10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2004

OR

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from              to             

Commission File number 0-18490

K-SWISS INC.

(Exact name of registrant as specified in its charter)

Delaware	95-4265988
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

31248 Oak Crest Drive, Westlake Village, California	91361
(Address of principal executive offices)	(Zip code)

818-706-5100

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No  ¨

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Shares of common stock outstanding at April 28, 2004:

Class A	26,801,482
Class B	8,530,734

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

K-SWISS INC.

CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands)

	March 31, 2004			December 31, 2003
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	90,239		$	81,455
Accounts receivable, less allowance for doubtful accounts of $2,043 and $2,079 as of March 31, 2004 and December 31, 2003, respectively		93,286			51,006
Inventories		56,727			73,660
Prepaid expenses and other		1,988			4,760
Deferred taxes		2,863			3,014
Total current assets		245,103			213,895
PROPERTY, PLANT AND EQUIPMENT, net		8,466			8,596
OTHER ASSETS
Intangible assets (Note 5)		5,571			7,301
Other		5,026			4,838
		10,597			12,139
	$	264,166		$	234,630
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Trade accounts payable	$	16,516		$	19,447
Accrued income taxes		10,037			347
Accrued liabilities		22,277			16,715
Total current liabilities		48,830			36,509
OTHER LIABILITIES		15,359			15,234
DEFERRED TAXES		3,984			3,360
STOCKHOLDERS’ EQUITY (Note 7)
Preferred Stock – authorized 2,000,000 shares of $0.01 par value; none issued and outstanding		—			—
Common Stock:
Class A – authorized 90,000,000 shares of $0.01 par value; 26,979,348 shares issued, 26,800,148 shares outstanding and 179,200 shares held in treasury at March 31, 2004 and 26,755,362 shares issued and outstanding at December 31, 2003		270			268
Class B – authorized 18,000,000 shares of $0.01 par value; issued and outstanding 8,530,734 shares at March 31, 2004 and 8,682,734 shares at December 31, 2003		85			87
Additional paid-in capital		31,878			31,059
Treasury Stock		(4,258	)		—
Retained earnings		164,312			143,427
Accumulated other comprehensive earnings -
Foreign currency translation		3,706			4,686
		195,993			179,527
	$	264,166		$	234,630

The accompanying notes are an integral part of these statements.

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K-SWISS INC.

CONSOLIDATED STATEMENTS OF EARNINGS

AND COMPREHENSIVE EARNINGS

(Amounts in thousands, except per share amounts)

(Unaudited)

	Three Months Ended March 31,
	2004			2003
Revenues	$	152,020		$	115,809
Cost of goods sold		82,254			61,593
Gross profit		69,766			54,216
Selling, general and administrative expenses		34,207			26,531
Operating profit		35,559			27,685
Interest income, net		127			187
Earnings from continuing operations before income taxes		35,686			27,872
Income tax expense		13,918			10,972
Earnings from continuing operations		21,768			16,900
Loss from discontinued operations, less applicable income tax benefit of $2,064 for the three months ended March 31, 2003 (Note 2)		—			(3,256	)
NET EARNINGS	$	21,768		$	13,644
Earnings per common share (Note 3)
Basic:
Earnings from continuing operations	$	0.62		$	0.47
Loss from discontinued operations		—			(0.09	)
Net Earnings	$	0.62		$	0.38
Diluted:
Earnings from continuing operations	$	0.57		$	0.45
Loss from discontinued operations		—			(0.09	)
Net Earnings	$	0.57		$	0.36
Dividends declared per common share	$	0.025		$	0.005
Net Earnings	$	21,768		$	13,644
Other comprehensive earnings (loss) –
Foreign currency translation adjustments, net of income taxes of $0 and $0 for the three months ended March 31, 2004 and 2003, respectively		(980	)		910
Comprehensive earnings	$	20,788		$	14,554

The accompanying notes are an integral part of these statements.

