Exhibit 99.1
K-Swiss Reports Third Quarter Results
WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)--Nov. 6, 2007--K-Swiss Inc.
(NASDAQ: KSWS) today announced results for the third quarter ended September 30,
2007.
Financial Highlights
Net earnings and net earnings per diluted share for the third quarter of
2007 were $12,821,000, or $0.36 per diluted share, compared with $20,950,000, or
$0.59 per diluted share, in the prior-year period. Net earnings and net earnings
per diluted share for the nine months ended September 30, 2007, were
$38,477,000, or $1.08 per diluted share, compared with $66,194,000, or $1.87 per
diluted share, for the prior-year period. Net earnings and net earnings per
diluted share for the three and nine months ended September 30, 2007, includes a
one-time other income item of $5,232,000, or $0.12 per diluted share, which
consists of a reversal of an estimate of the underpayment of payroll withholding
liabilities in a foreign jurisdiction from January 1, 1993 through December 31,
2005.
For the third quarter of 2007, total worldwide revenues were $107,246,000
compared with $133,135,000 in the prior-year period. Domestic revenues decreased
36.3% to $52,017,000, and international revenues increased 7.4% to $55,229,000.
Total worldwide revenues for the first nine months of 2007 were $332,265,000
compared with $407,315,000 in the first nine months of 2006. Domestic revenues
decreased 36.9% to $168,064,000, while international revenues increased 16.4% to
$164,201,000.
Futures Orders
Worldwide futures orders with start ship dates from October through March
were $145,029,000 at September 30, 2007, compared with $171,923,000 at September
30, 2006. Domestic futures orders decreased 38.9% to $56,794,000 from
$92,914,000 the previous year. International futures orders increased 11.7% to
$88,235,000 from $79,009,000 the previous year.
Stock Repurchase Program
The Company did not purchase shares of Class A Common Stock during the
third quarter of 2007. At September 30, 2007, there remains authorization to
repurchase approximately 4,061,000 shares under the Company's existing stock
repurchase program. Since August 1996, K-Swiss has purchased a total of 25.3
million shares of Class A Common Stock for a total expenditure of $164.6
million.
Earnings Guidance
K-Swiss also issued guidance for the fourth quarter of 2007 and full-year
2007. The Company expects revenues for the fourth quarter of 2007 to be
approximately $73 to $81 million and earnings per diluted share to be in the
range of $0.00 to $0.09. The Company expects full-year revenues to be
approximately $405 to $413 million and expects to report full-year earnings per
diluted share of approximately $1.08 to $1.17.
The Company's estimates for the fourth quarter of 2007 and full-year 2007
reflect a significant decline in domestic revenues; substantial investments in
product development and marketing for the K-Swiss brand; continued expansion of
international operations; and continued investment in the Royal Elastics brand.
The estimates are based upon the following assumptions: gross margins will be
approximately 46%; SG&A will not rise above $37 million for the fourth quarter
of 2007 and $154 million for the full-year 2007; the annual tax rate will be
approximately 21%; customer order cancellations will be moderate; and the
Company's growth initiatives with respect to Royal Elastics will not exceed a
net loss of $0.10 per share for the full year.
Steven Nichols, Chairman of the Board and President, stated, "Investing in
our growth for 2008 and 2009 was the top priority in the third quarter and will
continue to be the main focus of the company for the next several quarters. Our
domestic footwear business remains very challenging for us with no positive
trends to speak of in domestic backlog and international growth appears to be
slowing. We will continue to manage the company for the long term while
aggressively investing the necessary dollars to prime future growth
opportunities."
Investor Conference Call and Web Simulcast
K-Swiss will conduct a conference call on its third quarter 2007 earnings
release at 11:00 a.m. ET on November 6, 2007. The number to call for this
interactive teleconference is (913) 981-5591. A replay of this conference call
will be available until November 14, 2007, by dialing (719) 457-0820 and
entering the passcode, 5241713.
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 14, 2007.
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 brand. The Company also designs and manufactures footwear under the
Royal Elastics brand. Royal Elastics, a wholly owned subsidiary, is the leading
innovator of slip-on, laceless footwear.
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, 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 slower
worldwide economy. 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,
2007, 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,
------------------ -----------------
(Unaudited) (Unaudited)
2007 2006 2007 2006
-------- ------- ------- -------
Revenues $ 107,246 $133,135 $332,265 $407,315
Cost of goods sold 57,052 69,782 179,601 212,689
--------- -------- -------- --------
Gross profit 50,194 63,353 152,664 194,626
Selling, general and
administrative expenses 43,352 36,549 116,603 105,425
--------- -------- -------- --------
Operating profit 6,842 26,804 36,061 89,201
Other income 5,232 -- 5,232 --
Interest income, net 2,602 1,768 7,176 4,932
--------- -------- -------- --------
Earnings before income taxes 14,676 28,572 48,469 94,133
Income tax expense 1,855 7,622 9,992 27,939
--------- -------- -------- --------
Net earnings $ 12,821 $ 20,950 $ 38,477 $ 66,194
========= ======== ======== ========
Basic earnings per share $ 0.37 $ 0.61 $ 1.11 $ 1.93
========= ======== ======== ========
Diluted earnings per share $ 0.36 $ 0.59 $ 1.08 $ 1.87
========= ======== ======== ========
Weighted average number of shares
outstanding
Basic 34,746 34,435 34,688 34,350
Diluted 35,475 35,338 35,487 35,337
K-Swiss Inc. Condensed Balance Sheets
(In thousands)
September 30,
-----------------
2007 2006
-------- --------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $282,499 $240,747
Accounts receivable, net 47,235 51,116
Inventories 59,382 63,143
Prepaid expenses and other 7,162 6,685
Deferred taxes 4,979 4,918
-------- --------
Total current assets 401,257 366,609
PROPERTY, PLANT AND EQUIPMENT, NET 24,349 14,319
OTHER ASSETS
Intangible assets 4,700 4,700
Deferred taxes 3,537 3,917
Other 8,114 7,157
-------- --------
16,351 15,774
-------- --------
$441,957 $396,702
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank lines of credit $ --- $ ---
Trade accounts payable 16,156 17,264
Accrued liabilities 30,083 26,892
-------- --------
Total current liabilities 46,239 44,156
OTHER LIABILITIES 11,662 11,260
STOCKHOLDERS' EQUITY 384,056 341,286
-------- --------
$441,957 $396,702
======== ========
CONTACT: K-Swiss Inc.
George Powlick, 818-706-5100
Chief Financial Officer