON SENIOR SECURITIES None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None Item 5. OTHER INFORMATION None Item 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits Exhibit 10.A.#--Letter of Agreement dated December 22, 1997 by and between Gateway 2000, Inc. and Boston Acoustics, Inc. Exhibit 27.--Financial Data Schedule b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended December 27, 1997. - -------------------- # Indicates that portions of the exhibit have been omitted pursuant to a request for confidential treatment. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Boston Acoustics, Inc. ---------------------- Registrant Date: February 3, 1998 By: s/Andrew G. Kotsatos --------------------- Andrew G. Kotsatos Director, Chief Executive Officer and Treasurer Date: February 3, 1998 By: s/Fred E.Faulkner, Jr. ---------------------- Fred E.Faulkner, Jr. President and Chief Operating Officer 14 EX-10. 2 EXHIBIT 10.A Exhibit 10.A * = THE MATERIAL HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND SUCH MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION GATEWAY 2000 610 Gateway Drive P.O. Box 2000 North Sioux City, SD 57049-2000 Phone: 605-232-2000 Toll Free: 800-846-2000 Fax: 605-232-2023 December 22nd, 1997 Bob Spaner Boston Acoustics 300 Jubilee Dr. Peabody, MA 01960 Dear Mr. Spaner: This Letter of Agreement ("LOA") will confirm the understanding and intent of Boston Acoustics, Inc. ("BA") and Gateway 2000, Inc., and its subsidiaries and affiliates ("Gateway"), to enter into an Agreement for the provision of services and products by BA to Gateway worldwide. The Agreement will be established under terms and conditions to be set forth in a signed definitive written agreement dated March 17th, 1997. Gateway hereby agrees to commit to purchase, worldwide, the following number of systems during the timeframes as set forth below: * for the life of the product - 14-18 months Up to * in * costs This commitment is in no way inclusive of the number of systems Gateway may purchase. This commitment is conditional upon the following: 1. Receipt of * speakers for delivery to Gateway's customers, based upon the * schedule, no later than May 1st, 1998. The parties understand that Gateway expects to receive product for sale prior to these dates. 2. The agreed upon cost by both parties for the: * as follows: December - all products shipped to GW2K*. January cost - $* February cost - $* March cost - $* April cost - $* *: $* US, Net * 3. Gateway's specification, support for Redbook audio, DVD, and all testing (compatibility, regulatory, etc.) and product schedule being met. 4. GW2K is now responsible for *. 5. Acceptance and compliance with Definitive Agreement, once executed. BA and Gateway acknowledge, that while this LOA sets forth their intentions, this LOA does not contain all masters upon which agreement must be reached in order to proceed. All information exchanged to date and hereafter between the parties is proprietary to the party submitting the information and shall be held in the strictest confidence between the parties. Please indicate your acceptance of and agreement to this Letter of Agreement by signing below. Sincerely, Dave Russell Director ACCEPTED AND AGREED ACCEPTED AND AGREED Boston Acoustics Gateway 2000, Inc. By: /s/ Andrew G. Kotsatos By: /s/ Dave Russell ------------------------------- ------------------------------ Name: Andrew G. Kotsatos Name: Dave Russell Title: CEO Title: Director Date: 12/23/97 Date: 12/22/97 EX-27 3 EX-27_1521
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FINANCIAL STATEMENTS IN ITS QUARTERLY REPORT ON FORM 10Q FOR THE QUARTERLY PERIOD ENDED DECEMBER 27, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000805268 BOSTON ACOUSTICS, INC. 9-MOS MAR-28-1998 DEC-27-1997 1562830 255196 15489514 477000 12265860 30600826 18488561 7760675 43221550 8797739 13175000 0 0 46209 49547519 43221550 57738674 57738674 34611336 11611089 0 0 789080 10895941 4173000 6722941 0 0 0 6722941 1.90 1.85
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