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K-SWISS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

	Three Months Ended March 31,
	2004			2003
Net cash provided by (used in) operating activities	$	14,808		$	(8,545	)
Cash flows from investing activities:
Purchase of property, plant and equipment		(332	)		(508	)
Net cash used in investing activities		(332	)		(508	)
Cash flows from financing activities:
Purchase of treasury stock		(4,258	)		(11,064	)
Payment of dividends		(883	)		(176	)
Proceeds from stock options exercised		149			24
Net cash used in financing activities		(4,992	)		(11,216	)
Effect of exchange rate changes on cash		(700	)		461
Net increase (decrease) in cash and cash equivalents		8,784			(19,808	)
Cash and cash equivalents at beginning of period		81,455			67,593
Cash and cash equivalents at end of period	$	90,239		$	47,785
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	181		$	1
Income taxes	$	294		$	409

The accompanying notes are an integral part of these statements.

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K-SWISS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “S.E.C.”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the consolidated financial position of
K-Swiss Inc. (the “Company” or “K-Swiss”) as of March 31, 2004 and the results of its operations and its cash flows for the three months ended March 31, 2004 and 2003 have been included for the periods presented. The results of operations and cash flows for the three months ended March 31, 2004 are not necessarily indicative of the results to be expected for any other interim period or the full year. The balance sheet at December 31, 2003 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. These consolidated financial statements should be read in combination with the audited consolidated financial statements and notes thereto for the year ended December 31, 2003. Certain reclassifications have been made in the three months ended March 31, 2003 presentation to conform to the three months ended March 31, 2004 presentation.

2. National Geographic

In the fourth quarter of 2003, the Company reached an agreement with National Geographic to terminate its licensing agreement for $2.0 million. Operations of the National Geographic brand have been accounted for and shown as a discontinued operation in the accompanying financial information. The operations for National Geographic for the three months ended March 31, 2003 are as follows (in thousands):

	Three Months Ended March 31, 2003
Revenues	$	124
Cost of goods sold		3,869
Gross loss		(3,745	)
Selling, general and administrative expenses		1,504
Operating loss		(5,249	)
Interest expense, net		71
Income tax benefit		(2,064	)
Loss from discontinued operations	$	(3,256	)

3. Earnings per Share

The following is a reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations (shares in thousands):

	Three Months Ended March 31,
	2004				2003
	Shares	Per Share Amount			Shares	Per Share Amount
Basic EPS	35,376	$	0.62		35,562	$	0.38
Effect of Dilutive Stock Options	2,592		(0.05	)	2,261		(0.02	)
Diluted EPS	37,968	$	0.57		37,823	$	0.36

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The following options were not included in the computation of diluted EPS because the options’ exercise price was greater than the average market price of the common shares:

	Three Months Ended March 31, 2004	Three Months Ended March 31, 2003
Options to purchase shares of common stock (in thousands)	—	56
Exercise prices	—	$12.50
Expiration dates	—	March 2013

4. Accounting for Stock-Based Compensation

Statement of Financial Accounting Standards (“SFAS”) No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of SFAS 123,” encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company’s stock at the date of grant over the amount an employee must pay to acquire the stock.

During the three months ended March 31, 2004 and 2003, 8,500 and 32,000 options, respectively, were granted at exercise prices below fair market value. All other options were granted at an exercise price equal to the fair market value of the Company’s common stock at the date of grant. Accordingly, no compensation cost has been recognized for such options granted.

In connection with the exercise of options, the Company realized income tax benefits in the three months ended March 31, 2004 and 2003 that have been credited to additional paid-in capital.

Had compensation cost for the plan been determined based on the fair value of the options at the grant dates consistent with the method of SFAS No. 148, the Company’s net earnings and earnings per share would have been:

	Three Months Ended March 31,
	2004			2003
Net earnings (in thousands)
As reported	$	21,768		$	13,644
Add stock-based employee compensation charges reported in net income		70			53
Less total stock-based employee compensation expense, determined under the fair value method		(487	)		(384	)
Pro forma	$	21,351		$	13,313
Basic earnings per share
As reported	$	0.62		$	0.38
Pro forma		0.60			0.37
Diluted earnings per share
As reported	$	0.57		$	0.36
Pro forma		0.56			0.35

The fair value of options at date of grant was estimated using the Black-Scholes model with the following assumptions:

