Koss reports loss, suspends Mexico operations
Milwaukee-based Koss Corp. has reported a fiscal fourth quarter loss of $2.2 million, or 29 cents per share, compared to net income of $4.6 million, or 62 cents per share, in the fourth quarter of 2013.
Sales at the high-fidelity headphone manufacturer were $6.2 million, down from $9.9 million in the same period a year ago.
For the full year, Koss reported a net loss of $5.6 million, or 75 cents per share, compared to net income of $5.4 million, or 74 cents per share, in 2013.
Sales for 2014 were $23.8 million, down 33.3 percent from $35.8 million in 2013.
Koss attributed the losses to increased industry competition and lower export sales, especially in Europe.
The company plans to suspend operations in Mexico until demand picks up for the products made there.
"The company had extremely disappointing results in the past fiscal year and in the quarter ended June 30, 2014," said Michael Koss, president and chief executive officer. "We experienced major setbacks in export sales, particularly in Europe. That drop in sales was significant enough for us to suspend operations in Mexico until sales volumes support enough demand for the products being produced there. In addition, with the changes that need to be made to the Striva Wi-Fi headphone technology, we wrote off the capitalized software costs as well as the related tooling and inventory. These three factors resulted in a significant loss in the fiscal year 2014. Conversely, in the fourth quarter last year, the company recorded the gain from settling the lawsuit with the former auditors."
"Increased competition in our industry has played a role in the setback, but we believe the severe reduction in 2014 export sales was also driven by certain economic challenges, struggling economies, and available credit for retailers and distributors. In addition, one of our largest European distributors reported overstocked inventory levels on a broad range of items on hand, including Koss products," Koss said. "The company still believes in the viability of the Striva Technology but has temporarily suspended its research and development effort in this area until our base business is restored to more profitable levels. Furthermore, we continue to believe that a manufacturing presence in Mexico has future strategic value and may resume production there if key economic factors improve to justify it."