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Dear Stockholder:
We are very pleased to announce results for the fiscal year ending June 30,
2001.
Sales for the fourth quarter ending June 30, 2001 were up 5% to $10,186,107
compared with $9,745,408 for the same period one year ago. Income from
operations for the quarter increased 23% and reached $2,521,133 compared with
$2,051,156 for the fourth quarter of 2000. Net income increased 11% to
$1,692,877 compared with $1,527,987 for the same three month period last year.
Fourth quarter diluted earnings per share increased by 31% to $0.81 compared
with $0.62 for the fourth quarter of fiscal year 2000.
Year-to-date sales for the 12 months ending June 30, 2001 increased by 9% to
$38,609,335 compared with $35,401,533 for the fiscal year 2000. Income from
operations for the 12 months increased by 23% to $8,126,089 from $6,611,003.
Year-to-date income for the 12 months increased by 15% reaching a company high
of $5,687,521 compared with $4,953,461 for the 12 months ending June 30, 2000.
Diluted earnings per share were $2.56, an increase of 35% over the previous
fiscal year record of $1.90.
The final quarter for the fiscal year was exceptional. Throughout the year we
had been anticipating a lower fourth quarter compared with 2000 and instead we
are pleased to report a solid increase in sales and earnings. This is simply our
best year of stereophone sales in the history of the Company and has produced a
record in terms of our profitability. The Company had been most successful
through the year in its growth of the base stereophone business at retail,
despite setbacks in the OEM and automotive segments of the business.
Our Sales team was consistently challenged to perform this year by meeting and
exceeding progress we made last year in areas outside our consumer retail
business. The Company's ability to make up for slumps in the OEM sectors through
increases in our sales to the retail channel helped post solid gains for the
year and led us to new records in terms of our profitability and earnings.
In addition, income from operations had shown more solid and consistent growth
than net income based upon inconsistencies in royalty income through the year.
Renewal of the license agreement with Orient Power has now been extended for an
additional 12 months.
Koss remains committed to its core Stereophone business and improvements in new
product development and placement in both current and new accounts will continue
to positively impact fiscal year 2002. The Company will continue to use cash to
buy its undervalued shares from the market.
We are also pleased to announce that following the First Quarter of this fiscal
year, the Company will pay a $0.25 dividend to shareholders of record on
September 30, 2001. This is the first time Koss has paid a dividend to
shareholders since 1984. While the Company anticipates the ability to pay a
quarterly dividend in the future, investors should be cautious not to expect
this to automatically continue or to see any annual increase in the quarterly
rates in the foreseeable future.
We would like to take this opportunity to thank our customers, suppliers,
stockholders as well as the entire Koss team for their dedication to the current
and future success of Koss Corporation.
Sincerely,
John C. Koss Michael J. Koss
Chairman President and CEO
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STOCKHOLDERS' INFORMATION
Koss Corporation's 2001 Annual Report is presented in a simple, readable and
functional style. This Annual Report contains condensed financial statements
only. The detailed financial statements including footnotes are included in the
Form 10-K which has been provided to all stockholders along with the 2001 Annual
Report. The Company believes this manner of presentation provides a concise
summary for those who want to be kept informed while at the same time allowing
those who feel it necessary the opportunity to investigate further.
Koss Corporation common stock is traded on the Over the Counter market and
quotations are available through the National Market System. The trading symbol
is KOSS.
For additional Annual Reports, Form 10-K's or Proxy materials write to:
Investment Relations
Koss Corporation 4129 N. Port Washington Ave.