	March 31,
	2004		2003
Expected life (years)	4		8
Risk-free interest rate	2.40	%	3.35	%
Expected volatility	46	%	58	%
Expected dividend yield	0.4	%	0.2	%

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5. Goodwill and Intangible Assets

SFAS No. 142, “Goodwill and Other Intangible Assets,” eliminates the requirement to amortize goodwill and indefinite-lived intangible assets, requiring instead that those assets be measured for impairment at least annually, and more often when events indicate that an impairment exists. Intangible assets with finite lives will continue to be amortized over their useful lives. Goodwill and intangible assets are as follows (in thousands):

	March 31, 2004			December 31, 2003
Goodwill	$	4,676		$	4,772
Trademarks		3,745			5,382
Other		8			8
Less accumulated amortization		(2,858	)		(2,861	)
	$	5,571		$	7,301

The changes in the carrying amount of goodwill and intangible assets is as follows (in thousands):

	Three Months Ended March 31,
	2004			2003
Beginning balance	$	7,301		$	8,107
Amortization of assets with finite lives		—			(66	)
Impairment losses		(1,730	)		(746	)
Ending balance	$	5,571		$	7,295

In applying SFAS No. 142, the Company has performed the annual reassessment and impairment test required as of January 1, 2004 to determine whether goodwill and intangible assets were impaired. In the first quarter of 2004, as a result of the annual reassessment and impairment test and after a review of sales, backlog, cash flows and marketing strategy, the Company determined that its investment in the Royal Elastics goodwill and trademark were impaired and recognized an impairment loss of $1,730,000 during the three months ended March 31, 2004. In the first quarter of 2003, after a review of sales backlog, the Company determined based on estimated revenues, operating profits and cash flows that its investment in the National Geographic license was impaired and recognized an impairment loss of $746,000 in the first quarter of 2003. See Note 2 for additional information on National Geographic.

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6. Segment Information

The Company’s predominant business is the design, development and distribution of athletic footwear. Substantially all of the Company’s revenues are from sales of footwear products. The Company is organized into three geographic regions: the United States, Europe and other international operations. Certain segment information that follows excludes the operations of the National Geographic brand, which was discontinued in 2003. Certain reclassifications have been made in the 2003 presentations. The following tables summarize segment information (in thousands):

	Three Months Ended March 31,
	2004			2003
Revenues from unrelated entities (1):
United States	$	129,575		$	100,733
Europe		13,946			8,396
Other International		8,499			6,680
	$	152,020		$	115,809
Inter-geographic revenues:
United States	$	1,046		$	780
Europe		98			30
Other International		2,919			2,133
	$	4,063		$	2,943
Total revenues:
United States	$	130,621		$	101,513
Europe		14,044			8,426
Other International		11,418			8,813
Less inter-geographic revenues		(4,063	)		(2,943	)
	$	152,020		$	115,809
Operating profit:
United States (2)	$	35,657		$	29,635
Europe		2,351			589
Other International (2)		1,719			1,285
Less corporate expenses (3)		(5,327	)		(5,118	)
Eliminations		1,159			1,294
	$	35,559		$	27,685

	March 31, 2004		December 31, 2003
Identifiable assets:
United States	$	146,701	$	127,380
Europe		37,947		26,350
Other International		12,847		11,109
Corporate assets and eliminations (4)		66,671		69,791
	$	264,166	$	234,630

(1) Revenue is attributable to geographic regions based on the location of the Company subsidiary.

(2) For the three months ended March 31, 2004, operating profit includes impairment losses of $1,730,000 on the Royal Elastics trademark and goodwill, of which $1,016,000 and $714,000 of impairment losses were recognized in the United States segment and Other International segment, respectively. For the three months ended March 31, 2003, operating profit includes impairment losses of $746,000 on the National Geographic license, which was recognized in the United States segment.

(3) Corporate expenses include expenses such as salaries and related expenses for executive management and support departments such as accounting and treasury, information technology, human resources and legal which benefit the entire corporation and are not segment/region specific. The increase in corporate expenses during the three months ended March 31, 2004 is due to an increase in compensation and bonus/incentive related expenses due to an increase in headcount and an increase in revenues and earnings, offset by a decrease in legal expenses in connection with the defense of two lawsuits in the three months ended March 31, 2003, which were settled in the second quarter of 2003.

