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Koss Corp. Reports Operating Results (10-Q)

November 01, 2010 | About:
10qk

10qk

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Koss Corp. (KOSS) filed Quarterly Report for the period ended 2010-09-30.

Koss Corp. has a market cap of $41 million; its shares were traded at around $5.559 with a P/E ratio of 25.3 and P/S ratio of 1. The dividend yield of Koss Corp. stocks is 4.4%.KOSS is in the portfolios of Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Operations Net sales for the three months ended September 30 declined to $10,032,134 in 2010 compared with $11,614,645 in 2009. This $1,582,511 decrease in net sales was primarily driven by lower sales in the export market. Including the unauthorized transaction and unauthorized transaction related costs and recoveries, net as expenses, the Company had income from operations of $990,661 for the three months ended September 30, 2010, compared to a loss from operations of $2,413,490 for the three months ended September 30, 2009. The increased income from operations was primarily driven by the there not being any unauthorized transactions during the three months ended September 30, 2010 compared to $5,324,164 for the three months ended September 30, 2009. The reduction in unauthorized transactions was partially offset by lower sales and a decrease in the gross profit percentage, which was 43.5% for the three months ended September 30, 2010 compared to 48.6% for the same period last year. Operating income, excluding the unauthorized transactions and related costs and recoveries, was $1,256,945 in 2010 or 12.5% of net sales for the three months ended September 30, 2010 compared to $2,910,674 or 25.1% of net sales for the three months ended September 30, 2009.

Gross profit in the three months ended September 30, 2010 was $4,361,609 or 43.5% of net sales compared to $5,649,972 or 48.6% of net sales in the three months ended September 30, 2009. The decreased gross margin percentage was due to higher freight costs for importation of products, the unfavorable impact of the absorption of overhead on the lower sales volume and lower sales of one of the most profitable products. Freight is higher as a percentage of sales due to higher shipping costs and a lower value of purchased product per shipment. Overhead costs were higher on lower sales volume. The primary increase in costs was due to spending approximately $66,000 on prototypes and engineering tests for products expected to be introduced later in fiscal 2011. Sales of a very profitable product mix to foreign distributors were approximately $1,200,000 lower in the three months ended September 30, 2010 than they were in the same period last year.

In the three months ended September 30, 2010, the Company had operating income, including the unauthorized transaction related costs and recoveries, of $990,661 compared to an operating loss, including the unauthorized transactions as expense, of $2,413,490 in the three months ended September 30, 2009. The increase in operating income was primarily the result of no unauthorized transactions. The elimination of unauthorized transactions was partially offset by the lower gross profit percentage and lower volume. Operating income, excluding the unauthorized transactions and related costs and recoveries, was $1,256,945 in the three months ended September 30, 2010 or 12.5% of net sales compared to $2,910,674 or 25.1% of net sales in the three months ended September 30, 2009.

During the three months ended September 30, 2010, cash used in operations was $1,070,327, as compared to $3,567,033 used in the three months ended September 30, 2009. Working capital was $7,523,120 at September 30, 2010 and $5,371,158 at June 30, 2010. The net increase in working capital of $2,151,962 from June 30, 2010 primarily represents the increase in accounts receivable and inventory. The accounts receivable increased because of the increase in sales in the three months ended September 30, 2010 compared to the three months ended June 30, 2010. These were partially offset by a decrease in accounts payable and accrued liabilities because of the efforts to get more current with the Companys primary vendors. As of September 30, 2010 the Company had open commitments of approximately $1,065,000 for software and new product development.

Net cash provided by financing activities was $1,882,038 in the three months ended September 30, 2010 and $2,891,517 in the three months ended September 30, 2009. In the three months ended September 30, 2010, the Company received $2,325,000 from borrowing on its line of credit offset by a $442,962 dividend payment. In the three months ended September 30, 2009, there was borrowing of $2,750,000 on the line of credit offset a dividend payment of $479,876. The Company intends to continue its regular quarterly dividends for the foreseeable future.

(1) In April of 1995, the Board of Directors approved a stock repurchase program authorizing the Company to purchase from time to time up to $2,000,000 of its common stock for its own account. Subsequently, the Board of Directors periodically has approved increases in the stock repurchase program. The most recent increase was for an additional $2,000,000 in October 2006, for a maximum of $45,500,000 of which $43,360,247 had been expended through September 30, 2010.

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