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Koss First Quarter Sales Dip 9% as Retail Recoils
Company Announces 2:1 Stock Split
October 2, 2001 -- Milwaukee, Wisconsin: Koss Corporation (NASDAQ SYMBOL:
KOSS), the U.S. based leader in high-fidelity stereophones, has announced the
results of its first quarter ending September 30, 2001 and that it would split
the company stock 2:1 effective November 5, 2001 to shareholders of record on
October 22, 2001. Sales for the three months dipped 9% to $8,951,411 compared to
$9,879,638 for the same period one year ago. Income from operations for the
three months fell from $1,902,460 to $1,525,927. Net income fell from $1,383,991
compared to $1,030,874. First quarter diluted earnings per share were $0.50
compared with $0.59 one year ago.
"Our thoughts and prayers go to the victims and families of the devastating
attacks on our country," Michael J. Koss, President and CEO, told employees here
at a quarterly profit sharing meeting. "We salute the brave volunteers who have
given so selflessly to help rescue and recover those whom we all have lost. The
attack of September 11, 2001 did have a chilling affect on the economy and on
the company's first quarter performance. Combined with general inconsistencies
in retail market segments during July and August, the nation's consumer reaction
to the devastation of September 11, brought many North American retailers to a
stand still for one full week, followed by reduced consumer store traffic in the
wake of shaken economic reports."
Koss went on to say that the company had seen a slight softening in sales during
July and August, but had continued to anticipate more typical September sales in
preparation for the holiday season. The loss of store traffic during the final
three weeks of September resulted in vastly reduced retail sales that impacted
automatic product replenishment.
Reductions in sales revenue clipped gross margins by 1.4% from 40% in 2000 to
38.6% in 2001 reflecting a lower rate of overhead absorption.
Royalty income from the licensing agreement with Orient Power was dramatically
affected by the depressed market conditions resulting in a reduction in royalty
payments of 43% from $293,888 to $167,714, impacting net income compared with
the same three month period a year ago.
"The company has taken active steps to plan for any subsequent diversions that
might interrupt supply and delivery. We have also focused on our resource
allocations in the event that consumers hunker down and retail sales further
soften," Koss said. "Continuous and flexible planning and execution will be our
focus as businesses across America rally to support freedom and free enterprise.
We are bullish on the ingenuity, and patriotism of America, and the American
consumer specifically, as we work through these challenging times."
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Koss went on to say that the company's Board of Directors had approved the
distribution of its first dividend since 1983. The quarterly dividend of $0.25
cents per share to shareholders of record on September 30, 2001 will be paid on
October 15, 2001.
Koss Corporation markets a complete line of high-fidelity stereophones,
speaker-phones, computer headsets, telecommunications headsets, active noise
canceling stereophones, wireless stereophones, and compact disc recordings of
American Symphony Orchestras on the Koss Classics label.
Forward-looking statements in this release are subject to many uncertainties in
the Company's operations and business environment. These uncertainties include
general economic conditions, in particular, consumer demand for the Company's
and its customers' products, competitive and technological developments, foreign
currency fluctuations, and costs of operations. Shareholders, potential
investors and other readers are urged to consider these factors carefully in
evaluating the forward-looking statements and are cautioned not to place undue
reliance on such forward-looking statements. The forward-looking statements made
herein are only made as of the date of this press release and the company
undertakes no obligation to publicly update such forward-looking statements to
reflect subsequent events or circumstances. In addition, such uncertainties and
other operational matters are discussed further in the Company's quarterly and
annual filings with the Securities and Exchange Commission.
KOSS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended September 30
2001 2000
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Net Sales $ 8,951,411 $ 9,879,638
Cost of goods sold 5,499,520 5,927,391
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Gross profit 3,451,891 3,952,247
Selling, general and
administrative expense 1,925,964 2,049,787
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Income from operations 1,525,927 1,902,460
Other income (expense)
Royalty income 167,714 293,888
Interest income 7,281 45,387
Interest expense (10,964) (7,816)
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Income before income tax provision 1,689,958 2,233,919
Provision for income taxes 659,084 849,928
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Net income $ 1,030,874 $ 1,383,991
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Earnings per common share:
Basic $ 0.54 $ 0.62
Diluted $ 0.50 $ 0.59
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Dividends per common share $ 0.25 None
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