(4) Corporate assets include cash and cash equivalents and intangible assets.

During the three months ended March 31, 2004 and 2003, approximately 21% and 27%, respectively, of revenues were attributable to one customer.

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7. Stockholders’ Equity

Under its stock repurchase programs, the Company purchased 179,200 shares of Class A Common Stock during the three months ended March 31, 2004 for a total expenditure of approximately $4,258,000.

8. Recent Accounting Pronoucements

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments With Characteristics of Both Liabilities and Equity.” SFAS No. 150 changes the classification in the statement of financial position of certain common financial instruments from either equity or mezzanine presentation to liabilities and requires an issuer of those financial statements to recognize changes in fair value or redemption amount, as applicable, in earnings. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and with one exception, is effective at the beginning of the first interim period beginning after June 15, 2003. The effect of adopting SFAS No. 150 will be recognized as a cumulative effect of an accounting change as of the beginning of the period of adoption. Restatement of prior periods is not permitted. SFAS No. 150 did not have any impact on the Company’s financial position or results of operations.

In December 2003, the Securities and Exchange Commission (“S.E.C.”) issued Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition,” which revises or rescinds portions of the interpretative guidance included in SAB No. 101, “Revenue Recognition in Financial Statements” in order to make guidance consistent with authoritative accounting and auditing guidance and with S.E.C. rules and regulations. The principal revisions relate to the rescission of material no longer necessary because of private sector developments in United States generally accepted accounting principles. The adoption of SAB No. 104 did not have a material impact on the Company’s financial position or results of operations.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Note Regarding Forward-Looking Statements and Analyst Reports

“Forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”), include certain written and oral statements made, or incorporated by reference, by us or our representatives in this report, other reports, filings with the Securities and Exchange Commission (the “S.E.C.”), press releases, conferences, or otherwise. Such forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will be,” “will continue,” “will likely result,” or any variations of such words with similar meaning. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Investors should carefully review the risk factors set forth in other reports or documents we file with the S.E.C., including Forms 10-Q, 10-K and 8-K. Some of the other risks and uncertainties that should be considered include, but are not limited to, the following: international, national and local general economic and market conditions; the size and growth of the overall athletic footwear and apparel markets; the size of our competitors; intense competition among designers, marketers, distributors and sellers of athletic footwear and apparel for consumers and endorsers; market acceptance of our training shoe line; market acceptance of new Limited Edition product; market acceptance of non-performance product in Europe; market acceptance of Royal Elastics footwear; demographic changes; changes in consumer preferences; popularity of particular designs, categories of products, and sports; seasonal and geographic demand for our products; the size, timing and mix of purchases of our products; fluctuations and difficulty in forecasting operating results, including, without limitation, the fact that advance “futures” orders may not be indicative of future revenues due to the changing mix of futures and at-once orders; potential cancellation of future orders; our ability to continue, manage or forecast our growth and inventories; new product development and commercialization; the ability to secure and protect trademarks, patents, and other intellectual property; difficulties in implementing, operating and maintaining our increasingly complex information systems and controls; concentration of production in China; potential earthquake disruption due to the location of our warehouse and headquarters; potential disruption in supply chain, due to various factors including but not limited to epidemic diseases or customer purchasing habits; performance and reliability of products; customer service; adverse publicity; the loss of significant customers or suppliers; dependence on distributors; dependence on major customers; concentration of credit risk; business disruptions; increased costs of freight and transportation to meet delivery deadlines; the effects of terrorist actions on business activities, customer orders and cancellations, and the United States and international governments’ responses to these terrorist actions; changes in business strategy or development plans; general risks associated with doing business outside the United States, including, without limitation, import duties, tariffs, quotas and political and economic instability; changes in government regulations; liability and other claims asserted against us; the ability to attract and retain qualified personnel; and other factors referenced or incorporated by reference in this report and other reports.

