ITEM 1. BUSINESS
POCAHONTAS BANKSHARES CORPORATION
Pocahontas Bankshares Corporation ("Corporation" or "Registrant") was organized under the laws of West Virginia in 1983 at the direction of the Board of Directors of The First National Bank of Bluefield ("Bluefield"). On March 1, 1984, the effective date of the corporate reorganization, the shareholders of Bluefield became the shareholders of the Corporation, and Bluefield became a wholly-owned subsidiary of the Corporation. On March 11, 1988, the Registrant acquired control of the Bank of Oceana, Oceana, WV ("Oceana"). On May 24, 1991, the Registrant formed First Century Bank, Roanoke, Virginia. During 1993, the main office of First Century Bank was redesignated to Wytheville, Virginia. Effective November 28, 1994, the merger of Bank of Oceana into The First National Bank of Bluefield was completed and the name of the resulting entity was changed to First Century Bank, National Association, with its main office in Bluefield, West Virginia. Substantially, all of the operations of the Corporation are carried on through its Bluefield subsidiary which serves as the Registrant's lead bank. The officers and directors of the Corporation, who are also officers and directors of the subsidiaries, receive their entire compensation from the subsidiaries. The Corporation's executive offices are located at 500 Federal Street, Bluefield, West Virginia.
The Registrant's principal business and major source of revenue is, and is expected to remain, commercial banking. The Registrant currently derives substantially all its revenues from dividends paid by the subsidiary banks. Dividend payments by these subsidiaries are influenced by the earnings, asset growth and current capital position of the individual subsidiary. In addition, various regulatory agencies control the payment of dividends. For additional information regarding the payment of dividends, see Note 11 of the Notes to the Consolidated Financial Statements in the Registrant's 1995 Annual Report to the Stockholders attached as Exhibit 13 to this report.
FIRST CENTURY BANK, N.A.
First Century Bank, N.A., a national banking association, was organized and chartered in 1891 as The First National Bank of Bluefield, under the laws of the State of West Virginia and the National Bank Act. Bluefield offers customary banking services, including commercial, real estate, installment, and other loans; interest-bearing and non-interest bearing transaction accounts, savings and time deposit accounts including certificates and other deposit accounts, featuring various maturities and market rates; Individual Retirement Accounts; Visa and MasterCard services under an arrangement with a correspondent bank; safe deposit facilities; personal and corporate trust services; and various cash management services. In addition to the main office, Bluefield currently operates five additional branches in Mercer and Wyoming counties in southern West Virginia.
As of December 31, 1995, Bluefield had 120 full-time employees and 9 part-time employees. Bluefield is not a party to any collective bargaining agreements, and, in the opinion of management, enjoys satisfactory re lations with its employees.
FIRST CENTURY BANK
First Century Bank, Wytheville, Virginia ("Wytheville"), is a state chartered bank organized under the laws of the Commonwealth of Virginia. Wytheville offers customary banking services, including commercial, real estate, installment, and other loans; interest-bearing and non-interest bearing transaction accounts, savings and time deposit accounts including certificates and other deposit accounts, featuring various maturities and market rates; Individual Retirement Accounts; Visa and MasterCard services under an arrangement with a correspondent bank; safe deposit facilities; personal and corporate trust services; and various cash management services. In addition to the main office, Wytheville currently operates one additional branch.
As of December 31, 1995, Wytheville had 14 full-time employees and 2 part-time employees. Wytheville is not a party to any collective bargaining agreements, and, in the opinion of management, enjoys satisfactory relations with its employees.
COMPETITION
Vigorous and intense competition exists in all areas where the Registrant and its subsidiaries are engaged in business, generally from other banks located in southern West Virginia and southwestern Virginia. However, this competition is not only limited to other commercial banks. The subsidiary banks also compete for certain lines of business with savings and loan associations, mortgage companies, credit unions, consumer finance companies, leasing companies, insurance companies, mutual funds and brokerage firms. Significant competition also exists from state-wide multi-bank holding companies located in West Virginia and Virginia, which have offices in the communities the Registrant serves. These institutions are larger in terms of capital, resources and personnel. This requires that the Registrant place a high emphasis on quality service, with a significant amount of personal attention, in order to effectively compete with these larger institutions. Management feels that this competition is likely to intensify in the future, as the so called "super-regionals" (such as NationsBank and Banc One) continue to enter the markets in which the Registrant currently operates.
FUTURE ACQUISITIONS AND EXPANSION
The Registrant may from time to time consider expansion of its banking operations through acquisition of or formation of other banks and/or bank related businesses.
SUPERVISION AND REGULATION
The Corporation is under the jurisdiction of the United States Securities and Exchange Commission and the State of West Virginia's Secretary of State with respect to matters relating to the offer and sale of its securities and matters relating to reporting to such commissions and to its shareholders.
The Corporation is a registered holding company under the Bank Holding Company Act of 1956, as amended, and is regulated by the Federal Reserve. As a bank holding company, the Corporation is required to file with the Federal Reserve an Annual Report and such additional information as the Federal Reserve may require pursuant to the Bank Holding Company Act. The Federal Reserve may also conduct examinations of the Corporation and each subsidiary. The Bank Holding Company Act requires every bank holding company to obtain prior approval from the Federal Reserve before acquiring direct or indirect ownership or control of more than five percent of the voting shares of any bank which is not already majority owned or controlled by that bank holding company. The Federal Reserve is prohibited, however, from approving the acquisition by the Corporation of the voting shares of, or substantially all of the assets of, any bank located outside West Virginia, unless such acquisition is specifically authorized by the laws of the state in which the bank is located. Under West Virginia law, the Corporation is authorized to acquire ownership or control of additional banks in the state of West Virginia, provided, this does not result in control of more than twenty percent (20%) of the total deposits of all depository institutions in the state of West Virginia. Acquisition of such additional banks would require ap proval from the Federal Reserve and the Commissioner of Banking of the State of West Virginia.
The Bank Holding Company Act further provides that the Federal Reserve will not approve any acquisition, merger or consolidation (a) which would result in a monopoly, (b) which would be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking at any part of the United States, (c) the effect of which may be to substantially lessen competition or to tend to create a monopoly in any section of the country or (d) which in any other manner would be in restraint of trade, unless the anti-competitive effects of the proposed transaction are clearly outweighed by the public interest in the probable effect of the transaction meeting the convenience and needs of the community to be served.
In addition to having the right to acquire ownership and control of other banks, the Corporation is authorized to acquire ownership and control of non-banking companies, provided the activities of such companies are so closely related to banking or managing or controlling banks that the Federal Reserve considers such activities to be proper to the operation and control of banks. Regulation Y, promulgated by the Federal Reserve, sets forth those activities which are regarded as closely related to banking or managing or controlling banks and thus are permissible activities for bank holding companies, subject to the approval by the Federal Reserve in individual cases.
Subsidiary banks of a bank holding company are subject to certain restrictions imposed by the Bank Holding Company Act on any extension of credit to the bank holding company or any of its subsidiaries, on investment in the stock or other securities thereof, and on the taking of such stock or securities for loans to any borrower. Further, under Section 106 of the 1970 amendments to the Bank Holding Company Act and the regulations of the Federal Reserve, a bank holding company through its banking subsidiaries is prohibited from engaging in certain tie-in arrangements in connection with any extension
of credit or provision of any property or services. The Federal Reserve possesses cease and desist powers over bank holding companies and their non-bank subsidiaries if their actions are unsafe or unsound practices or violations of law.
Bluefield operates as a national banking association subject to examination by the Office of the Comptroller of the Currency (the "Comptroller"). The Comptroller regulates all areas of a national bank's operations, both commercial and trust, including loans, deposits, mergers, branches, interest rates, and payments of dividends.
Bluefield, by means of its national charter, is also a member of the Federal Reserve System, and as such, is affected by the monetary policies of the Federal Reserve System which regulates the national money supply in order to mitigate recessionary and inflationary pressures. The instruments of monetary policy employed by the Federal Reserve include open market operations in U. S. Government securities, changes in the reserve requirement for member banks, and changes in the discount rate for member bank borrowings.
In view of the changing conditions in the national economy and the money markets, as well as, the effect of actions by monetary and fiscal authorities, including the Federal Reserve, no prediction can be made as to possible future changes in interest rates, deposit levels, loan demand of the business and earnings of the Corporation or its subsidiaries.
Wytheville operates as an insured state non-member bank subject to examination by the Bureau of Financial Institutions of the State Corporation Commission of the Commonwealth of Virginia. The Bureau of Financial Institutions regulates all areas of a state bank's operation, both commercial and trust, including loans, deposits, mergers, branches, interest rates and payment of dividends.
Both of the subsidiary banks are also insured and regulated by the Federal Deposit Insurance Corporation (the "FDIC"). The major function of the FDIC with respect to insured member banks is to pay depositors to the extent provided by law in the event an insured bank is closed without adequately providing for payment of the claims of the depositors.
