Koss Corp. (KOSS, Financial) filed Annual Report for the period ended 2009-06-30.
KOSS CORP. operates in the audio/video industry segment of the homeentertainment industry through its design manufacture and sale of stereoheadphones audio/video loudspeakers and related accessory products.Co.'s principal product is the design manufacture and sale ofstereophones and related accessories. Koss Corp. has a market cap of $49.6 million; its shares were traded at around $13.45 with a P/E ratio of 24.9 and P/S ratio of 1.3. The dividend yield of Koss Corp. stocks is 3.9%. Koss Corp. had an annual average earning growth of 6.7% over the past 10 years.
The amount spent on engineering and research activities relating to the development of new products or the improvement of existing products was approximately $1,948,000 during fiscal year 2009 as compared with $981,000 during fiscal year 2008. These activities were conducted by both Company personnel and outside consultants.
The Company sells a line of products with a suggested retail price ranging from less than $10 up to $1,000. The gross margin for each of these models is unique in terms of percentages. The price range of the products also produces a different level of actual dollar contribution per unit. For example a product with a gross margin contribution of 50% might yield a $5.00 contribution for one item, while another item may feature a 30% gross margin which could yield $50.00. The Company finds the low priced portion of the market most competitive and therefore most subject to pressure on gross margin percentages, which tends to lower profit contributions. Retail preference for lower priced items can reduce profit margins and contributions. The risk is that a shift in retail customer specifications toward lower priced items can lead to lower gross margins and lower profit contributions per unit of sale. Due to the range of products that the Company sells, the product sales mix can produce a variation in terms of a range of profit margins. Some customers sell a limited range of products that yield lower profit margins than others. Most notably, the budget priced headphone segment of the market below $10.00 retail which is distributed through computer stores, office supply stores, and mass market retailers tend to yield the lowest gross margins. An increase in business with these types of accounts, if coupled with a simultaneous reduction in sales to customers with higher gross margins would reduce profit margins and profitability.
The Company has significant accounts receivable or other amounts due from the Companys customers. The accounts receivable balance at the end of the last four quarters averaged approximately $8,967,067. Terms of payment for customers generally range from cash in advance to net 90 day credit terms. These credit arrangements are negotiated at unspecified and irregular intervals. The largest customers generate the largest receivable balances. If a customer develops operational difficulty it is not uncommon to temporarily suspend payment to vendors. The Company is subject to this risk in the retail marketplace. From time to time a customer may develop severe operating losses which can lead to a bankruptcy. In these cases, the Company may lose most of the outstanding balance due. Occasionally, the Company has been current with a customer at the time such an event occurs. The more material risk is that of losing the revenue of the customer which might be more onerous than losing the current outstanding accounts receivable. In addition, many companies that will insure accounts receivables will not do so for the Companys largest mass market customers. An example of such a loss was KMART Corporation. The Company recorded a loss of approximately $500,000 of which $44,000 was repaid in 2007, $37,000 in 2005 and $312,000 in 2004, when KMART filed for re-organization. KMART was current with the Company at the time that KMART filed Chapter 11 bankruptcy in January of 2002. The Company continued to supply KMART during its post petition re-organization and continues to supply the customer profitably today. The risk is that the Company derives most of the Companys sales revenue and profits from selling products to retailers for resale to consumers. The failure of the Companys customers to pay in full amounts due to the Company could negatively affect future profitability.
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KOSS CORP. operates in the audio/video industry segment of the homeentertainment industry through its design manufacture and sale of stereoheadphones audio/video loudspeakers and related accessory products.Co.'s principal product is the design manufacture and sale ofstereophones and related accessories. Koss Corp. has a market cap of $49.6 million; its shares were traded at around $13.45 with a P/E ratio of 24.9 and P/S ratio of 1.3. The dividend yield of Koss Corp. stocks is 3.9%. Koss Corp. had an annual average earning growth of 6.7% over the past 10 years.
Highlight of Business Operations:
The aggregate market value of the common voting stock held by nonaffiliates of the registrant as of December 31, 2008 was approximately $9,733,454 (based on the $9.30 per share closing price of the Companys common stock as reported on the NASDAQ Stock Market on December 31, 2008). In determining who are affiliates of the Company for purposes of this computation, it is assumed that directors, officers, and any persons who held on December 31, 2008 more than 5% of the issued and outstanding common stock of the Company are affiliates of the Company. The characterization of such directors, officers, and other persons as affiliates is for purposes of this computation only and should not be construed as a determination or admission for any other purpose that any of such persons are, in fact, affiliates of the Company.The amount spent on engineering and research activities relating to the development of new products or the improvement of existing products was approximately $1,948,000 during fiscal year 2009 as compared with $981,000 during fiscal year 2008. These activities were conducted by both Company personnel and outside consultants.
The Company sells a line of products with a suggested retail price ranging from less than $10 up to $1,000. The gross margin for each of these models is unique in terms of percentages. The price range of the products also produces a different level of actual dollar contribution per unit. For example a product with a gross margin contribution of 50% might yield a $5.00 contribution for one item, while another item may feature a 30% gross margin which could yield $50.00. The Company finds the low priced portion of the market most competitive and therefore most subject to pressure on gross margin percentages, which tends to lower profit contributions. Retail preference for lower priced items can reduce profit margins and contributions. The risk is that a shift in retail customer specifications toward lower priced items can lead to lower gross margins and lower profit contributions per unit of sale. Due to the range of products that the Company sells, the product sales mix can produce a variation in terms of a range of profit margins. Some customers sell a limited range of products that yield lower profit margins than others. Most notably, the budget priced headphone segment of the market below $10.00 retail which is distributed through computer stores, office supply stores, and mass market retailers tend to yield the lowest gross margins. An increase in business with these types of accounts, if coupled with a simultaneous reduction in sales to customers with higher gross margins would reduce profit margins and profitability.
The Company has significant accounts receivable or other amounts due from the Companys customers. The accounts receivable balance at the end of the last four quarters averaged approximately $8,967,067. Terms of payment for customers generally range from cash in advance to net 90 day credit terms. These credit arrangements are negotiated at unspecified and irregular intervals. The largest customers generate the largest receivable balances. If a customer develops operational difficulty it is not uncommon to temporarily suspend payment to vendors. The Company is subject to this risk in the retail marketplace. From time to time a customer may develop severe operating losses which can lead to a bankruptcy. In these cases, the Company may lose most of the outstanding balance due. Occasionally, the Company has been current with a customer at the time such an event occurs. The more material risk is that of losing the revenue of the customer which might be more onerous than losing the current outstanding accounts receivable. In addition, many companies that will insure accounts receivables will not do so for the Companys largest mass market customers. An example of such a loss was KMART Corporation. The Company recorded a loss of approximately $500,000 of which $44,000 was repaid in 2007, $37,000 in 2005 and $312,000 in 2004, when KMART filed for re-organization. KMART was current with the Company at the time that KMART filed Chapter 11 bankruptcy in January of 2002. The Company continued to supply KMART during its post petition re-organization and continues to supply the customer profitably today. The risk is that the Company derives most of the Companys sales revenue and profits from selling products to retailers for resale to consumers. The failure of the Companys customers to pay in full amounts due to the Company could negatively affect future profitability.
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