K-Swiss (the “Company,” “we,” “us,” and “our”) operates in a very competitive and rapidly changing environment. New risk factors can arise and it is not possible for management to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

Investors should also be aware that while we communicate, from time to time, with securities analysts, it is against our policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, investors should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, we have a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts or others contain any projections, forecasts or opinions, such reports are not our responsibility.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

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We believe that the estimates, assumptions and judgements involved in the accounting policies described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our most recent Annual Report on Form 10-K have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates we use in applying the critical accounting policies. Certain of these critical accounting policies affect working capital account balances, including the policies for revenue recognition, the reserve for uncollectible accounts receivable and inventory reserves. These policies require that we make estimates in the preparation of our financial statements as of a given date.

Within the context of these critical accounting policies, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

Results of Operations

The following table sets forth, for the periods indicated, the percentage of certain items in the consolidated statements of earnings relative to revenues.

	Three Months Ended March 31,
	2004		2003
Revenues	100.0	%	100.0	%
Cost of goods sold	54.1		53.2
Gross profit	45.9		46.8
Selling, general and administrative expenses	22.5		22.9
Interest income, net	0.1		0.2
Earnings from continuing operations before income taxes	23.5		24.1
Income tax expense	9.2		9.5
Earnings from continuing operations	14.3		14.6
Loss from discontinued operations	—		(2.8	)
Net earnings	14.3		11.8

K-Swiss brand revenues increased to $150,274,000 for the quarter ended March 31, 2004 from $113,980,000 for the quarter ended March 31, 2003, an increase of $36,294,000 or 31.8%. The increase for the quarter ended March 31, 2004 was the result of increases in the volume of footwear sold along with higher average wholesale prices per pair. The volume of footwear sold increased to 5,793,000 for the quarter ended March 31, 2004, from 4,508,000 pair for the quarter March 31, 2003. The increase in the volume of footwear sold for the quarter ended March 31, 2004 was primarily the result of increased sales of the Classic, tennis, training and children’s shoes of 26.8%, 34.7%, 47.1% and 26.1%, respectively. This increase for the quarter ended March 31, 2004 was also due to an increase in the average wholesale price per pair to $25.32 for the quarter ended March 31, 2004 from $24.71 for the quarter ended March 31, 2003, an increase of 2.5%, which resulted from a mix of sales.

The breakdown of revenues (dollar amounts in thousands) is as follows:

	Three Months Ended March 31,
	2004		2003		% Change
Domestic
K-Swiss brand	$	129,030	$	100,368	28.6	%
Royal Elastics brand		545		366	48.9
Total domestic	$	129,575	$	100,734	28.6	%
International
K-Swiss brand	$	21,244	$	13,612	56.1	%
Royal Elastics brand		1,201		1,463	(17.9	)
Total international	$	22,445	$	15,075	48.9	%
Total Revenues	$	152,020	$	115,809	31.3	%

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Overall gross profit margins, as a percentage of revenues, decreased to 45.9% for the quarter ended March 31, 2004, from 46.8% for the quarter ended March 31, 2003. Gross profit margin for the quarter ended March 31, 2004 was affected by product mix changes and lower at-once business. Our gross margins may not be comparable to our competitors as we recognize warehousing costs within selling, general and administrative expenses.

Overall selling, general and administrative expenses increased to $34,207,000 (22.5% of revenues) for the quarter ended March 31, 2004, from $26,531,000 (22.9% of revenues) for the quarter ended March 31, 2003, an increase of $7,676,000 or 28.9%. The increases in general and administrative expenses during the quarter ended March 31, 2004 were the result of an impairment recognition and increases in advertising and compensation and compensation related expenses offset by a decrease in legal expenses. Impairment of $1,730,000 was recognized on the trademark and goodwill of the Royal Elastics brand based on many factors including the brand not growing as rapidly as we had expected. Advertising expenses increased 25.4% as part of a strategic effort to drive higher revenues. Compensation expenses, which includes commissions and bonus/incentive related expenses, increased 28.7% due to an increase in headcount (as a result of the increase in volume) and as a result of an increase in revenues and earnings. Legal expenses decreased 69.6% in connection with the defense of two lawsuits in the quarter ended March 31, 2003, which were settled in the second quarter of 2003.

