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| KOSS > SEC Filings for KOSS > Form 10-Q on 8-May-2009 | All Recent SEC Filings |
8-May-2009
Quarterly Report
Financial Condition, Liquidity and Capital Resources
Cash provided by operating activities during the nine months ended March 31, 2009 amounted to $2,590,224. This was a result of net income for the period adjusted for changes in operating assets and current liabilities, which arose primarily out of increases in other current assets, and decreases in accrued liabilities, and accounts payable.
Capital expenditures for new equipment (including production tooling) were $1,802,011 for the nine months ended March 31, 2009. Capital expenditures for fiscal year 2009 are expected to be approximately $2.6 million. The Company expects to generate sufficient funds through operations to fund these expenditures.
Stockholders' investment increased to $23,407,449 at March 31, 2009, from $23,217,435 at June 30, 2008. The net increase reflects net income and exercise of stock options offset by the effect of the purchase and retirement of common stock and dividends declared.
On February 16, 2009, the Company entered into a new credit facility for an unsecured line of credit for up to a maximum of $10,000,000 up to and including January 29, 2010. This credit facility replaces the Company's previous credit facility, which has been terminated and contained substantially the same terms as the Company's new credit facility. The Company can use the new credit facility for working capital, to refinance existing indebtedness, for stock repurchase and for general corporate purposes. Borrowings under this credit facility bear interest at either the bank's most recently publicly announced prime rate or at a LIBOR-based rate determined in accordance with the loan agreement. This credit facility includes financial covenants that require the Company to maintain a minimum tangible net worth, liabilities to tangible net worth ratios and interest coverage ratios. The Company uses its credit facility from time to time, although there was no utilization of this credit facility at March 31, 2009 or June 30, 2008. The Company did not utilize the credit facility during the quarter or nine months ended March 31, 2009.
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. The Company intends to effectuate all stock purchases either on the open market or through privately negotiated transactions, and intends to finance all stock purchases through its own cash flow or by borrowing for such purchases.
For the quarter ended March 31, 2009, the Company purchased 168 shares of its common stock at an average net price of $9.30 per share, for a total net purchase price of $1,562. For the nine months ended March 31, 2009, the Company purchased 3,998 shares of its common stock at an average net price of $10.91 per share, for a total net purchase price of $43,620.
From the commencement of the Company's stock repurchase program through March 31, 2009, the Company has purchased a total of 5,474,102 shares for a total gross purchase price of $52,768,873 (representing an average gross purchase price of $9.64 per share) and a total net purchase price of $41,945,130 (representing an average net purchase price of $7.66 per share). The difference between the total gross purchase price and the total net purchase price is the result of the Company receiving from employees cash acquired from such employees pursuant to the Company's stock option program. In determining the dollar amount available for additional purchases under the stock repurchase program, the
Company uses the total net purchase price by the Company for all stock purchases, as authorized by the Board of Directors.
The Company also has an Employee Stock Ownership Plan and Trust ("ESOP") pursuant to which shares of the Company's common stock are purchased by the ESOP for allocation to the accounts of ESOP participants. There were no ESOP purchases of the Company's common stock for the nine months ended March 31, 2009.
Results of Operations
Net sales for the third quarter ended March 31, 2009 declined by 19% to $8,145,930 from $10,003,648 for the same period in 2008. Net sales for the nine months ended March 31, 2009 declined by 14% to $29,919,559 from $34,740,651 for the same period in 2008. The decrease is primarily the result of soft U.S. retail sales.
Gross profit as a percent of net sales was 32% for the quarter ended March 31, 2009 compared to 36% for the same period in the prior year. For the nine months ended March 31, 2009 the gross profit percentage was 35% compared to 37% for the same period in the prior year. The decrease in gross profit for the nine months ended March 31, 2009 was primarily due to a less profitable model mix sold in that period.
Selling, general and administrative expenses for the quarter ended March 31, 2009 were $2,388,169 or 29% of net sales, compared to $2,602,122 or 26% of net sales for the same period in 2008. For the nine month period ended March 31, 2009, these expenses were $8,342,795 or 28% of net sales, compared to $7,757,424 or 22% of net sales, for the same period in 2008. This increase is due to extra costs incurred related to engineering, research development and marketing.
For the quarter ended March 31, 2009, income from operations was $225,825 compared to $963,002 for the same period in the prior year. Income from operations for the nine months ended March 31, 2009 was $2,154,541 compared to $4,924,055 for the same period in 2008, a 56% decrease. Income from operations decreased primarily as a result of decreased net sales for the quarter and nine months ended March 31, 2009.
For the quarter ended March 31, 2009, net income decreased 79% to $137,767 from $647,997 for the same period in 2008. Net income for the nine months ended March 31, 2009, decreased 57% from $3,230,223 in 2008 to $1,373,985 in 2009. Net income decreased primarily as a result of decreased net sales for the quarter and nine months ended March 31, 2009.
Royalty income for the quarter ended March 31, 2009 was zero compared to $87,501 for the quarter ended March 31, 2008. For the nine month period ended March 31, 2009, royalty income was $58,333 compared to $262,501 for the same period ended March 31, 2008.
Interest income for the quarter was $2 compared to $11,929 for the same quarter in 2008. For the nine month period ended March 31, 2009, interest income was $15,501, compared to $109,120, for the same period in the prior year. Interest income fluctuates in relation to cash balances on hand throughout the year and fluctuations in interest rates earned.
The provision for income taxes for the quarter ended March 31, 2009, was $88,058 compared to $414,435 for the same period last year. For the nine months ended March 31, 2009, the provision for income taxes was $854,390 compared with $2,065,453 for the same period last year. The effective tax rate was 39% for each of the quarters.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
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