STATISTICAL DISCLOSURE
The statistical and other financial data disclosures required pursuant to Guide 3 of the Preparation and Filing of Reports and Registration Statements under the Securities Exchange Act of 1934 are contained within Management's Discussion and Analysis of Financial Condition and Results of Operations appearing on pages 3 through 15 of the accompanying 1995 Annual Report to Stockholders, incorporated herein by reference in this Form 10-K annual report as Exhibit 13.
ITEM 2.

ITEM 2. PROPERTIES
The offices of the Registrant are located at 500 Federal Street, Bluefield, West Virginia. Principal properties owned or leased by the subsidiary banks consist of modern single purpose facilities that house all the amenities to comfortably conduct the full range of financial services provided by the Registrant and its subsidiaries.
Bluefield holds title to seven pieces of real estate, including the property and building at 500 Federal Street, the property and building at 516 Federal Street, formerly known as the "Ammar Building." These two buildings, which are adjacent to each other, comprise a total of approximately 45,000 square feet of space. The third property is located at 501 Federal Street, which comprises approximately 4,300 square feet of interior space and approximately 10,200 square feet of real estate. The fourth property is located at 519 Federal Street, and consists of approximately 5,000 of interior space. These four properties accommodate the main offices of both Bluefield and the Registrant.
Bluefield also holds title to three pieces of real estate in Wyoming County, West Virginia. (1) The property and building that houses the office in Oceana, located on State Route 10, Cook Parkway, Oceana, West Virginia. This property consists of approximately 22,000 square feet, of which approximately 6,500 square feet is interior space. (2) The property and building that houses the Pineville office located on State Route 10, Pineville, West Virginia. This property consists of approximately 18,000 square feet, of which approximately 3,000 square feet is interior space. (3) Lots Number 22 and 23 Hedrick Addition which is currently used as an employee parking lot for the Oceana main office. This property consists of approximately 14,000 square feet, of which 5,500 square feet is paved.
In addition, Bluefield leases approximately 8,000 square feet at 200 Princeton Avenue, Bluefield, WV, in accordance with a renewable lease which provides for an annual rent of $5,000. Bluefield also leases ap proximately 21,750 square feet
feet of space at 2020 College Avenue, Bluefield, WV, under a renewable lease which currently requires a rental rate of $600 per month. Bluefield also leases approximately 27,225 square feet of space at 1215-A Stafford Drive, Princeton, WV. The current renewable lease provides for rent to be paid at the rate of $14,000 per year with adjustments allowed at the end of each five year period of the term. In addition, Bluefield also leases approximately 10,000 square feet at 525 Federal Street, Bluefield, WV, under a lease which has an annual rent of $19,200.
Wytheville holds title to two pieces of real estate. The property and building located at 200 Peppers Ferry Road in Wytheville, Virginia houses the main office and is comprised of approximately two acres of real estate and approximately 6,200 square feet of interior space. Wytheville also owns the property and building located on State Route 52 in Max Meadows, Virginia, which is comprised of approximately one acre of real estate and approximately 2,000 square feet of interior space and houses the Fort Chiswell branch.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
Neither the Registrant nor any of its subsidiaries are presently involved in any material legal proceedings other than ordinary routine litigation incidental to its business.
As a result of efforts to collect a delinquent loan, Bluefield filed suit in the Circuit Court of Mercer County, Civil Action 85-C-847-B, against Andrew L. Clark and William J. Sheppard involving their alleged failure to pay equity into a townhouse project which was the subject of a loan agreement with Mercer County, West Virginia, covering the issuance of an industrial revenue bond in the principal sum of $1,000,000. Still pending are certain counts of a counterclaim filed by Clark and Sheppard in relation to the underlying case which was decided in Bluefield's favor. Management and legal counsel feel strongly that the remaining counts of the counterclaim filed by Clark and Sheppard are without merit.
As a result of efforts to collect delinquent loans, Oceana filed suit in the Circuit Court of Wyoming County, Civil Action 90-C-152, against Michael C. Crouch, d/b/a K&M Auto Sales. Crouch has filed a counterclaim seeking $3,000,000 in damages against Oceana. The counterclaim purports fraudulent acts and other wrong-doings relative to the payment and collection of these loans. Management feels that this counterclaim is without merit and is vigorously contesting this action.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to security holders for a vote during the fourth quarter ended December 31, 1995.
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
No established public market presently exists for the common stock of the Registrant. Management does not expect that a more active trading market will develop in the near future for the common stock of the Registrant.
Page 13 of the 1995 Annual Report to Stockholders (incorporated herein by reference) describes further the information for market, stockholders, and dividends. The payment of dividends is subject to the restrictions described in Note 11 of the Notes to Consolidated Financial Statements. The Board of Directors evaluates the dividend payment on the Registrant's common stock after the conclusion of each calendar quarter.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
The selected financial data required by this item is set forth in Management's Discussion and Analysis of Financial Condition and Results of Operations on page 15 of the Registrant's 1995 Annual Report to Stockholders (Exhibit 13), incorporated herein by reference.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations appearing on pages 3 through 15 of the accompanying 1995 Annual Report to Stockholders is incorporated by reference in this Form 10-K annual report as Exhibit 13. Management's discussion and analysis should be read in conjunction with the related financial statements and notes thereto.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements, management report of financial responsibility, and report of independent accountants for the years ended December 31, 1995, 1994, and 1993, which are included in the Corporation's 1995 Annual Report to Stockholders (Exhibit 13), are incorporated herein by reference:
The report of independent accountants on page 35 of the Registrant's 1995 Annual Report to Stockholders reflects an unqualified opinion on the 1995 and 1994 consolidated statements of financial condition and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1995, issued by Coopers & Lybrand, Charlotte, North Carolina, the Registrant's independent accountant for those years.
The supplementary financial information required by this item is set forth in Note 14 of "Notes to Consolidated Financial Statements" on Page 32 of the Corporation's 1995 Annual Report to Stockholders (Exhibit 13), incorporated herein by reference.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements with the independent accountants on accounting principles or practices, financial statement disclosure, or auditing scope or procedure.
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the directors and executive officers of the Registrant has been omitted in accordance with General Instruction G since Registrant has filed its definitive proxy statement with the Com mission on or about March 29, 1996 (which is not later than 120 days after December 31, 1995, the close of the fiscal year of Registrant): and such information is incorporated herein by reference to such proxy statement.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
Management remuneration has been omitted in accordance with General Instruction G since Registrant has filed its definitive proxy statement with the Commission on or about March 29, 1996, (which is not later than 120 days after December 31, 1995, the close of the fiscal year of Registrant): and such information is incorporated herein by reference to such proxy statement.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security ownership of certain beneficial owners and management has been omitted in accordance with General Instruction G since Registrant has filed its definitive proxy statement with the Commission on or about March 29, 1996, (which is not later than 120 days after December 31, 1995, the close of the fiscal year of Registrant): and such information is incorporated herein by reference to such proxy statement.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain relationships and related transactions has been omitted in accordance with General Instruction G since Registrant has filed its definitive proxy statement with the commission on or about March 29, 1996, (which is not later than 120 days after December 31, 1995, the close of the fiscal year of Registrant): and is incorporated herein by reference to such proxy statement.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements. See Item 8 on Page 6 of this document for a listing of all Financial Statements, Accountants' Report, and Supplementary Data.
2. Financial Statement Schedules. All schedules are omitted, as the required information is inapplicable or the information is presented in the Consolidated Financial Statements or related notes.
(b) Reports on Form 8-K. No Reports on Form 8-K were filed during the fourth quarter of 1995.
(c) Exhibits
3. Articles of incorporation and bylaws.
Articles of amendment to articles of incorporation and restated articles of incorporation were filed with and are incorporated herein by reference to the 1994 Form 10-K. (Bylaws were previously filed in a Registration Statement on Form S-14, Registration No. 2-85126, and are incorporated herein by reference.)
10. Material Contracts a. Sample agreement pertaining to a split-dollar life insurance arrangement between Bluefield and Messrs. Wilkinson, Satterfield, Kennett and Albert.
11. Statement regarding computation of per share earnings. (These statements are included in the notes to the consolidated financial statements which are incorporated herein by reference.)
13. Annual report to security holders.
22. Subsidiaries of the registrant. (This disclosure is included in the notes to the consolidated financial statements which are incorporated herein by reference.)
27. Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Pocahontas Bankshares Corporation
BY: /s/ J. Ronald Hypes ----------------------------------------- J. Ronald Hypes, Treasurer (Principal Accounting & Financial Officer)
DATE: March 20, 1996 ------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
BY: /s/ B. L. Jackson Date: March 12, 1996 ------------------------------- -------------- B. L. Jackson, Jr., Chairman of the Board and Director
BY: /s/ R. W. Wilkinson Date: March 20, 1996 ------------------------------- -------------- R. W. Wilkinson, President & Chief Executive Officer & Director (Principal Executive Officer)
BY: /s/ Charles A. Peters Date: March 19, 1996 ------------------------------- -------------- Charles A. Peters, Secretary and Director
BY: Date: ------------------------------- -------------- Stelio J. Corte, Director
BY: /s/ Eustace Frederick Date: March 19, 1996 ------------------------------- -------------- Eustace Frederick, Director
BY: Date: ------------------------------- -------------- P. Stanley Hodges, C.P.A., Director
BY: /s/ Robert M. Jones, Jr. Date: March 19, 1996 ------------------------------- -------------- Robert M. Jones, Jr., M.D., Director
BY: Date: ------------------------------- -------------- Harold L. Miller, Jr., Director
BY: Date: ------------------------------- -------------- C. E. Richner, Director
BY: /s/ B. K. Satterfield Date: March 20, 1996 ------------------------------- -------------- Byron K. Satterfield, Director
BY: Date: ------------------------------- -------------- John C. Shott, Director
BY: /s/ Scott H. Shott Date: March 19, 1996 ------------------------------- -------------- Scott H. Shott, Director
BY: /s/ Walter L. Sowers Date: March 19, 1996 ------------------------------- -------------- Walter L. Sowers, Director
BY: /s/ J. Brookins Taylor Date: March 19, 1996 ------------------------------- -------------- J. Brookins Taylor, M. D., Director
BY: /s/ James P. Thomas Date: March 19, 1996 ------------------------------- -------------- James P. Thomas, M. D., Director


Item 1. BUSINESS.
As used herein, the term "Company" means Koss Corporation and its consolidated subsidiaries, unless the context otherwise requires.
The Company operates in the audio/video industry segment of the home entertainment industry through its design, manufacture and sale of stereo headphones, audio/video loudspeakers, and related accessory products.
The Company's principal product is the design, manufacture, and sale of stereophones and related accessories. The percentage of total revenues related to the product line over the past three years was:
The Company's products are sold through audio specialty stores, catalog showrooms, regional department store chains, military exchanges and national retailers under the "Koss" name and dual label. The Company has more than 1,600 domestic dealers and its products are carried in more than 11,000 domestic retail outlets. International markets are served by a foreign sales subsidiary in Canada and a sales office in Switzerland which utilizes independent distributors in several foreign countries.
Management believes that it has sources of raw materials that are adequate for its needs.
The Company regularly applies for registration of its trademarks and has numerous patents. Certain of its trademarks are of material value and importance to the conduct of its business. Although the Company considers protection of its proprietary developments important, the Company's business is not, in the opinion of management, materially dependent upon any single patent.
Although retail sales of consumer electronics are predictably higher during the holiday season, management of the Company is of the opinion that its business and industry segment are not seasonal as evidenced by the fact that 54% of sales occurred in the first six months of the fiscal year and 46% of sales occurred in the latter six months of the fiscal year.
The Company's working capital needs do not differ substantially from those of its competitors in the industry and generally reflect the need to carry significant amounts of inventory to meet delivery requirements of its customers. The Company provides extended payment terms for product sales to certain customers. Based on historical trends, management does not expect these practices to have any material effect on net sales or revenues. The Company's current backlog of orders is not material in relation to annual net sales.
The Company markets its products to approximately 2,000 customers worldwide. During 1995 the Company's sales to its largest single customer, Tandy Corporation, were 18% of total sales. Management believes that any loss of this customer's revenues would be partially offset by a corresponding decrease, on a percentage basis, in expenses thereby dampening the impact on the Company's operating income. Although perhaps initially material, management believes this impact would be offset in future years by expanded sales to both existing and new customers. The five largest customers of the Company accounted for approximately 33% of total sales in 1995.
Although competition in the stereophone market has increased this past year, the Company has maintained its competitive position as a leading marketer and producer of high fidelity stereophones in the United States. In the stereophone market, the Company competes directly with approximately five major competitors, several of which are large and diversified and have greater total assets and resources than the Company.
The amount spent on engineering and research activities relating to the development of new products or the improvement of existing products was $306,000 during fiscal 1995 as compared with $310,000 during fiscal 1994 and $316,000 during fiscal 1993. These activities were conducted by both Company personnel and outside consultants. The Company relies upon its unique sound, quality workmanship, brand identification, engineering skills and customer service to maintain its competitive position.
As of June 30, 1995, the Company employed 148 people. The Company also utilizes temporary personnel to meet seasonal production demands.
Foreign Sales.
The Company services the Canadian market through its wholly-owned subsidiary Koss Ltd., a Canadian corporation. Other international markets are serviced through manufacturers representatives or independent distributors with product produced in the United States. In the opinion of management, the Company's competitive position and risks attendant to the conduct of its business in such markets are comparable to the domestic market. For further information, see Note 8 to consolidated financial statements accompanying this Form 10-K.
Item 2.

Item 2. PROPERTIES.
The Company leases its main plant and offices in Milwaukee, Wisconsin from its Chairman, John C. Koss. On June 25, 1993, the lease was renewed for a period of ten years, and is being accounted for as an operating lease. The new lease extension increases the rent from $280,000 per year (plus Consumer Price Index increase in 1994) to a fixed rate of $350,000 per year for three years and $380,000 for the seven years thereafter. The lease is on terms no less favorable to the Company than those that could be obtained from an independent party. The Company is responsible for all property maintenance, insurance, taxes and other normal expenses related to ownership. The Company leases approximately 6,500 square feet of office, service and warehouse space in Canada.
All facilities are in good repair and, in the opinion of management, are suitable for the Company's purposes.
Item 3.

Item 3. LEGAL PROCEEDINGS.
Neither Koss nor its subsidiaries are subject to any material legal proceedings.
Item 4.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of stockholders during the fourth quarter of the fiscal year ended June 30, 1995.
PART II
Item 5.

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION ON COMMON STOCK
The Company's common stock is traded on The Nasdaq Stock Market under the trading symbol "KOSS". There were approximately 1,240 holders of the Company's common stock as of September 15, 1995. The Company's previous lending agreement prohibited the payment of cash dividends on the common stock. No cash dividends have been paid for the years ended June 30, 1995, 1994, and 1993. (See note 2 to the financial statements accompanying this report.) The quarterly high and low sale prices of the Company's common stock for the last two fiscal years are shown below.
Item 6.

Item 6. SELECTED FINANCIAL DATA.
Item 7.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
FINANCIAL CONDITION AND LIQUIDITY
During 1995, cash provided by operations was $1,751,464. Working capital was $15,462,600 at June 30, 1995. The increase of $964,954 from the balance at June 30, 1994 represents primarily the net effect of an increase of $1,558,596 in inventory, an increase of $132,521 in prepaid expenses, an increase of $160,181 in other assets, an increase in accounts payable of $460,158, an increase in accrued liabilities of $196,584 and a decrease of $154,040 in accounts receivable. The increase in inventory is primarily due to an unexpected decline in computer speaker sales. Volume is expected to be sufficient in fiscal year 1996 to profitably decrease the current level of computer speakers.
Capital expenditures for new property and equipment including production tooling were $806,551, $370,839, and $699,235 in 1995, 1994, and 1993, respectively. Depreciation charges aggregated $691,492, $638,125, and $728,156 for the same fiscal years. Budgeted capital expenditures for fiscal year 1996 are $1,600,000. The Company expects to generate sufficient funds through operations to fulfill these expenditures.
Stockholders' investment increased to $15,341,426 at June 30, 1995 from $12,658,628 at June 30, 1994. The increase reflects primarily net income and the exercise of stock options for the year. No cash dividends have been paid since the first quarter of fiscal 1984.
The Company has an unsecured working capital credit facility with a bank which runs through March 15, 1997. This credit facility provides for borrowings up to a maximum of $8 million. Borrowings under this credit facility bear interest at the bank's prime rate or LIBOR plus 2.25%. This credit facility includes certain covenants that require the Company to maintain a minimum tangible net worth and specified current, interest coverage and leverage ratios. Utilization of this credit facility as of June 30, 1995 totaled $682,808, consisting of $570,000 in borrowings and $112,808 in commitments for foreign letters of credit. In addition, the Company recently negotiated a $2 million credit facility which can be used by the Company in the event the Company desires to purchase shares of its own stock. In April, 1995 the Board of Directors authorized the Company's purchase from time to time of its Common Stock utilizing the aforementioned $2 million line of credit. If the Company decides to make any such purchases, it may do so from time to time as conditions warrant either in open-market transactions or privately-negotiated purchases.
