BOSTON ACOUSTICS INC - 10-Q Quarterly Report

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 September 25, 2004

¨	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 x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ¨ No x

There were 4,176,845 shares of Common Stock issued and outstanding as of November 9, 2004.

Boston Acoustics, Inc.

Index


			Page
Part I: Financial Information

	Item 1.	Financial Statements	3

		Consolidated Balance Sheets- March 27, 2004 and September 25, 2004 (Unaudited)	4

		Consolidated Statements of Income (Unaudited)- Three months and six months ended September 27, 2003 and September 25, 2004	6

		Consolidated Statements of Cash Flows (Unaudited)- Six months ended September 27, 2003 and September 25, 2004	7

		Notes to Unaudited Consolidated Financial Statements	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

		Items 1 through 6	19

		Signatures	20

		Exhibits	21

		Exhibit 31.1 and 31.2 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

		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

PART I: FINANCIAL INFORMATION

Item 1: Financial Statements

Boston Acoustics, Inc. and Subsidiaries

Consolidated Balance Sheets

Assets


	March 27, 2004		September 25, 2004
Current Assets:
Cash and cash equivalents	$	7,552,054	$	7,845,192
Accounts receivable, net of allowance for doubtful accounts of approximately $582,000 and $561,000 at March 27, 2004 and September 25, 2004, respectively		8,202,044		8,411,901
Inventories		12,240,838		12,305,735
Deferred income taxes		2,492,000		2,492,000
Prepaid income taxes		480,000		471,000
Prepaid expenses and other current assets		956,142		978,683

Total current assets		31,923,078		32,504,511

Property and Equipment, at Cost:

Machinery and equipment		17,429,279		18,028,196
Building and improvements		8,795,567		8,795,567
Office equipment and furniture		5,902,487		5,958,070
Land		1,815,755		1,815,755
Motor vehicles		209,950		209,950

		34,153,038		34,807,538

Less-Accumulated depreciation and amortization		23,278,695		24,395,449

		10,874,343		10,412,089

Other Assets, Net

Other assets, net		754,710		783,828
Deferred income taxes		406,000		406,000

	$	43,958,131	$	44,106,428

The accompanying notes are an integral part of these consolidated financial statements.

Boston Acoustics, Inc. and Subsidiaries

Consolidated Balance Sheets

Liabilities and Stockholders’ Equity


	March 27, 2004		September 25, 2004
Current Liabilities:

Accounts payable	$	7,322,535	$	7,839,069
Accrued payroll and payroll-related expenses		523,234		671,297
Accrued income taxes		649,512		365,195
Dividends payable		354,182		354,182
Other accrued expenses		1,081,361		1,083,833
Current maturity of line of credit		309,394		82,367

Total current liabilities		10,240,218		10,395,943

Stockholders’ Equity:

Common stock, $.01 par value -
Authorized — 8,000,000 shares
Issued — 5,161,514 and 4,166,864 shares at March 27, 2004 and September 25, 2004, respectively		51,615		41,668
Additional paid-in capital		1,789,689		1,355,155
Retained earnings		43,409,158		32,313,662

		45,250,462		33,710,485

Less-Treasury stock, 994,650 and 0 shares at cost, at March 27, 2004 and September 25, 2004, respectively		11,532,549		—

Total stockholders’ equity		33,717,913		33,710,485

	$	43,958,131	$	44,106,428

The accompanying notes are an integral part of these consolidated financial statements.

Boston Acoustics, Inc. and Subsidiaries

Consolidated Statements of Income


	Three Months Ended						Six Months Ended
	September 27, 2003			September 25, 2004			September 27, 2003			September 25, 2004
Net sales	$	13,110,912		$	12,250,511		$	25,708,109		$	24,870,462
Cost of goods sold		8,269,544			7,170,807			16,287,002			14,302,765

Gross profit		4,841,368			5,079,704			9,421,107			10,567,697

Selling and marketing expenses		2,300,302			2,512,979			4,441,692			5,132,617
General and administrative expenses		1,090,687			1,083,468			2,201,994			2,113,640
Engineering and development expenses		1,094,608			1,080,046			2,214,169			2,286,700

Total operating expenses		4,485,597			4,676,493			8,857,855			9,532,957

Income from operations		355,771			403,211			563,252			1,034,740

Interest income		40,834			17,282			63,877			31,169
Interest expense		(7,936	)		(7,986	)		(15,873	)		(15,972	)
Other income (expense)		(93,937	)		(24,298	)		(1,737	)		21,999

Income before provision for income taxes		294,732			388,209			609,519			1,071,936

Provision for income taxes		158,000			148,000			257,000			371,000

Net income	$	136,732		$	240,209		$	352,519		$	700,936

Net income per share:
Basic	$	.03		$	.06		$	.08		$	.17

Diluted	$	.03		$	.06		$	.08		$	.17

Weighted-average common shares outstanding (Note 4):
Basic		4,330,476			4,166,845			4,366,915			4,166,845
Diluted		4,375,892			4,208,339			4,383,710			4,199,574

Dividends per share	$	.085		$	.085		$	.17		$	.17

The accompanying notes are an integral part of these consolidated financial statements.

Boston Acoustics, Inc. and Subsidiaries

Consolidated Statements of Cash Flows


	Six Months Ended
	September 27, 2003			September 25, 2004
Operating activities
Net income	$	352,519		$	700,936
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,377,954			1,116,754
Deferred income taxes		293,000			—
Charge related to conversion of full recourse notes and forgiveness of subscription receivable		29,042			—
Provision for bad debt		4,240			(17,850	)
Changes in assets and liabilities:
Accounts receivable		(511,755	)		(192,007	)
Inventories		1,865,340			(64,897	)
Prepaid expenses and other current assets		530,897			(13,541	)
Accounts payable		361,000			516,534
Accrued payroll and other accrued expenses		58,836			(133,782	)

Net cash provided by operating activities		4,361,073			1,912,147

Investing activities
Purchases of property and equipment		(855,377	)		(654,500	)
Increase in other assets		(20,676	)		(29,118	)

Net cash used in investing activities		(876,053	)		(683,618	)

Financing activities
Net payments on line of credit		—			(227,027	)
Purchase of treasury stock		(3,271,386	)		—
Dividends paid		(747,422	)		(708,364	)

Net cash used in financing activities		(4,018,808	)		(935,391	)

Net increase (decrease) in cash and cash equivalents		(533,788	)		293,138

Cash and cash equivalents, beginning of period		6,941,222			7,552,054

Cash and cash equivalents, end of period	$	6,407,434		$	7,845,192

Supplemental Disclosure of Noncash Financing and Investing Activities
Dividends payable	$	349,936		$	354,182

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