SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| þ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the quarterly period ended December 27, 2003
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 of incorporation or organization) |
(I.R.S. employer identification no.) |
| 300 Jubilee Drive Peabody, Massachusetts |
01960 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(978) 538-5000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ¨ No þ
There were 4,105,645 shares of Common Stock issued and outstanding as of February 10, 2004.
Boston Acoustics, Inc.
| Page | ||
| Part I: Financial Information |
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| Item 1. Financial Statements |
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| Consolidated Balance Sheets March 29, 2003 and December 27, 2003 (Unaudited) |
4 | |
| 6 | ||
| 7 | ||
| 8 | ||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
18 | |
| Item 4. Controls and Procedures |
18 | |
| Part II: Other Information |
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| 19 | ||
| 20 | ||
| Exhibits |
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| Exhibit 31.1 and 31.2 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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| Exhibit 32.1 and 32.2 Certifications pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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2
PART I: FINANCIAL INFORMATION
| Item 1: | Financial Statements |
3
Boston Acoustics, Inc. and Subsidiaries
Consolidated Balance Sheets
Assets
| March 29, 2003 |
December 27, 2003 | |||||
| Current Assets: |
||||||
| Cash and cash equivalents |
$ | 6,941,222 | $ | 7,395,860 | ||
| Accounts receivable, net of allowance for doubtful accounts of approximately $312,000 and $534,000 at March 29, 2003 and December 27, 2003, respectively |
6,582,033 | 9,245,100 | ||||
| Inventories |
11,919,039 | 11,649,790 | ||||
| Deferred income taxes |
3,577,000 | 3,284,000 | ||||
| Prepaid income taxes |
1,449,000 | 698,114 | ||||
| Prepaid expenses and other current assets |
1,009,369 | 913,728 | ||||
| Total current assets |
31,477,663 | 33,186,592 | ||||
| Property and Equipment, at Cost: |
||||||
| Machinery and equipment |
16,449,563 | 17,389,536 | ||||
| Building and improvements |
8,795,567 | 8,795,567 | ||||
| Office equipment and furniture |
5,473,707 | 5,802,205 | ||||
| Land |
1,815,755 | 1,815,755 | ||||
| Motor vehicles |
264,969 | 224,201 | ||||
| 32,799,561 | 34,027,264 | |||||
| Less-Accumulated depreciation and amortization |
20,609,012 | 22,893,566 | ||||
| 12,190,549 | 11,133,698 | |||||
| Other Assets, Net |
996,172 | 1,003,950 | ||||
| $ | 44,664,384 | $ | 45,324,240 | |||
The accompanying notes are an integral part of these consolidated financial statements.
4
Boston Acoustics, Inc. and Subsidiaries
Consolidated Balance Sheets
Liabilities and Shareholders’ Equity
| March 29, 2003 |
December 27, 2003 | ||||||
| Current Liabilities: |
|||||||
| Accounts payable |
$ | 5,630,246 | $ | 8,541,468 | |||
| Accrued payroll and payroll-related expenses |
602,589 | 526,288 | |||||
| Dividends payable |
374,136 | 348,980 | |||||
| Other accrued expenses |
2,079,095 | 2,875,674 | |||||
| Total current liabilities |
8,686,066 | 12,292,410 | |||||
| Minority Interest in Joint Venture |
37,344 | 36,712 | |||||
| Shareholders’ Equity: |
|||||||
| Common stock, $.01 par value - Authorized — 8,000,000 shares Issued — 5,100,314 shares |
51,003 | 51,003 | |||||
| Additional paid-in capital |
1,191,988 | 1,191,988 | |||||
| Subscriptions receivable |
(230,917 | ) | — | ||||
| Retained earnings |
42,978,409 | 43,274,897 | |||||
| 43,990,483 | 44,517,888 | ||||||
| Less-Treasury stock, 698,700 and 994,650 shares, at March 29, 2003 and December 27, 2003, respectively, at cost |
8,049,509 | 11,522,770 | |||||
| Total shareholders’ equity |
35,940,974 | 32,995,118 | |||||
| $ | 44,664,384 | $ | 45,324,240 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
5
Boston Acoustics, Inc. and Subsidiaries
Consolidated Statements of Operations
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| December 28, 2002 |
December 27, 2003 |
December 28, 2002 |
December 27, 2003 |
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| Net sales |
$ | 20,463,831 | $ | 15,377,307 | $ | 57,248,724 | $ | 41,085,416 | ||||||||
