EX-99.1 2 a4752877ex991.txt K-SWISS INC. EXHIBIT 99.1 Exhibit 99.1 K-Swiss Reports Third Quarter Results; Company Increases Stock Repurchase Authorization by 5 Million Shares WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)--Oct. 28, 2004--K-Swiss Inc. (NASDAQ/NM:KSWS) today announced results for the third quarter ended September 30, 2004. Financial Highlights Net earnings and net earnings per diluted share for the third quarter of 2004 increased 36.9% and 42.5%, respectively, to $20,681,000, or $0.57 per diluted share, compared with $15,106,000, or $0.40 per diluted share, in the prior-year period. Net earnings and net earnings per diluted share for the nine months ended September 30, 2004, increased 34.5% and 39.4%, respectively, to $55,637,000, or $1.52 per diluted share, compared with $41,369,000, or $1.09 per diluted share, at September 30, 2003. For the third quarter of 2004, total worldwide revenues increased 12.0% to $135,799,000 compared with $121,292,000 in the prior-year period. Domestic revenues increased 5.3% to $110,938,000 in the third quarter, and international revenues increased 55.7% to $24,861,000. Total worldwide revenues for the first nine months of 2004 increased 13.5% to $395,723,000 compared with $348,730,000 in the first nine months of 2003. Domestic revenues increased 8.2% to $329,009,000 in the first nine months of 2004, while international revenues increased 49.2% to $66,714,000. Futures Orders Worldwide futures orders with start ship dates from October 2004 through March 2005 decreased 0.6% to $192,702,000 at September 30, 2004, compared with $193,949,000 at September 30, 2003. Domestic futures orders decreased 10.1% to $153,922,000 at September 30, 2004, from $171,244,000 at September 30, 2003. International futures orders increased 70.8% to $38,780,000 at September 30, 2004, from $22,705,000 the previous year. Stock Repurchase Program The Company purchased 470,000 shares of Class A Common Stock during the third quarter of 2004 for a total expenditure of approximately $9,211,000 as part of its stock repurchase program. There remains authorization to repurchase $17,000 of stock under the Company's existing stock repurchase program. Since August 1996, K-Swiss has purchased a total of 12.9 million shares of Class A Common Stock for a total expenditure of $135.3 million. The Company announced the Board of Directors authorized a new stock repurchase program to repurchase up to 5,000,000 shares of the Company's Class A Common Stock. This program is in addition to the Company's October 2003 $25 million stock repurchase program that, as noted above, is almost completed. Under the new stock repurchase program, the Company may purchase through December 31, 2009, as market conditions warrant and from time to time on the open market, up to 5,000,000 shares of its Class A Common Stock. K-Swiss also issued guidance for the fourth quarter of 2004 and updated guidance for 2004. The Company expects revenues for the fourth quarter of 2004 to be approximately $78 to $82 million and earnings per diluted share to be in the range of $0.17 to $0.21. The Company expects full year revenues to be approximately $473 to $477 million and expects to report full year earnings per diluted share of approximately $1.69 to $1.73. Consistent with the Company's policy, it intends to issue guidance for the first quarter and full year 2005 when it releases its 2004 year-end results in February 2005. However, the Company believes that revenues for the first quarter of 2005 will be less than the comparable 2004 period by up to 10%. The Company's estimates for the fourth quarter reflect the continued investments in marketing, sales and product development for the Royal Elastics brand as well as the expansion of European operations. They are based upon the following assumptions: gross margins will be between 44% and 45% for the quarter; SG&A will not rise above $26 million for the quarter; cancellations will be moderate; and the Company's growth initiatives with respect to Royal Elastics will not exceed a net loss of $0.04 per share for the quarter. Steven Nichols, Chairman of the Board and President, stated, "We achieved strong results on several fronts this quarter. Our international operations continued to post significant revenue growth with Europe and Asia leading the charge and Europe becoming profitable again in the quarter. We were also positively surprised by how successful we were in clearing excess inventory left from the second quarter without any impact to our margins. In addition, our balance sheet is perhaps the strongest it has ever been with over $129 million in cash. Noting this strong financial position, we were pleased the Board decided to increase the share repurchase authorization by an additional 5 million shares." The per share results reported herein reflect the effect of the two-for-one stock split which was distributed on December 26, 2003, to stockholders of record on December 22, 2003. Discontinued operations are comprised of the results of the National Geographic brand. Investor Conference Call and Web Simulcast K-Swiss will conduct a conference call on its third quarter 2004 earnings release on October 28, 2004, at 10:00 am EDT. The number to call for this interactive teleconference is (913) 981-5510. A replay of this conference call will be available until November 4, 2004, by dialing (719) 457-0820 and entering the passcode, 748688. 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.fulldisclosure.com on October 28, 2004, beginning at 10:00 a.m. EDT. The online replay will follow shortly after the call and continue through November 11, 2004. 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 training shoe and new Limited Edition lines, and Royal Elastics brand, market acceptance of the Company's casual product in Europe, 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, 2004, 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 "future" 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) 2004 2003 2004 2003 -------- -------- -------- -------- Revenues $135,799 $121,292 $395,723 $348,730 Cost of goods sold 74,050 68,246 214,455 190,167 -------- -------- -------- -------- Gross profit 61,749 53,046 181,268 158,563 Selling, general and administrative expenses 31,406 27,545 93,920 82,725 -------- -------- -------- -------- Operating profit 30,343 25,501 87,348 75,838 Interest income, net 252 87 552 451 -------- -------- -------- -------- Earnings from continuing operations before income taxes 30,595 25,588 87,900 76,289 Income tax expense 9,914 10,084 32,263 30,059 -------- -------- -------- -------- Earnings from continuing operations 20,681 15,504 55,637 46,230 Loss from discontinued operations -- (398) -- (4,861) -------- -------- -------- -------- Net earnings $20,681 $15,106 $55,637 $41,369 ======== ======== ======== ======== Basic earnings per share $0.59 $0.43 $1.59 $1.17 ======== ======== ======== ======== Diluted earnings per share $0.57 $0.40 $1.52 $1.09 ======== ======== ======== ======== Weighted average number of shares outstanding Basic 34,818 35,384 35,065 35,413 Diluted 36,276 37,949 36,576 37,892 K-Swiss Inc. Condensed Balance Sheets (In thousands) September 30, 2004 2003 -------- -------- ASSETS (Unaudited) CURRENT ASSETS Cash and cash equivalents $129,021 $68,739 Accounts receivable, net 57,855 70,849 Inventories 56,600 58,811 Prepaid expenses and other 6,253 1,932 Deferred taxes 4,717 4,737 -------- -------- Total current assets 254,446 205,068 PROPERTY, PLANT AND EQUIPMENT, NET 8,192 8,293 OTHER ASSETS Intangible assets 4,700 7,299 Other 5,036 4,764 -------- -------- 9,736 12,063 -------- -------- $272,374 $225,424 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Bank lines of credit $-- $-- Trade accounts payable 19,160 18,678 Accrued liabilities 25,320 23,610 -------- -------- Total current liabilities 44,480 42,288 OTHER LIABILITIES 14,423 11,455 DEFERRED TAXES 3,936 4,372 STOCKHOLDERS' EQUITY 209,535 167,309 -------- -------- $272,374 $225,424 ======== ======== CONTACT: K-Swiss Inc., Westlake Village George Powlick, 818-706-5100