The Company's Canadian subsidiary has a line of credit of $550,000. Borrowings under this credit facility bear interest at the bank's prime rate plus 1.25%. This credit facility is subject to the availability of qualifying receivables and inventories which serve as security for the borrowings. As of June 30, 1995, $550,000 was available, of which none was being utilized. The due date for the line is October 31, 1995 and the Company expects the line will be renewed on substantially the same terms.
1995 RESULTS COMPARED WITH 1994
Net sales for 1995 were $33,432,344 compared with $35,561,322 in 1994, a decrease of $2,128,978 or 6%. This decrease was the result of a decline in computer speaker sales as compared to the previous year and an increase in sales returns by dealers for repairs and credit. Sources indicate that credit returns were common throughout the retail industry and not limited to the Company.
Gross profit was $10,622,307 or 31.8% in 1995 compared with $11,874,351 or 33.4% in 1994. The decrease relates to higher than expected labor costs related to newer customized items and a less profitable mix of products in the last two quarters of the fiscal year.
Selling, general and administrative expenses increased from $8,191,504 in 1994 to $8,376,204 in 1995. This increase is mainly attributed to higher professional fees including the cost related to maintaining the company's worldwide patents and trademarks.
Income from operations was $2,246,103 in 1995 compared with $3,682,847 in 1994, a decrease of 39%. Interest expense for 1995 was $317,922 compared with $246,911 in 1994. The increase is primarily due to increased levels of borrowings during the fiscal year.
The Company has a license agreement with Trabelco N.V., a subsidiary of Hagemeyer, N.V. Hagemeyer, N.V., a diverse international trading company based in the Netherlands, has business interests in food, appliances, electromechanical and automobile distribution as well as a solid base of consumer electronic distribution business in Asia, Europe and North America. Royalty income earned in connection with the license agreement in 1995 was $1,412,723 as compared to $1,108,458 in 1994. This increase in royalty income is a result of Trabelco N.V. experiencing higher sales volumes on products under the license agreement. The license agreement expires December 31, 1997, however, can be renewed for additional three year periods at the option of Trabelco N.V.
1994 RESULTS COMPARED WITH 1993
Net sales for 1994 were $35,561,322 compared with $32,137,448 in 1993, an increase of $3,423,874 or 11%. This increase was the result of higher sales of current products as well as the introduction of new products.
Gross profit was $11,874,351 or 33.4% of net sales in 1994 compared with $11,351,328 or 35.3% in 1993. Increased customer demand during this fiscal year for some product lines resulted in the company spending more on air freight than anticipated. This in turn directly affected the decrease in gross profit for the year.
Selling, general and administrative expenses increased from $7,177,946 in 1993 to $8,191,504 in 1994. This increase is directly attributed to higher promotional activities related to new products and trade show activities in the computer market.
Income from operations was $3,682,847 in 1994 compared with $4,173,382 in 1993, a decrease of 12%. Interest expense for 1994 was $246,911 compared with $312,501 in 1993. The decrease is due to lower levels of borrowing throughout the fiscal year.
The Company has a license agreement with Trabelco N.V., a subsidiary of Hagemeyer, N.V. Hagemeyer N.V., a diverse international trading company based in the Netherlands, has business interests in food, appliances, electromechanical and automobile distribution as well as a solid base of consumer electronic distribution business in Asia, Europe and North America. Royalty income earned in connection with the license agreement in 1994 was $1,108,458 as compared to $610,795 in 1993. This increase in royalty income is a result of Trabelco N.V. experiencing higher sales volumes on products under the license agreement.
MANAGEMENT'S REPORT
The consolidated financial statements and related financial information included in this report are the responsibility of management as to preparation, presentation and reliability. Management believes that the financial statements have been prepared in conformity with generally accepted accounting principles appropriate in the circumstances and necessarily include amounts that are based on best estimates and judgments.
The Company maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that the books and records reflect the authorized transactions of the Company.
The Board of Directors, acting through the Audit Committee, is responsible for the selection and appointment of the independent auditors and reviews the scope of their audit and the findings. The independent auditors have direct access to the Audit Committee, with or without the presence of management representatives, to discuss the scope and the results of their audit work. The Audit Committee is comprised solely of non-employee directors.
The independent auditors provide an objective assessment of the degree to which management meets its responsibility for fairness of financial reporting. They evaluate the system of internal accounting controls in connection with their audit and perform such tests and procedures as they deem necessary to reach and express an opinion on the fairness of the financial statements.
Item 8.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Consolidated financial statements of the Company at June 30, 1995 and 1994 and for each of the three years in the period ended June 30, 1995 and the notes thereto, and the report of independent accountants thereon are set forth on pages 14 to 25.
Selected unaudited quarterly financial data is as follows:
Item 9.

Item 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
Item 10.

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information relating to the directors of Koss Corporation is incorporated herein by reference from the "ELECTION OF DIRECTORS -- Information As To Nominees" section of the Koss Corporation Proxy Statement for its 1995 Annual Meeting of Stockholders (the "1995 Proxy Statement"), which 1995 Proxy Statement is to be filed within 120 days of the end of the fiscal year covered by this Report pursuant to General Instruction G(3) of Form 10-K.
Item 11.

Item 11. EXECUTIVE COMPENSATION.
Information relating to executive compensation is incorporated herein by reference from the "ELECTION OF DIRECTORS -- Executive Compensation And Related Matters" section of the 1995 Proxy Statement.
Item 12.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information relating to the security ownership of certain beneficial owners and management is incorporated herein by reference from the "ELECTION OF DIRECTORS - -- Information As To Nominees" and "ELECTION OF DIRECTORS -- Beneficial Ownership Of Company Securities" sections of the 1995 Proxy Statement.
Item 13.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information relating to related transactions is incorporated herein by reference from the "ELECTION OF DIRECTORS -- Executive Compensation And Related Matters" and "ELECTION OF DIRECTORS -- Related Transactions" sections of the 1995 Proxy Statement.
PART IV
Item 14.

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
a. The following documents are filed as part of this report:
1. Financial Statements The following consolidated financial statements of Koss Corporation are set forth on pages 14 to 25:
2. Financial Statement Schedules All schedules have been omitted because the information is not applicable or is not material or because the information required is included in the financial statements or the notes thereto.
3. Exhibits Filed
3.5 Articles of Koss Corporation, as amended and in effect on February 6, 1987.
3.7 By-Laws of Koss Corporation, as amended and in effect on February 6, 1987.
4.1 Articles of Incorporation of Koss Corporation. (see Exhibit 3.5)
4.2 By-Laws of Koss Corporation. (see Exhibit 3.7)
10.1 Officer Loan Policy.
10.2 Directors' Stock Purchase Plan.
10.3 Supplemental Medical Care Reimbursement Plan.
10.4 Death Benefit Agreement with John C. Koss.
10.5 Stock Repurchase Agreement with John C. Koss.
10.6 Salary Continuation Resolution for John C. Koss.
10.7 1983 Incentive Stock Option Plan.
10.8 Assignment of Lease to John C. Koss.
10.9 Addendum to Lease.
10.10 1990 Flexible Incentive Stock Plan.
10.12 Loan Agreement, effective as of February 17, 1995.
10.13 Amendment dated June 15, 1995 to Loan Agreement effective as of February 17, 1995.
22. List of Subsidiaries of Koss Corporation.
27. Financial Data Schedule.
b. No reports on Form 8-K were filed by the Company during the last quarter of the period covered by this report.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF KOSS CORPORATION
In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) on page 12 present fairly, in all material respects, the financial position of Koss Corporation and its subsidiaries at June 30, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP Milwaukee, Wisconsin July 20, 1995
CONSOLIDATED STATEMENTS OF INCOME
See accompanying notes.
CONSOLIDATED BALANCE SHEETS
See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS
See accompanying notes.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
See accompanying notes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
CONCENTRATION OF CREDIT RISK--The Company operates in the audio/video industry segment of the home entertainment industry through its design, manufacture and sale of stereo headphones, audio/video loudspeakers and related accessory products. The Company's products are sold through audio specialty stores, catalog showrooms, regional department store chains, military exchanges and national retailers under the "Koss" name and dual label. The Company has more than 1,600 domestic dealers and its products are carried in more than 11,000 domestic retail outlets. International markets are served by a foreign sales subsidiary in Canada and a sales office in Switzerland, which utilizes independent distributors in several foreign countries. The Company grants credit to its domestic and Canadian customers. Collection is dependent on the retailing industry economy. International customers outside of Canada are sold on a cash against documents or letter of credit basis. Approximately 25% and 23% of the Company's accounts receivable at June 30, 1995 and 1994, respectively, were foreign receivables.
BASIS OF CONSOLIDATION--The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany accounts and transactions have been eliminated.
ROYALTY INCOME--The Company recognizes royalty income when earned under terms of a license agreement. The agreement expires December 31, 1997, however, contains renewal options for additional three year periods.