Overall net interest income was $127,000 (0.1% of revenues) for the quarter ended March 31, 2004, compared to $187,000 (0.2% of revenues) for the quarter ended March 31, 2003, representing a decrease of $60,000 for the quarter ended March 31, 2004 compared to the same prior year period. This decrease in net interest income was the result of lower average interest rates offset by average higher balances.

Our effective tax rate was 39.0% and 39.4% for the quarter ended March 31, 2004 and 2003, respectively.

The net loss from discontinued operations was $3,256,000 for the quarter ended March 31, 2003. Included in the quarter ended 2003 was a $2.9 million expense related to a guaranteed royalty payment commitment to National Geographic and a $746,000 impairment loss on the National Geographic license.

Net earnings increased 59.5% to $21,768,000, or $0.57 per share (diluted earnings per share), for the quarter ended March 31, 2004 from $13,644,000, or $0.36 per share (diluted earnings per share) for the quarter ended March 31, 2003.

At March 31, 2004 and 2003 total futures orders with start ship dates from April 2004 and 2003 through September 2004 and 2003 were approximately $194,954,000 and $171,488,000, respectively, an increase of 13.7%. The 13.7% increase in total futures orders is comprised of a 10.4% increase in the second quarter 2004 future orders and an 18.2% increase in the third quarter 2004 future orders. At March 31, 2004 and 2003, domestic futures orders with start ship dates from April 2004 and 2003 through September 2004 and 2003 were approximately $162,313,000 and $152,266,000, respectively, an increase of 6.6%. At March 31, 2004 and 2003, international futures orders with start ship dates from April 2004 and 2003 through September 2004 and 2003 were approximately $32,641,000 and $19,222,000, respectively, an increase of 69.8%. “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. Orders generally may be canceled by customers without financial penalty. We believe our rate of net customer cancellations of domestic orders approximates industry averages for similar companies. Customers may also reject nonconforming goods. To date, we believe we have not experienced returns of our products or bad debts of customers materially in excess of industry averages for similar companies.

Liquidity and Capital Resources

We experienced net cash inflows of approximately $14,808,000 from our operating activities during the three months ended March 31, 2004 compared to net cash outflows of approximately $8,545,000 from our operating activities during the three months ended March 31, 2003. The increase in operating cash inflows from the prior year is due primarily to an increase in net earnings, an increase in accounts receivable offset by a decrease in inventories as a result of firm order commitments at December 31, 2003 that were shipped during the first quarter of 2004, and an increase in accounts payable and accrued liabilities primarily due to timing of payments.

12

We had a net outflow of cash from our investing activities for the three months ended March 31, 2004 and 2003 due to the purchase of property, plant and equipment.

We had a net outflow of cash from our financing activities for the three months ended March 31, 2004 and 2003 primarily due to the purchase of treasury stock.

During the first quarter of 2004, we completed our October 2002 $25 million stock repurchase program. However, prior to this, on October 22, 2003, the Board of Directors authorized a new stock repurchase program to repurchase through December 2008 up to an additional $25 million of our Class A Common Stock. We adopted this program because we believe repurchasing our shares can be a good use of excess cash depending on our array of alternatives. Currently, we have made purchases under all stock repurchase programs from August 1996 through April 28, 2004 (the day prior to the filing of the Form 10-Q) of 23.2 million shares at an aggregate cost totaling approximately $112,827,000. See Part II – Other Information, Item 2. Changes in Securities and Use of Proceeds and Issuer Purchases of Equity Securities.

No other material capital commitments exist at March 31, 2004. Depending on our future growth rate, funds may be required by operating activities. With continued use of our revolving credit facility and internally generated funds, we believe our present and currently anticipated sources of capital are sufficient to sustain our anticipated capital needs for the remainder of 2004. At March 31, 2004, we do not have any funded debt on our lines of credit and are in compliance with all relevant covenants under our credit facilities.

