K-Swiss Reports Third Quarter Results

http://www.businesswire.com/news/home/20091105005179/en

WESTLAKE VILLAGE, Calif.--(Business Wire)--
K•Swiss Inc. (NASDAQ: KSWS) today announced results for the third quarter ended
September 30, 2009. The sale of Royal Elastics on April 30, 2009, is accounted
for as a discontinued operation in the Company`s financial results and is
excluded from futures orders data for the current and prior-year periods.

Financial Highlights

Net loss for the third quarter of 2009 was $2,884,000, or $0.08 per diluted
share, compared with net earnings of $1,066,000 or $0.03 per diluted share, in
the prior-year period. Net loss for the nine months ended September 30, 2009,
was $15,474,000, or $0.44 per diluted share, compared with net earnings of
$34,599,000, or $0.98 per diluted share, in the nine months ended September 30,
2008. Results for the nine-month 2009 period includes a pre-tax non-operating
loss of $2.6 million, or $0.08 per diluted share (after tax), from the
acquisition of the remaining interest in Palladium SAS in June 2009, and a
pre-tax gain of $1.4 million, or $0.03 per diluted share (after tax), from the
sale of Royal Elastics in April 2009. Earnings for the nine-month 2008 period
includes a pre-tax gain of $30,000,000, or $0.52 per diluted share (after tax),
related to the settlement of litigation.

For the third quarter of 2009, total worldwide revenues decreased 23.7% to
$70,633,000 compared with $92,629,000 in the prior-year period. Domestic
revenues decreased 33.0% to $23,987,000 in the third quarter, and international
revenues decreased 18.0% to $46,646,000. Total worldwide revenues for the first
nine months of 2009 decreased 27.5% to $198,709,000, compared with $273,915,000,
in the first nine months of 2008. Domestic revenues decreased 25.7% to
$83,094,000, and international revenues decreased 28.7% to $115,615,000.

Futures Orders

Worldwide futures orders with start ship dates from October 2009 through March
2010 were $67,996,000 at September 30, 2009, compared with $100,076,000 at
September 30, 2008. Domestic futures orders decreased 36.8% to $23,121,000 at
September 30, 2009, from $36,583,000 the previous year. International futures
orders decreased 29.3% to $44,875,000 at September 30, 2009, from $63,493,000
the previous year.

Earnings Guidance

The Company expects full-year revenues to be approximately $230 million to $240
million and expects to report a full-year loss per diluted share of
approximately $0.70 to $0.80. Full-year SG&A expenses are currently projected to
be approximately $119 million, but are expected to fluctuate based on strategic
decisions made during the year as well as general trends in the retail
marketplace.

Steven Nichols, Chairman of the Board and President, stated, "The third quarter
results were in line with our expectations, as we worked through remaining
inventories, scaled up the sales of Palladium and continued investing in
Classic, running, and tennis development. We have said all year that we are not
looking for the short-term fix to our revenue and backlog trends. Our strategy
is slow and steady with a long-term focus on making performance shoes that will
end up in everyday footwear and re-establishing the revenue and margin growth we
enjoyed for nearly two decades. We remain committed to ensuring the success of
this strategy."

Investor Conference Call and Web Simulcast

K•Swiss will conduct a conference call on its third quarter 2009 results today,
at 11:00 a.m. ET. The number to call for this interactive teleconference is
(480) 629-9644. A replay of this conference call will be available until
November 12, 2009, by dialing (303) 590-3030 and entering the passcode, 4065118.

The Company will also provide an online Web simulcast and rebroadcast of this
conference call. The live broadcast of K•Swiss' quarterly conference call will
be available online at www.streetevents.com and www.earnings.com today,
beginning at 11:00 a.m. ET. The online replay will follow shortly after the call
and continue through November 12, 2009.

K•Swiss Inc. designs, develops and markets an array of athletic footwear for
high performance sports use, fitness activities and casual wear under the
K•Swiss and Palladium brands.

Certain matters discussed in this press release are subject to certain risks and
uncertainties that could cause actual results to differ materially, including,
but not limited to: non-achievement of the assumptions discussed herein, general
and regional economic conditions, availability of credit, industry trends,
merchandise trends, including market acceptance of the Company's product
offerings, customer demand, competition, the impact of terrorism and/or a
potential global conflict on the worldwide economy, dependence on large
customers and credit concentrations and order cancellations and reduced sales
resulting from a deepening of the current worldwide recession. A complete
description of these factors, as well as others which could affect the Company's
business, is set forth in the Company's periodic filings, including its Form
10-Q for the quarter ended September 30, 2009, which is currently on file with
the SEC. "Backlog" as of any date, represents orders scheduled to be shipped
within the next six months.Backlog does not include orders scheduled to be
shipped on or prior to the date of determination of backlog.The mix of "futures"
and "at-once" orders can vary significantly from quarter to quarter and year to
year and, therefore, "futures" are not necessarily indicative of revenues for
subsequent periods.

K•Swiss Inc. Consolidated Statements of Earnings
(In thousands, except earnings per share data)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(Unaudited) (Unaudited)
Revenues $ 70,633 $ 92,629 $ 198,709 $ 273,915
Cost of goods sold 44,341 55,739 127,865 154,717
Gross profit 26,292 36,890 70,844 119,198
Selling, general and administrative expenses 30,329 36,409 90,609 110,326
Operating (loss) profit (4,037 ) 481 (19,765 ) 8,872
Other (expense) income, net (486 ) - (1,249 ) 30,000
Interest Income, net 354 2,345 698 6,501
(Loss) earnings before income taxes and discontinued operations (4,169 ) 2,826 (20,316 ) 45,373
Income tax (benefit) expense (1,581 ) 1,320 (5,058 ) 9,016
(Loss) earnings before discontinued operations (2,588 ) 1,506 (15,258 ) 36,357
Loss from discontinued operations, less applicable income tax (296 ) (440 ) (216 ) (1,758 )
Net (loss) earnings $ (2,884 ) $ 1,066 $ (15,474 ) $ 34,599
Basic (loss) earnings per share $ (0.08 ) $ 0.03 $ (0.44 ) $ 1.00
Diluted (loss) earnings per share $ (0.08 ) $ 0.03 $ (0.44 ) $ 0.98
Weighted average number of shares outstanding
Basic 34,999 34,830 34,909 34,763
Diluted 34,999 35,357 34,909 35,315

K•Swiss Inc. Condensed Balance Sheets
(In thousands)

September 30,
2009 2008
ASSETS (Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 160,368 $ 291,079
Available for sale securities 31,197 -
Accounts receivable, net 41,975 47,958
Inventories 51,419 68,309
Prepaid expenses and other 2,381 5,463
Deferred taxes 6,660 5,199
Total current assets 294,000 418,008
PROPERTY, PLANT AND EQUIPMENT, NET 22,619 25,718
OTHER ASSETS
Intangible assets 20,226 23,576
Deferred taxes 13,527 3,376
Other 8,801 9,032
Total other assets 42,554 35,984
$ 359,173 $ 479,710

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank lines of credit and short-term debt $ 7,749 $ 8,382
Trade accounts payable 9,497 15,897
Accrued liabilities 14,921 25,674
Total current liabilities 32,167 49,953
OTHER LIABILITIES
Long-term debt 780 1,051
Other liabilities 12,966 12,580
Manditorily redeemable minority interest - 3,792
Total other liabilities 13,746 17,423
STOCKHOLDERS' EQUITY 313,260 412,334
$ 359,173 $ 479,710

K•Swiss Inc.
George Powlick, 818-706-5100
Chief Financial Officer

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