INVENTORIES--At June 30, 1995 and 1994, approximately 88% and 80%, respectively, of the Company's inventories were valued at the lower of last-in, first-out (LIFO) cost or market. All other inventories are valued at the lower of first-in, first-out (FIFO) cost, or market. If the FIFO method of inventory accounting had been used by the Company for inventories valued at LIFO, inventories would have been $685,679, and $578,314 higher than reported at June 30, 1995 and 1994, respectively.
The components of inventories at June 30, is as follows:
PROPERTY AND EQUIPMENT--Depreciation is provided on a straight-line basis over the estimated useful life of the asset as follows:
Leasehold Improvements 15 years Machinery, Equipment, Furniture and Fixtures 3-10 years Tools, Dies, Molds and Patterns 4-5 years
RESEARCH AND DEVELOPMENT--Research and development expenditures charged to operations amounted to approximately $306,000 in 1995, $310,000 in 1994 and $316,000 in 1993.
EARNINGS PER SHARE--Earnings per share are computed based on the average number of common and common share equivalents outstanding. When dilutive, stock options are included as share equivalents using the Treasury stock method.
RECLASSIFICATION--Certain reclassifications have been made to the 1994 financial statements to conform with current presentation, including the reclassification of $1,490,000 from Stockholders' Investment to Contingently Redeemable Equity Interest in the June 30, 1995 and 1994 balance sheets. The amount reclassified reflects the estimated net obligation in the event of execution of the stock repurchase agreement between the Company and its Chairman (see Note 3).
2. NOTES PAYABLE AND LONG TERM DEBT
The Company has an unsecured credit facility with a bank providing up to a maximum of $8 million through March 15, 1997. Borrowings under the credit facility bear interest at the bank's prime rate or LIBOR plus 2.25%. Interest is payable monthly. The credit facility includes certain covenants that require the Company to maintain a minimum tangible net worth and specified current, interest coverage and leverage ratios. Utilization of the available line as of June 30, 1995 totaled $682,808, consisting of $570,000 in borrowings and $112,808 in commitments for foreign letters of credit. Subsequent to June 30, 1995, the credit facility was amended to provide an additional $2 million of available borrowings. Terms of the credit facility were not amended.
The Company's Canadian subsidiary has a line of credit of $550,000. The due date for the loan is October 31, 1995 and it is renewable annually. The interest rate is the prime rate plus one and one half percent. The credit facility is subject to the availability of qualifying receivables and inventories which serve as security for the borrowings. Loan advances against the line were $0 at June 30, 1995 and 1994.
Long term debt at June 30, 1995 and 1994 is as follows:
Maturities of long term debt in subsequent fiscal years are as follows: 1997 - $570,000.
3. STOCK OPTIONS AND STOCK PURCHASE AGREEMENTS
As of June 30, 1995, there were stock options outstanding granted pursuant to the Company's 1983 Incentive Stock Option Plan (the "1983 Plan"). The 1983 Plan provides for the granting of options to certain officers and key employees to purchase up to 200,000 shares of the Company's common stock at a price not less than the market value of the stock on the date of grant. The options are exercisable at varying times and expire no later than ten years after the date of grant. All of the authorized shares available for grant pursuant to the 1983 Plan have been granted.
In 1990, pursuant to the recommendation of the Board of Directors, the stockholders ratified the creation of the Company's 1990 Flexible Incentive Stock Plan (the "1990 Plan"). The 1990 Plan is administered by a committee of the Board of Directors and provides for the granting of various stock-based awards including stock options to eligible participants, primarily officers and certain key employees. A total of 225,000 shares of common stock were available in the first year of the Plan's existence. Each year thereafter additional shares equal to .25% of the shares outstanding as of the first day of the applicable fiscal year were reserved for issuance pursuant to the 1990 Plan. On July 22, 1992, the Board of Directors authorized the reservation of an additional 250,000 shares to the 1990 Plan, which was approved by the stockholders.
On April 3, 1995 and May 19, 1993, the Board of Directors authorized the grant of 52,500 and 375,000 incentive stock options, respectively, under the 1990 Plan.
On April 12, 1995, the Company's Chairman exercised an option for the purchase of 250,000 shares of the Company's common stock at a price of $1.00 per share.
The following table identifies options granted, exercised, cancelled or available for exercise pursuant to the above mentioned Plans:
The Company has an agreement with its Chairman to repurchase stock from his estate in the event of his death. The repurchase price is 95% of the fair market value of the common stock on the date that notice to repurchase is provided to the Company. The total number of shares to be repurchased shall be sufficient to provide proceeds which are the lesser of $2,500,000 or the amount of estate taxes and administrative expenses incurred by his estate. The Company is obligated to pay in cash 25% of the total amount due and to execute a promissory note at a prime rate of interest for the balance. The Company maintains a $1,150,000 life insurance policy to fund a substantial portion of this obligation.
4. INCOME TAXES
Effective July 1, 1993, the Company adopted Statement of Financial Accounting Standard ("SFAS") No. 109, "Accounting for Income Taxes." SFAS No. 109 requires the use of the liability method of accounting for income taxes. The liability method measures the expected tax impact of future taxable income and deductions implicit in the consolidated balance sheet. The adoption of this statement did not have a significant effect on the Company's financial position or results of operations.
The Company provision for income taxes in 1995, 1994, and 1993 consists of the following:
The 1995, 1994 and 1993 tax provision results in an effective rate different than the federal statutory rate due to the following:
Income (loss) before taxes for United States operations was $4,042,437 in 1995, $4,700,339 in 1994, and $4,366,374 in 1993. Such amounts for foreign operations were $(603,443), $(99,484), and $149,385 for the respective years.
Temporary differences which give rise to deferred tax assets and liabilities at June 30 include:
The net deferred tax asset at June 30, 1995 is comprised of a current asset, prepaid income taxes of $378,946 and a long term liability, deferred income taxes of $6,862. The net deferred tax asset at June 30, 1994 is comprised of a current asset, prepaid income taxes of $268,486 and a long term liability, deferred income taxes of $87,202.
5. ACCRUED LIABILITIES
Accrued liabilities at June 30 consist of the following:
6. ADDITIONAL CASH FLOW INFORMATION
The net changes in cash as a result of changes in operating assets and liabilities, other than cash and indebtedness, consist of the following:
7. EMPLOYEE BENEFIT PLANS
Substantially all domestic employees are participants in the Company's Employee Stock Ownership Plan and Trust (KESOT) under which an annual contribution in either cash or common stock may be made at the discretion of the Board of Directors. The expense recorded for such contributions amounted to $205,000 in 1995 and $0 in 1994 and 1993.
The Company maintains a retirement savings plan under Section 401(k) of the Internal Revenue Code. This plan covers all employees of the Company who have completed six months of service. Matching contributions can be made at the discretion of the Company's Board of Directors. For calendar years 1995, 1994, and 1993, the matching contribution was 100% of employee contributions to the plan, not to exceed 10% of the employee's annual compensation. Vesting of Company contributions occurs immediately. Contributions for the years ended June 30, 1995, 1994, and 1993 were $144,000, $141,700, and $120,501, respectively.
8. INDUSTRY SEGMENT INFORMATION, FOREIGN OPERATIONS AND SIGNIFICANT CUSTOMERS
The Company has one line of business--the design, manufacture and sale of stereophones and related accessories. The table below summarizes certain information regarding the Company's United States and Canadian operations for the years ended June 30, 1995, 1994, and 1993.
The Company ships directly to independent distributors from its domestic plant. The Company's export sales to customers in foreign countries amounted to $2,231,509 during 1995, $1,951,212 during 1994, and $1,675,517 during 1993.
Sales to one customer, Tandy Corporation, were approximately 18%, 16%, and 16% of total sales for 1995, 1994, and 1993, respectively.
9. COMMITMENTS AND CONTINGENCIES
The Company leases its main plant and offices in Milwaukee, Wisconsin from its Chairman, John C. Koss. On June 25, 1993, the lease was renewed for a period of ten years, and is being accounted for as an operating lease. The new lease extension increases the rent from $280,000 per year (plus Consumer Price Index increase in 1994) to a fixed rate of $350,000 per year for three years and $380,000 for the seven years thereafter. The lease is on terms no less favorable to the Company than those that could be obtained from an independent party. The Company is responsible for all property maintenance, insurance, taxes and other normal expenses related to ownership. The Company also leases approximately 6,500 square feet of office, service and warehouse space in Canada of which a significant portion is subleased to a third party. In addition, the Company leases certain property which requires payments of $84,000 in 1996.
In 1980, the Company entered into an agreement with John C. Koss that if he dies prior to attaining 70 years of age, the Company will pay to his spouse or other designated beneficiary the sum of $50,000 every six months until the total benefits paid equal $700,000. The agreement is null and void if he reaches age 70.
