WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)--November 4, 2010--K•Swiss Inc. (NASDAQ: KSWS) today announced results for the third quarter ended September 30, 2010. 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 prior-year periods.

Net loss for the third quarter of 2010 was $28,334,000, or $0.80 per diluted share, compared with a net loss of $2,884,000, or $0.08 per diluted share, for the prior-year period. Results for the third quarter of 2010 include a $20,222,000 valuation allowance taken against the Company’s U.S. deferred tax assets (see separate discussion below), resulting in income tax expense of $13,993,000 in the third quarter compared with an income tax benefit of $1,581,000 in the prior-year period. Net loss for the nine months ended September 30, 2010, was $47,577,000, or $1.35 per diluted share, compared with a net loss of $15,474,000, or $0.44 per diluted share, for the nine months ended September 30, 2009. Results for the nine-month 2010 period include the valuation allowance noted above, resulting in income tax expense for the period of $8,152,000 compared with an income tax benefit of $5,058,000 in the prior-year period. Results for the nine-month 2009 period also includes a pre-tax non-operating loss of $2,616,000, 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 $1,367,000, or $0.03 per diluted share (after tax), from the sale of Royal Elastics in April 2009.

For the third quarter of 2010, total worldwide revenues decreased 12.8% to $61,621,000 compared with $70,633,000 in the prior-year period. Domestic revenues increased 13.2% to $27,142,000 in the third quarter, and international revenues decreased 26.1% to $34,479,000 for the same period. Total worldwide revenues for the first nine months of 2010 decreased 12.3% to $174,322,000 compared with $198,709,000 in the first nine months of 2009. Domestic revenues decreased 11.2% to $73,786,000 in the first nine months of 2010, and international revenues decreased 13.0% to $100,536,000.

Worldwide futures orders with start ship dates from October 2010 through March 2011 increased 17.5% to $79,915,000 at September 30, 2010. Domestic futures orders increased 50.9% to $34,894,000 at September 30, 2010, from $23,121,000 the previous year. International futures orders increased 0.3% to $45,021,000 at September 30, 2010, from $44,875,000 the previous year.

K•Swiss has previously disclosed that should it be unable to substantiate evidence for realizing the benefit of the Company’s deferred tax assets in the second half of 2010, it might be required to establish a reserve against these deferred tax assets. The Company has concluded that it cannot prove that it is “more likely than not” that the Company’s U.S. deferred tax assets will be realized in the future and, therefore, the Company recognized a tax valuation allowance of $20,222,000 against the U.S. deferred tax assets in the third quarter of 2010.

Steven Nichols, Chairman of the Board and President, stated, “While the results over the last couple of years have been dismal, there are an increasing number of ‘green shoots’ of promise that Spring will in fact come in 2011. Our domestic futures orders are up 50% and positive worldwide, which could be an acknowledgement that our three years of investing in innovative product and brand positioning might pay off.”

For 2010, the Company expects full year consolidated revenues to be 5% to 10% less than 2009.

Consolidated gross margin is expected to be approximately 41% compared with 35.8% in 2009 due to expected lower closeout sales during 2010 compared with 2009.

Selling, general & administrative expenses are expected to be $138 million to $144 million due to increased marketing expenditures. These expenditures will be continually evaluated and could change over time, including the possibility of even greater marketing expenditures depending on available branding opportunities.

The tax rate is projected to be approximately 16%, compared with a previous expectation of a tax benefit rate of 25%.

K•Swiss will conduct a conference call on its third quarter 2010 results today, at 11:00 a.m. ET. The number to call for this interactive teleconference is (212) 231-2902. A replay of this conference call will be available until November 11, 2010, by dialing (402) 977-9140 and entering the passcode, 21464003.

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 11, 2010.

Founded more than forty years ago in Van Nuys, California, K•Swiss introduced the first all-leather tennis shoe, the K•Swiss "Classic" in 1966. Since its inception, K•Swiss has rooted itself in California Sport with an aim to be the most inspiring and innovative sports brand in the market. Today the Company offers performance and lifestyle footwear and apparel for several categories under its California Sports umbrella including Tennis Heritage, California Fit (Running, Triathlon and Fitness) and California Youth. K•Swiss also designs, develops and markets footwear under the Palladium brand and owns the FORM Athletics brand. For more information about K•Swiss, visit www.kswiss.com.

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: the ability to adequately replace lost manufacturing capacity in Thailand, 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, 2010, which is currently on file with the SEC. Futures orders as of any date, represents orders scheduled to be shipped within the next six months. Futures orders as of a certain date do not include orders scheduled to be shipped on or prior to that date. 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/Loss
(In thousands, except earnings per share data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
	(Unaudited)						(Unaudited)
Revenues	$	61,621		$	70,633		$	174,322		$	198,709
Cost of goods sold		36,519			44,341			103,048			127,865
Gross profit		25,102			26,292			71,274			70,844
Selling, general and administrative expenses		39,246			30,329			107,549			90,609
Operating loss		(14,144	)		(4,037	)		(36,275	)		(19,765	)
Other expense, net		-			(486	)		(3,320	)		(1,249	)
Interest income (expense), net		(197	)		354			170			698
Loss before income tax expense (benefit) and discontinued operations		(14,341	)		(4,169	)		(39,425	)		(20,316	)
Income tax expense (benefit)		13,993			(1,581	)		8,152			(5,058	)
Loss before discontinued operations		(28,334	)		(2,588	)		(47,577	)		(15,258	)
Loss from discontinued operations, less applicable income tax		-			(296	)		-			(216	)
Net loss	$	(28,334	)	$	(2,884	)	$	(47,577	)	$	(15,474	)
Basic loss per share	$	(0.80	)	$	(0.08	)	$	(1.35	)	$	(0.44	)
Diluted loss per share	$	(0.80	)	$	(0.08	)	$	(1.35	)	$	(0.44	)
Weighted average number of shares outstanding
Basic		35,246			34,999			35,192			34,909
Diluted		35,246			34,999			35,192			34,909


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

							September 30,
							2010			2009
ASSETS							(Unaudited)
CURRENT ASSETS
Cash and cash equivalents							$	44,116		$	138,098
Restricted cash and cash equivalents and restricted investments available for sale								24,373			22,270
Investments available for sale								71,637			31,197
Accounts receivable, net								44,174			41,975
Inventories								55,292			51,419
Prepaid expenses and other current assets								4,523			2,381
Income taxes receivable								14,865			-
Deferred income taxes								-			6,660
Total current assets								258,980			294,000
PROPERTY, PLANT AND EQUIPMENT, NET								21,156			22,619
OTHER ASSETS
Intangible assets								18,269			20,226
Deferred income taxes								3,320			13,527
Other								10,120			8,801
Total other assets								31,709			42,554
							$	311,845		$	359,173

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank lines of credit and current portion of long-term debt							$	5,416		$	7,749
Trade accounts payable								15,327			9,497
Accrued income taxes payable								165			382
Accrued liabilities								16,599			14,539
Total current liabilities								37,507			32,167
OTHER LIABILITIES
Long-term debt								436			780
Other liabilities								13,757			12,966
Contingent purchase price								5,857			-
Total other liabilities								20,050			13,746
STOCKHOLDERS' EQUITY								254,288			313,260
							$	311,845		$	359,173