Milwaukee, WI 53212
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Koss Corporation
We have audited, in accordance with auditing standards generally accepted in the
United States of America, the consolidated balance sheets of Koss Corporation
and its subsidiaries as of June 30, 2001 and 2000, and the related consolidated
statements of income, of stockholders' investment and of cash flows for each of
the three years in the period ended June 30, 2001 (not presented herein); and in
our report dated July 10, 2001, except for Note 12 (not presented herein) for
which the date is July 25, 2001, we expressed an unqualified opinion on those
consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated financial statements is fairly stated, in all material respects, in
relation to the consolidated financial statements from which it has been
derived.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
July 10, 2001, except for Note 12 (not presented herein)
for which the date is July 25, 2001
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CONSOLIDATED STATEMENTS OF INCOME
Year Ended June 30, 2001 2000 1999
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Net sales $38,609,335 $35,401,533 $33,776,039
Cost of goods sold 23,037,127 21,843,517 20,920,145
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Gross profit 15,572,208 13,558,016 12,855,894
Selling, general, and
administrative expense 7,446,119 6,947,013 7,225,340
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Income from operations 8,126,089 6,611,003 5,630,554
Other income (expense)
Royalty income 1,010,026 1,283,563 1,403,194
Interest income 85,423 102,139 33,373
Interest expense (15,465) (24,244) (67,932)
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Income before income taxes 9,206,073 7,972,461 6,999,189
Provision for income taxes 3,518,552 3,019,000 2,681,000
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Net income $ 5,687,521 $ 4,953,461 $ 4,318,189
=============================================================================================================
Earnings per common share:
Basic $2.70 $1.95 $1.41
Diluted $2.56 $1.90 $1.39
=============================================================================================================
Dividends per common share None None None
=============================================================================================================
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CONSOLIDATED BALANCE SHEETS
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As of June 30, 2001 2000
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ASSETS
Current Assets:
Cash: $ 181,678 $ 3,164,401
Accounts receivable, less allowances of
$301,252 and $252,194, respectively 8,247,045 8,228,185
Inventories 8,496,010 9,414,036
Prepaid expenses 593,961 562,028
Income taxes receivable 480,322 244,755
Deferred income taxes 340,973 638,973
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Total current assets 18,339,989 22,252,378
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Equipment and Leasehold improvements, at cost:
Leasehold improvements 1,031,574 852,096
Machinery, equipment, furniture, and fixtures 5,012,089 4,910,652
Tools, dies, molds, and patterns 9,062,776 8,689,732
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15,106,439 14,452,480
Less--accumulated depreciation 13,415,811 12,888,178
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1,690,628 1,564,302
Deferred Income Taxes 557,135 488,135
Other Assets 908,576 739,492
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$ 21,496,328 $25,044,307
============================================================================================================================
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable $ 2,062,476 $ 570,567
Accrued liabilities 1,551,679 1,007,443
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Total current liabilities 3,614,155 1,578,010
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Contingently Redeemable Equity Interest 1,490,000 1,490,000
Deferred Compensation 1,015,390 1,045,310
Other Liabilities 437,354 437,354
Commitments and Contingencies
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Stockholders' Investment:
Common stock, $.01 par value,
authorized 8,500,000 shares;
issued and outstanding 1,943,378
and 2,349,369 shares, respectively 19,434 23,494
Contingently redeemable common stock (1,490,000) (1,490,000)
Undistributed retained earnings 16,409,995 21,960,139
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Total stockholders' investment 14,939,429 20,493,633
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$21,496,328 $25,044,307
============================================================================================================================
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MANAGEMENT INFORMATION
OFFICERS AND DIRECTORS
SENIOR MANAGEMENT
John C. Koss John C. Koss
Chairman of the Board Chairman of the Board
Koss Corporation
Michael J. Koss
Vice Chairman
President Thomas L. Doerr
Chief Executive Officer President
Chief Operating Officer Doerr Corporation
Chief Financial Officer
Victor L. Hunter
John C. Koss, Jr. President
Vice President-Sales Hunter Business Group, LLC
Sujata Sachdeva Michael J. Koss
Vice President- Finance Vice Chairman, President, C.E.O.,
C.O.O., C.F.O.
Koss Corporation
Jill McCurdy
Vice President-Product Development Lawrence S. Mattson
Retired President
Lenore Lillie Oster Company
Vice President-Operations
Martin F. Stein
Cheryl Mike Chairman
Vice President-Human Resources/Customer Relations Eyecare One Inc.
Declan Hanley John J. Stollenwerk
Vice President-International Sales President
Allen-Edmonds Shoe Corporation
ANNUAL MEETING
October 18, 2001
INDEPENDENT ACCOUNTANTS Performance Center
Koss Corporation
PricewaterhouseCoopers LLP 4129 N. Port Washington Avenue
Milwaukee, Wisconsin Milwaukee, WI 53212
TRANSFER AGENT
LEGAL COUNSEL
Questions regarding change of address,
Richard W. Silverthorn stock transfer, lost certificate, or
General Counsel information on a particular account
Whyte Hirschboeck Dudek S.C. should be directed in writing to:
Firstar Trust Company
Box 2077
Milwaukee, WI 53201
Attn: Mr. Philip Meyer