In 1991, the Board of Directors agreed to continue John C. Koss' current base salary in the event he becomes disabled prior to age 70. After age 70, Mr. Koss shall receive his current base salary for the remainder of his life, whether he becomes disabled or not. The Company is currently recognizing an annual expense of $115,080 in connection with this agreement, which represents the present value of the anticipated future payments. At June 30, 1995 and 1994, respectively, the related liabilities in the amounts of $421,140 and $306,060 have been included in deferred compensation in the accompanying balance sheets.
10. SUPPLEMENTARY INFORMATION
Changes in the allowance for doubtful accounts for the years ended June 30, 1995, 1994, and 1993 are summarized as follows:
*Represents charges against the allowance, net of recoveries.
The amounts included for advertising in selling, general and administrative expenses on the accompanying statements of income were $630,181 in 1995, $756,956 in 1994, and $503,285 in 1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
KOSS CORPORATION
By: /s/ Michael J. Koss Dated: 9/25/95 --------------------------- ------- Michael J. Koss, President, Chief Executive Officer Chief Operating Officer and Chief Financial Officer
By: /s/ Sujata Sachdeva Dated: 9/25/95 --------------------------- ------- Sujata Sachdeva, Vice President - Finance Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
/s/ Michael J. Koss ------------------------- --------------------------- John C. Koss, Director Michael J. Koss, Director Dated: Dated: 9/25/95 ------- -------
/s/ Martin F. Stein /s/ Victor L. Hunter ------------------------- --------------------------- Martin F. Stein, Director Victor L. Hunter, Director Dated: 9/25/95 Dated: 9/25/95 ------- -------
/s/ John J. Stollenwerk /s/ Lawrence S. Mattson ------------------------- --------------------------- John J. Stollenwerk, Director Lawrence S. Mattson, Director Dated: 9/25/95 Dated: 9/25/95 ------- -------
------------------------- Thomas L. Doerr, Director Dated: -------
The signatures of the above directors constitute a majority of the Board of Directors of Koss Corporation.
OFFICERS AND DIRECTORS SENIOR MANAGEMENT
John C. Koss John C. Koss Chairman of the Board Chairman of the Board Koss Corporation Michael J. Koss 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 Direct
Daniel Esposito Michael J. Koss Vice President--Corporate Systems President, C.E.O., C.O.O., C.F.O. Sujata Sachdeva Vice President--Finance Lawrence S. Mattson Retired President Richard W. Silverthorn Oster Company Secretary General Counsel Martin F. Stein Chairman Declan Hanley Eyecare One Inc. Vice President--International Sales John J. Stollenwerk President ANNUAL MEETING Allen-Edmonds Shoe Corporation
October 19, 1995 Performance Center Koss Corporation 4129 N. Port Washington Avenue Milwaukee, WI 53212
TRANSFER AGENT INDEPENDENT ACCOUNTANTS
Questions regarding change of address, Price Waterhouse LLP stock transfer, lost certificate, or Milwaukee, Wisconsin information on a particular account should be directed in writing to: LEGAL COUNSEL Firstar Trust Company Box 2077 Whyte Hirschboeck Dudek S.C. Milwaukee, WI 53201 Attn: Mr. Eugene R. Lee
EXHIBIT INDEX
(1) Incorporated by reference from Form 10-K for year ended June 30, 1986.
(2) Incorporated by reference from Exhibits 3.1 - 3.7 of Form 10-K for year ended June 30, 1989.
(3) Incorporated by reference from Form 10-K for year ended June 30, 1988.
(4) Incorporated by reference from Form 10-K for year ended June 30, 1990.
(5) Incorporated by reference from Form 10-Q for quarter ended March 31, 1995.


ITEM 1. BUSINESS.
General Development of Business _______________________________
Super Food Services, Inc., was incorporated on April 29, 1957, under the laws of the State of Delaware. Super Food Services, Inc., and its principal subsidiary, Kentucky Food Stores, Inc., d/b/a Affiliated Foods, a Kentucky corporation, (hereinafter sometimes collectively referred to as the "Company" or the "Registrant") are engaged in the wholesale grocery distribution business. The Company holds IGA (Independent Grocers' Alliance Distributing Company) franchises for each of its warehouse locations except for Lexington, Kentucky. IGA is an alliance of 20 wholesale grocers whose almost 4,000 associated IGA retail food stores located principally in the United States did an annual retail volume of approximately $16.5 billion in the year ended December 31, 1994.
Financial Information About Industry Segments _____________________________________________
The Company is engaged in a single line of business, the wholesale grocery distribution business.
Description of Business _______________________
The Company distributes a wide variety of food products, health and beauty aids, general merchandise and related non-food items to approximately 270 independently owned IGA retail food stores and to approximately 580 other retail food stores, including independently owned stores not licensed as IGA stores, several major chains and convenience stores, located primarily in the states of Michigan, Ohio, Indiana, Kentucky, Tennessee and West Virginia. In addition, the Company also provides merchandising, advertising, sales promotion and administrative programs and supervision for the retail stores that desire to utilize these services.
The Company does not engage in the retail food store business to any significant extent. Incidental to its primary wholesale grocery function, the Company may from time to time own and operate retail food stores which provide training for the Company's personnel in retail grocery operations or the Company may take over supermarkets formerly operated by its affiliated retailers.
The Company also operates a print shop which prints some of the advertising materials, catalogs and other material used by the Company and its independent retail food store customers.
The business of the Company is not seasonal to any significant extent.
Distribution and Cost of Services _________________________________
The Company distributes and sells goods and merchandise to retail food stores principally from the five distribution centers consisting of three in Ohio, one in Michigan and one in Kentucky. All of the Company's warehouses are equipped with modern inventory handling equipment for receiving, storing and shipping goods and merchandise. Each warehouse serves as a central source of supply for affiliated retailers within its operating area by handling a full line of products ranging from 10,000 to 15,000 items. Complete inventories are maintained consisting of national brand grocery products along with a number of private label items. In addition, most centers provide full lines of perishables including fresh meats and poultry, dairy and delicatessen products, and frozen foods. Retailers order their inventory requirements at regular intervals through direct linkage with the distribution center computer. Immediate product availability and efficient warehousing methods often make it possible for orders to be selected, loaded and shipped within 24 hours of receipt of the order. In addition, some products are delivered by suppliers directly to the retail stores through drop-ship programs established between suppliers and the Company. Deliveries are made by the Company's delivery fleet on a daily, semi-weekly or weekly basis as orders are received. The Company operates approximately 140 tractors, 195 refrigerated trailers and 205 dry trailers. Most of this equipment is owned by the Company.
The Company sells goods and merchandise to retail stores on a cost-plus-fee basis, with a weekly fee based on the type of commodity and quantity purchased. Selling prices are changed daily based on the latest cost information. In some geographic areas, delivery costs are also charged based on mileage and the quantity of goods purchased. Credit is extended generally on a weekly basis.
Service to Retailers ____________________
In general, the operations of the Company include (1) the procurement and arrangement for the procurement of food products and other allied items generally sold in retail food stores, (2) the development and administration of promotional, advertising and merchandising programs, (3) the establishment and supervision of retail accounting and payroll systems, (4) the installation of computerized inventory control and ordering systems, (5) store development services, (6) personnel management assistance and employee training and (7) insurance programs. The Company has a staff of retail management specialists who counsel with each store periodically with regard to store operations. The cost of many of these services is included in the fees charged by the Company in connection with the sale of goods and merchandise to the retail stores served. Separate charges are made for certain services such as retail accounting, insurance, employee training and certain store development services.
The activities of the store development departments in each operating division provide a means of continued growth for the Company through the development of new retail store locations and the enlargement and remodeling of existing retail stores. The services provided include site selection, market studies, building design, store layout and equipment planning and procurement.
The Company also may provide financial assistance to its affiliated independent retailers. Secured loans, generally repayable over a period not exceeding five years, are made for inventories and store fixtures, equipment, and leasehold improvements. Loans are secured by liens on inventory and/or equipment, by personal guarantees and by other types of security. The Company lends its credit strength by guaranteeing leases for its retail customers or by entering into leases for retail store locations and subleasing the same to affiliated independent retailers at rentals which generally are five to ten percent higher than the rent paid by the Company. As of August 26, 1995, the Company was obligated on a total of 77 leases which are subleased to affiliated independent retailers. As of August 26, 1995, Kentucky Food Stores, Inc., has guaranteed the payment of leases for certain retail customers with future minimum rentals aggregating approximately $4,636,000.
Products Supplied _________________
The Company primarily distributes and sells nationally advertised brand products purchased directly from various manufacturers, processors and suppliers or through manufacturers' representatives and brokers. Many of the major suppliers of the Company are large publicly-held companies. Adequate alternative sources of supply are available in most cases. The Company also distributes and sells IGA, BETTER VALU and SAVER'S CHOICE brand products and various products using the Company's own registered trademarks FAME, TABLE TREAT, TABLE KING, KINGSAVER and GARD. A wide variety of canned fruits and vegetables, frozen foods, paper products and other packaged products are sold under these labels. Private brand products are purchased from selected canners, packers and processors who apply the Company's private label brands. The FAME line of private label products now includes approximately 1,640 items. Approximately 12% of the total sales of the Company for the fiscal year ended August 26, 1995 were from the Company's own private label brand products and IGA and BETTER VALU brand products.
