EX-99.1 2 a5196499ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 K-Swiss Reports Second Quarter Results WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)--July 27, 2006--K-Swiss Inc. (NASDAQ/NM: KSWS) today announced results for the second quarter ended June 30, 2006. Financial Highlights Net earnings and net earnings per diluted share for the second quarter of 2006 increased 21.3% and 23.4%, respectively, to $20,334,000, or $0.58 per diluted share, compared with $16,765,000, or $0.47 per diluted share, in the prior-year period. Net earnings and net earnings per diluted share for the six months ended June 30, 2006, increased 6.1% and 7.6%, respectively, to $45,244,000, or $1.28 per diluted share, compared with $42,629,000, or $1.19 per diluted share, at June 30, 2005. For the second quarter of 2006, total worldwide revenues decreased 1.8% to $124,196,000 compared with $126,474,000 in the prior-year period. Domestic revenues decreased 14.7% to $81,114,000 in the second quarter, and international revenues increased 37.3% to $43,082,000. Total worldwide revenues for the first six months of 2006 decreased 1.9% to $274,180,000 compared with $279,617,000 in the first six months of 2005. Domestic revenues decreased 13.3% to $184,498,000 in the first half of 2006, while international revenues increased 34.0% to $89,682,000. Futures Orders Worldwide futures orders with start ship dates from July through December decreased 2.2% to $181,182,000 at June 30, 2006, compared with $185,181,000 at June 30, 2005. Domestic futures orders decreased 23.4% to $105,233,000 at June 30, 2006, from $137,464,000 at June 30, 2005. International futures orders increased 59.2% to $75,949,000 at June 30, 2006, from $47,717,000 the previous year. Stock Repurchase Program The Company purchased 10,000 shares of Class A Common Stock during the second quarter of 2006 for a total expenditure of approximately $268,000 as part of its stock repurchase program. At June 30, 2006, there remains authorization to repurchase approximately 4,091,000 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 $164.1 million. K-Swiss also issued guidance for the third quarter of 2006 and full year 2006. The Company expects revenues for the third quarter of 2006 to be approximately $119 to $129 million and earnings per diluted share to be in the range of $0.40 to $0.50. The Company expects full year revenues to be approximately $470 to $480 million and expects to report full year earnings per diluted share of approximately $1.90 to $2.00. The Company's estimates for the third quarter of 2006 and full year 2006 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 approximately 47%; SG&A will not rise above $37 million for the quarter and $134 million for the year; cancellations will be moderate; and the Company's growth initiatives with respect to Royal Elastics will not exceed a net loss of $0.08 per share for the year. Steven Nichols, Chairman of the Board and President, stated, "The results for the quarter demonstrate the benefit of past investments in building international sales and the continued need for new investment and concepts in our domestic business. The better-than-expected earnings and increased guidance also point to strong expense control and improved product margins. International revenues and backlog were once again decidedly positive with increases of 37% and 59%, respectively, for the second quarter. We are encouraged by the trends we see in the international backlog for the second half of the year and initial international bookings for the first quarter of 2007. However, the domestic business continues to be soft and, based on recent booking trends, indicate that a more realistic timeframe for stemming the domestic downturn is now at least the second half of 2007." Investor Conference Call and Web Simulcast K-Swiss will conduct a conference call on its second quarter 2006 earnings release on July 27, 2006, at 11:00 a.m. EDT. The number to call for this interactive teleconference is (913) 981-5519. A replay of this conference call will be available through August 3, 2006, by dialing (719) 457-0820 and entering the passcode, 4307563. 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 on July 27, 2006, beginning at 11:00 a.m. EDT. The online replay will follow shortly after the call and continue through August 10, 2006. 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 June 30, 2006, 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 Six Months Ended June 30, June 30, ------------------ ------------------ (Unaudited) (Unaudited) 2006 2005 2006 2005 -------- -------- -------- -------- Revenues $124,196 $126,474 $274,180 $279,617 Cost of goods sold 62,546 67,648 142,907 148,808 -------- -------- -------- -------- Gross profit 61,650 58,826 131,273 130,809 Selling, general and administrative expenses 34,450 34,946 68,876 67,285 -------- -------- -------- -------- Operating profit 27,200 23,880 62,397 63,524 Interest income, net 1,863 665 3,164 1,183 -------- -------- -------- -------- Earnings before income taxes 29,063 24,545 65,561 64,707 Income tax expense 8,729 7,780 20,317 22,078 -------- -------- -------- -------- Net earnings $ 20,334 $ 16,765 $ 45,244 $ 42,629 ======== ======== ======== ======== Basic earnings per share $ 0.59 $ 0.49 $ 1.32 $ 1.24 ======== ======== ======== ======== Diluted earnings per share $ 0.58 $ 0.47 $ 1.28 $ 1.19 ======== ======== ======== ======== Weighted average number of shares outstanding Basic 34,357 34,096 34,307 34,315 Diluted 35,321 35,552 35,337 35,800 K-Swiss Inc. Condensed Balance Sheets (In thousands) June 30, ------------------ 2006 2005 -------- -------- ASSETS (Unaudited) CURRENT ASSETS Cash and cash equivalents $195,345 $134,577 Accounts receivable, net 83,609 78,783 Inventories 70,331 65,792 Prepaid expenses and other 2,899 4,286 Deferred taxes 5,406 3,869 -------- -------- Total current assets 357,590 287,307 PROPERTY, PLANT AND EQUIPMENT, NET 10,497 8,419 OTHER ASSETS Intangible assets 4,700 4,700 Deferred taxes 3,819 5,331 Other 6,344 5,630 -------- -------- 14,863 15,661 -------- -------- $382,950 $311,387 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Bank lines of credit $ -- $ 3,750 Trade accounts payable 25,041 22,997 Accrued liabilities 26,275 23,938 -------- -------- Total current liabilities 51,316 50,685 OTHER LIABILITIES 11,230 15,108 STOCKHOLDERS' EQUITY 320,404 245,594 -------- -------- $382,950 $311,387 ======== ======== CONTACT: K-Swiss Inc. George Powlick, 818-706-5100