| Cost of goods sold |
13,868,471 | 8,828,722 | 39,143,179 | 25,115,724 | ||||||||||||
| Gross profit |
6,595,360 | 6,548,585 | 18,105,545 | 15,969,692 | ||||||||||||
| Selling and marketing expenses |
2,757,206 | 2,804,028 | 8,013,754 | 7,245,720 | ||||||||||||
| General and administrative expenses |
1,297,776 | 1,392,165 | 3,788,377 | 3,594,159 | ||||||||||||
| Engineering and development expenses |
1,646,131 | 1,186,143 | 4,563,581 | 3,400,312 | ||||||||||||
| Total operating expenses |
5,701,113 | 5,382,336 | 16,365,712 | 14,240,191 | ||||||||||||
| Income from operations |
894,247 | 1,166,249 | 1,739,833 | 1,729,501 | ||||||||||||
| Interest income |
27,366 | 53,398 | 86,103 | 117,275 | ||||||||||||
| Interest expense |
(9,674 | ) | (8,751 | ) | (41,314 | ) | (24,624 | ) | ||||||||
| Other income |
114,239 | 209,275 | 267,226 | 207,538 | ||||||||||||
| Income before provision for income taxes |
1,026,178 | 1,420,171 | 2,051,848 | 2,029,690 | ||||||||||||
| Provision for income taxes |
237,000 | 404,000 | 628,000 | 661,000 | ||||||||||||
| Net income |
$ | 789,178 | $ | 1,016,171 | $ | 1,423,848 | $ | 1,368,690 | ||||||||
| Net income per share: |
||||||||||||||||
| Basic |
$ | .18 | $ | .25 | $ | .31 | $ | .32 | ||||||||
| Diluted |
$ | .18 | $ | .25 | $ | .31 | $ | .32 | ||||||||
| Weighted average common shares outstanding (Note 4): |
||||||||||||||||
| Basic |
4,401,595 | 4,105,645 | 4,516,679 | 4,279,825 | ||||||||||||
| Diluted |
4,478,779 | 4,144,156 | 4,597,876 | 4,302,898 | ||||||||||||
| Dividends per share |
$ | .085 | $ | .085 | $ | .255 | $ | .255 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
6
Boston Acoustics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
| Nine Months Ended |
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| December 28, 2002 |
December 27, 2003 |
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| Operating activities |
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| Net income |
$ | 1,423,848 | $ | 1,368,690 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
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| Depreciation and amortization |
2,436,297 | 2,340,911 | ||||||
| Gain on sale of property and equipment |
(100,190 | ) | (3,643 | ) | ||||
| Deferred income taxes |
— | 293,000 | ||||||
| Charge related to conversion of subscriptions receivable |
— | 29,042 | ||||||
| Changes in assets and liabilities |
||||||||
| Accounts receivable |
(287,320 | ) | (2,663,067 | ) | ||||
| Inventories |
1,750,751 | 269,249 | ||||||
| Prepaid expenses and other current assets |
110,408 | 846,527 | ||||||
| Accounts payable |
2,547,997 | 2,911,222 | ||||||
| Accrued payroll and other accrued expenses |
(82,048 | ) | 720,278 | |||||
| Net cash provided by operating activities |
7,799,743 | 6,112,209 | ||||||
| Investing activities |
||||||||
| Purchases of property and equipment |
(933,183 | ) | (1,284,060 | ) | ||||
| Proceeds from sale of property and equipment |
100,190 | 3,643 | ||||||
| Decrease (increase) in other assets |
26,947 | (8,410 | ) | |||||
| Net cash used in investing activities |
(806,046 | ) | (1,288,827 | ) | ||||
| Financing activities |
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| Dividends paid |
(1,155,387 | ) | (1,097,358 | ) | ||||
| Purchase of treasury stock |
(2,428,850 | ) | (3,271,386 | ) | ||||
| Repayments on line of credit |
(2,500,000 | ) | — | |||||
| Net cash used in financing activities |
(6,084,237 | ) | (4,368,744 | ) | ||||
| Net increase in cash and cash equivalents |
909,460 | 454,638 | ||||||
| Cash and cash equivalents, beginning of period |
5,134,558 | 6,941,222 | ||||||
| Cash and cash equivalents, end of period |
$ | 6,044,018 | $ | 7,395,860 | ||||
| Supplemental Disclosure of Noncash Financing and Investing Activities |
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| Dividends payable |
$ | 374,136 | $ | 348,980 | ||||
| Partial forgiveness of recourse notes |
$ | — | $ | 90,443 | ||||
| Conversion of recourse notes into non-recourse notes |
$ | — | $ | 140,474 | ||||
| Increase (decrease) in minority interest in foreign subsidiary |
$ | 25,254 | $ | (632 | ) | |||
| Supplemental Disclosure of Cash Flow Information |
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| Cash paid for income taxes |
$ | 388,000 | ||||||