Retail Stores Served ____________________
The retail food stores served by the Company are mostly conventional self-service supermarkets which carry a wide variety of grocery products, health and beauty aids, general merchandise and other non-food items. Many stores also have one or more specialty departments such as delicatessens, in-store bakeries, lunch counters and flower shops. The stores served by the Company range in size from the small convenience stores to large supermarkets containing 35,000 or more square feet.
Franchises __________
Under the IGA franchises held by the Company, independently owned retail food stores are licensed by the Company to operate under the IGA merchandising, advertising and promotional programs, to use the name IGA in connection with the retail food stores, and to sell IGA merchandise. For these franchises and the merchandising, advertising, sales promotion programs, systems and consultation, the Company pays IGA a monthly membership fee based on the number of affiliated IGA retail stores. The Company in turn receives a fee for similar services from each affiliated IGA retail store it licenses. The IGA stores are privately owned and are otherwise operated independently of IGA and the Company. The franchises which the Company holds from IGA may be terminated by the Company at any time but may be terminated by IGA only if the Company (a) ceases to operate a wholesale grocery business, (b) fails to fulfill its obligations under the franchise, or (c) becomes bankrupt, insolvent or goes into receivership. The licenses granted by the Company to affiliated IGA retail stores may be terminated by either party at any time upon thirty days prior written notice.
The Company also licenses independent retailers to do business under the trade names SUPERAMA, SHOPWISE, KING$AVER and $UPER $AVER($).
Competition ___________
The wholesale food distribution business is highly competitive. The Company is in competition with independent, voluntary and cooperative wholesale grocery businesses in all of the areas in which it operates. In addition, the retail food stores serviced by the Company are in competition with national, regional and local corporate food chains, voluntary cooperative food stores and independent food stores. On the basis of current sales volume, the Company is one of the largest wholesale grocery companies in the United States.
Employee Relations and Benefits _______________________________
The Company and its subsidiaries currently employ about 1,670 full time employees. Of these, approximately 1,015 are warehouse employees, drivers, and certain other personnel who are members of various labor unions, principally various locals of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, under collective bargaining contracts expiring on various dates. During the fiscal year ended August 26, 1995, four contracts covering 465 employees were settled. One contract expired in 1993 which is still being negotiated. During the current fiscal year ending August 31, 1996, two contracts covering approximately 320 employees will expire. The labor relations of the Company are currently considered satisfactory and the Company has experienced no work stoppages since the beginning of last fiscal year.
Miscellaneous _____________
The Company is a substantial user of fuel and energy in its operations. In the last fiscal year, fuel and energy costs generally increased resulting in higher operating costs; however, the supply of fuel and energy was adequate. The Company is unable to predict what effect future cost increases or shortages of fuel and energy would have on its operations.
The Company is not involved in any type of business which may be subject to renegotiation of profits or termination of contracts or subcontracts at the election of the government.
During the fiscal year ended August 26, 1995, the Company did not engage in material research and development activities relating to the development of new products or services or the improvement of existing products or services in connec- tion with its business.
The Company does not engage in any foreign operations and export sales are not significant.
Compliance by the Company with Federal, State and local environmental protection laws during the fiscal year ended August 26, 1995, had no material effect upon capital expenditures, earnings or competitive position of the Company.
During the last fiscal year, the Company prepaid the balance of the 9.65% Senior Notes to Teachers Insurance Annuity Association of America in the original principal amount of $13,000,000. The principal amount of the Notes prepaid was $5,571,428 together with accrued interest and a premium of $119,473 applicable to such prepayment.
ITEM 2.

ITEM 2. PROPERTIES.
The Company's executive offices are located in a 27,800 square foot building located in Miamisburg, Ohio, a southern suburb of Dayton, Ohio, on an 8-acre site owned by the Company.
The following table lists the locations, approximate size, lease expiration dates and renewal options available with regard to the principal warehouse properties operated by the Company as of August 26, 1995.
Approximate Size Lease Renewal Location (Square Feet) Expiration Options
Bellefontaine, Ohio (1) 580,995 - - Cincinnati, Ohio (1) 370,732 - - Cincinnati, Ohio (1) 42,358 - - Bridgeport, Michigan(2)(3) 590,749 2010 4/5 year Lexington, Kentucky 298,750 1999 -
(1) This property is owned in fee by the Company.
(2) The lease for this property has been capitalized for financial statement purposes.
(3) A 186,000 square foot dry grocery addition and a 56,000 square foot perishable addition were completed in fiscal 1995.
The Company also leases 91 retail store locations, the majority of which are subleased to affiliated independent retailers. The leases for these locations expire on various dates, the latest being in 2013. Further information regard- ing lease commitments is contained in Note 8 on pages 20 and 21 of the 1995 Annual Report.
The Company also owns two supermarket buildings which it leases to affiliated independent retailers.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS.
The Company has no material legal proceedings pending other than ordinary routine litigation incidental to its business. Management is of the opinion that any liability, to the extent not provided for through insurance or otherwise, would not be material.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of the security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year ended August 26, 1995.
(1) Member of the Executive Committee of the Board of Directors.
(2) Director of the Registrant.
There is no family relationship between any of the executive officers listed above. All executive officers hold office from one annual meeting of the Board of Directors until the next annual meeting of the Board of Directors or until their successors are elected.
There are no arrangements or understandings between any of the executive officers of the Registrant and any other person (not an officer or director of the Registrant acting as such) pursuant to which any of the executive officers were selected as an executive officer of the Registrant.
Each of the executive officers of the Company listed above has been employed by the Registrant for more than five years.
PART II
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON SHARES AND RELATED SHAREHOLDER MATTERS.
The Registrant's Common Shares have been listed on the New York Stock Exchange since December 14, 1989 and trade under the symbol "SFS". Prior to that time, the Company's Common Shares were traded on the American Stock Exchange. On October 26, 1995, there were approximately 1,813 holders of record of the Registrant's Common Shares.
The information called for by Item 5 as to the Registrant's stock price ranges and quarterly dividends for the last two fiscal years is contained on page 24 of the 1995 Annual Report and is incorporated herein by reference.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA.
The information called for by Item 6 is incorporated herein by reference to page 25 of the 1995 Annual Report.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The information called for by Item 7 is incorporated herein by reference to pages 6 through 8 of the 1995 Annual Report.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information called for by Item 8 is incorporated herein by reference to pages 9 through 23 of the 1995 Annual Report.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for by Item 10 as to the Directors of the Registrant and compliance with Section 16(a) of the Securities Exchange Act of 1934 is incorporated by reference to pages 4 through 7 of the Registrant's definitive Proxy Statement dated November 6, 1995 in connection with the Registrant's 1995 Annual Meeting of Shareholders. Certain information regarding executive officers of the Registrant is included in Part 1 above.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION.
The information called for by Item 11 is incorporated by reference to pages 7 through 9 of the Registrant's definitive Proxy Statement dated November 6, 1995 in connection with the Registrant's 1995 Annual Meeting of Shareholders; provided, however, that the information contained in said Proxy Statement under the headings "Report on Executive Compensation" is not incorporated herein.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGE- MENT.
The information called for by Item 12 with respect to security ownership of certain beneficial owners and by each director of the Registrant and all executive officers and directors of the Registrant as a group is incorporated by reference to Registrant's definitive Proxy Statement dated November 6, 1995 in connection with Registrant's 1995 Annual Meeting of Shareholders on pages 2 through 4.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by Item 13 is incorporated by reference to page 6 of Registrant's definitive Proxy Statement dated November 6, 1995 in connection with the Registrant's 1995 Annual Meeting of Shareholders.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
1995 Annual (a) 1. Financial Statements Report Page(s)
The following are contained in the 1995 Annual Report and are incorporated herein by reference:
Consolidated Statements of Income for the Fiscal Years Ended August 26, 1995, August 27, 1994 and August 28, 1993 9
Consolidated Balance Sheets as of August 26, 1995 and August 27, 1994 10-11
Consolidated Statements of Cash Flows for the Fiscal Years Ended August 26, 1995, August 27, 1994 and August 28, 1993 12
Consolidated Statements of Shareholders' Equity for the Fiscal Years Ended August 26, 1995, August 27, 1994 and August 28, 1993 13
Notes to Consolidated Financial Statements 14-22
Report of Independent Public Accountants 23
(a) 2. Consolidated Financial Statement Schedule 10-K page
For Fiscal Years Ended August 26, 1995, August 27, 1994 and August 28, 1993
Report of Independent Public Accountants on Consolidated Schedule 18
Schedule II - Valuation and Qualifying Accounts 19
All other schedules are omitted because they are not applicable or not required, or because the required information is included in the consolidated financial statements or notes thereto.
(a) 3. The following exhibits are filed herewith or incorporated by reference as indicated. Exhibits are listed by numbers corresponding to Item 601 in Regulation S-K.
Exhibit No. Reference
3(a) Restated Certificate of Filed as Exhibit 4(a) of Incorporation. to Registration Statement No. 2-84640
3(b) Certificate of Amendment Incorporated by of Restated Certificate reference to of Incorporation. definitive Proxy Statement dated November 1, 1983
3(c) Certificate of Amendment Incorporated by of Restated Certificate reference to of Incorporation. definitive Proxy Statement dated October 31, 1986
3(d) By-Laws, as amended. Filed as Exhibit 1 to Form 10-K for the year ended August 30, 1986
4(a) $10,000,000 Revolving Filed as Exhibit 1 Credit Loan Agreement to Form 8-K dated dated as of September 17, September 17, 1987 1987 between Registrant and PNC Bank, Ohio.
4(b) Amendment to Loan Filed as Exhibit 1 Agreement dated April 11, to Form 8-K dated 1991 between Registrant April 9, 1991 and PNC Bank, Ohio.
4(c) $10,000,000 Revolving Filed as Exhibit 1 Credit Loan Agreement to Form 8-K dated dated April 9, 1991 April 9, 1991 between Registrant and Society Bank, N.A.
4(d) $25,000,000 Note Filed as Exhibit 1 Agreement dated as of to Form 8-K dated November 1, 1989 February 5, 1990 between Registrant and Nationwide Life Insurance Company.
4(e) $10,000,000 Revolving Filed as Exhibit 1 Credit Agreement dated to Form 8-K dated as of August 30, 1991 August 30, 1991 between Registrant and The First National Bank of Chicago.
4(f) Rights Agreement dated Filed as Exhibit 4(f) as of January 27, 1989 to Form 8-K dated between Registrant and January 27, 1989 and Chase Manhattan Bank, as Exhibits 1 and 2 N.A. as Rights Agent. to Form 8-A dated January 27, 1989
4(g) Agreement to furnish Pursuant to Item copies of long-term 601(b)(4)(iii) of debt instruments. Regulation S-K, copies of certain instruments defining the rights of holders of certain long-term debt of the Registrant and its subsidaries are not filed and, in lieu thereof, the Registrant agrees to furnish copies thereof to the Securities and Exchange Commission upon request
10 Material Contracts
(a) Employment Agreement Filed as Exhibit 4 to dated December 8, 1976 Form 10-K for the year between Registrant and ended August 29, 1981 Jack Twyman, as amended March 3, 1981.
(b) Employment Agreement Filed as Exhibit 5 to dated March 3, 1981 Form 10-K for the year between Registrant and ended August 29, 1981 John Demos.
(c) First Amendment to Filed as Exhibit 10 to Employment Agreement Form 8-K dated dated October 26, 1995 October 26, 1995 between Registrant and John Demos.
(d) 1986 Stock Option Plan. Filed as Appendix C to definitive Proxy Statement dated October 31, 1986
(e) Incentive Compensation Filed as Exhibit 7 to Plan. Form 10-K for the year ended August 29, 1981
(f) 1989 Restricted Stock Filed as Exhibit 4(g) Plan. to Form 8-K dated January 27, 1989
(g) 401(k) Plan. Description in Form 8-K dated January 27, 1989
(h) Excess Benefit Plan, Filed as Exhibit 1 to as amended. Form 10-K for the year ended August 26, 1989
(i) Supplemental Executive Filed as Exhibit 1 to Retirement Plan, as Form 10-K for fiscal amended and restated year ended August 27, as of May 18, 1994 1994 (formerly known as the Excess Benefit Plan).
(j) Supplemental Executive Filed as Exhibit 2 to Retirement Trust Form 10-K for fiscal Agreement between the year ended August 27, Registrant and Society 1994 National Bank.
11 Statement Re: Filed as Exhibit 11 Computation of Net herewith Income Per Share.
13 Annual Report to Filed as Exhibit 1 Shareholders for the herewith fiscal year ended August 26, 1995. (Only those portions of the Annual Report which are specifically designated in this Form 10-K as being incorporated by reference are being electronically filed pursuant to the Securities Exchange Act of 1934.)
18(a) Letter dated November 23, Filed as Exhibit 9 to 1981 from Registrant's Form 10-K for the year independent public ended August 29, 1981 accountants re change in accounting principles.
18(b) Letter dated November 22, Filed as Exhibit 2 to 1985 from Registrant's to Form 10-K for the independent public year ended August 31, accountants re change in 1985 accounting principles.
21 Subsidiaries of the Filed as Exhibit 2 Registrant. herewith
23 Consent of Arthur Filed as Exhibit 3 Andersen LLP. herewith
24 Power of Attorney Filed as Exhibit 4 authorizing John Demos, herewith Vice Chairman, Secretary and General Counsel to sign the Annual Report on Form 10-K on behalf of said Directors.
27 Financial Data Schedule
(b) Reports on Form 8-K:
The Registrant filed a Form 8-K with the Securities and Exchange Commission dated October 26, 1995 reporting the extension of the term of the Employment Agreement between the Registrant and John Demos to March 2, 1998.
FORM S-8 UNDERTAKING
Pursuant to the requirements of Item 512(h) of Regulation S-K and Part II of Form S-8 under the Securities Act of 1933, the undersigned registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into the following Registration Statements of the registrant on Form S-8: Registration Statement Nos. 2-66358, 2-60616, 2-88433, 33-20892 and 33-21069.
Insofar as indemnification for liabilities arising under the Securities Act of 1993 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 22nd day of November, 1995.
SUPER FOOD SERVICES, INC. (Registrant)
By/s/ Jack Twyman __________________________________ Jack Twyman Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on the 22nd day of November, 1995.
/s/ Jack Twyman /s/ Robert F. Koogler _________________________________ _________________________________ Jack Twyman Robert F. Koogler Director and Senior Vice President-Finance, Chairman of the Board Treasurer and Assistant Secretary (Principal Executive Officer) (Principal Accounting and Financial Officer)
/s/ John Demos /s/ Samuel L. Robinson _________________________________ _________________________________ John Demos Samuel L. Robinson Director and Vice Chairman of the Director and President and Board, Secretary and General Chief Operating Officer Counsel
*/s/ John W. Berry */s/ Dr. Thomas S. Haggai ________________________________ ________________________________ John W. Berry Dr. Thomas S. Haggai Director Director
*/s/ Dr. Edward H. Jennings */s/ C. E. Shaffer ________________________________ ________________________________ Dr. Edward H. Jennings C. E. Shaffer Director Director
* The undersigned, by signing his name hereto, does hereby sign this report on behalf of each of the above-indicated directors of the Registrant pursuant to powers of attorney executed on behalf of each such director.
*By/s/ John Demos _________________________________ John Demos Attorney-in-Fact November 22, 1995
SUPER FOOD SERVICES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
The following items included in the 1995 Annual Report of the Registrant to its shareholders are incorporated herein by reference:
Consolidated Statements of Income for the Fiscal Years Ended August 26, 1995, August 27, 1994 and August 28, 1993.
Consolidated Balance Sheets as of August 26, 1995 and August 27, 1994.
Consolidated Statements of Cash Flows for the Fiscal Years Ended August 26, 1995, August 27, 1994 and August 28, 1993.
Consolidated Statements of Shareholders' Equity for the Fiscal Years Ended August 26, 1995, August 27, 1994 and August 28, 1993.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants on the Consolidated Financial Statements as of August 26, 1995 and August 27, 1994 and for each of the three fiscal years in the period ended August 26, 1995.
With the exception of the aforementioned information and the information incorporated in Items 5, 6, 7 and 8, the 1995 Annual Report to Shareholders is not to be deemed filed as part of this report.
The following information for the fiscal years 1995, 1994 and 1993 is submitted herewith:
Consent of Independent Public Accountants.
Report of Independent Public Accountants on Consolidated Schedule.
Consolidated Financial Statement Schedule -
Schedule
Valuation and Qualifying Accounts II
All schedules except that listed above are omitted as not applicable or not required, or the required information is included in the consoli- dated financial statements or in the notes thereto.
Separate financial statements of the Registrant have been omitted since it is primarily an operating company and the minority interest in subsidiaries and long-term debt of the subsidiaries held by other than the Registrant is less than 5% of consolidated total assets.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Super Food Services, Inc.:
We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Super Food Services, Inc. and subsidiaries Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated October 19, 1995. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in Part IV, Item 14(a)2 is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole.
Arthur Andersen LLP
Dayton, Ohio, October 19, 1995