Our working capital increased $18,887,000 to $196,273,000 at March 31, 2004 from $177,386,000 at December 31, 2003. Working capital increased during the quarter ended March 31, 2004 mainly due to an increase in accounts receivable offset by a decrease in inventory as a result of firm order commitments at December 31, 2003 that were shipped during the first quarter of 2004.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes from the information previously reported under Item 7A of its Annual Report on Form 10-K for the fiscal year ended December 31, 2003, which Item 7A is hereby incorporated by reference.

ITEM 4. DISCLOSURE CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The Company’s management carried out an evaluation, under the supervision and with the participation of the Company’s President and Chief Executive Officer and Vice President of Finance and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2004, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Company’s President and Chief Executive Officer along with the Company’s Vice President of Finance and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of March 31, 2004 are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic filings under the Exchange Act.

(b) Changes in Internal Control Over Financial Reporting

No changes in the Company’s internal control over financial reporting have come to management’s attention during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

The Company is, from time to time, a party to litigation which arises in the normal course of our business operations. The Company does not believe that it is presently a party to litigation which will have a material adverse effect on its business or operations.

13

ITEM 2. Changes in Securities and Use of Proceeds and Issuer Purchases of Equity Securities

The following table provides information with respect to purchases made by K-Swiss of K-Swiss Class A Common Stock during the first quarter of 2004:

	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program (A), (B)	Approximate Dollar Value that May Yet Be Purchased Under the Program (A), (B)
January 1 through January 31, 2004	—	$	—	—	$	26,715,000
February 1 through February 29, 2004	179,200		23.76	179,200	$	22,457,100
March 1 through March 31, 2004	—		—	—	$	22,457,100
Total	179,200	$	23.76	179,200	$	22,457,100

(A) In October 2002, the Board of Directors approved a $25 million stock repurchase program. This program was completed in February 2004. At March 31, 2004, the number of shares purchased under this program was 1,832,340.

(B) In October 2003, the Board of Directors approved an additional $25 million stock repurchase program. This program expires in December 2008. At March 31, 2004, the number of shares purchased under this program was 107,460 and the remaining available yet to be purchased is $22,457,100.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Submission of Matters to a Vote of Security Holders

None.

ITEM 5. Other Information

None.

ITEM 6. Exhibits and Reports on Form 8-K

(a) Exhibits

3.1	Restated Certificate of Incorporation of K-Swiss Inc. (incorporated by reference to exhibit 3.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 2002)
3.2	Amended and Restated Bylaws of K-Swiss Inc. (incorporated by reference to exhibit 3.4 to the Registrant’s Form 10-K for the fiscal year ended December 31, 1991)
4.1	Certificate of Designations of Class A Common Stock of K-Swiss Inc. (incorporated by reference to exhibit 3.2 to the Registrant’s Form S-1 Registration Statement No. 33-34369)
4.2	Certificate of Designations of Class B Common Stock of K-Swiss Inc. (incorporated by reference to exhibit 3.3 to the Registrant’s Form S-1 Registration Statement No. 33-34369)
4.3	Specimen K-Swiss Inc. Class A Common Stock Certificate (incorporated by reference to exhibit 4.1 to the Registrant’s Form S-1 Registration Statement No. 33-34369)
4.4	Specimen K-Swiss Inc. Class B Common Stock Certificate (incorporated by reference to exhibit 4.2 to the Registrant’s Form S-1 Registration Statement No. 33-34369)

14

4.5	$400,000 324 Corp. 10% Junior Subordinated Debenture due December 31, 2001 originally issued to The Rug Warehouse, Inc. Pension Plan and Trust (incorporated by reference to exhibit 4.7 to the Registrant’s Form S-1 Registration Statement No. 33-34369)
4.6	$100,000 324 Corp. 10% Junior Subordinated Debenture due December 31, 2001 issued to George E. Powlick (incorporated by reference to exhibit 4.8 to the Registrant’s Form S-1 Registration Statement No. 33-34369)
10.1	K-Swiss Inc. 1990 Stock Incentive Plan, as amended through October 28, 2002 (incorporated by reference to exhibit 10.1 to the Registrant’s Form 10-K for the year ended December 31, 2002)
10.2	Form of Amendment No. 1 to K-Swiss Inc. Employee Stock Option Agreement Pursuant to the 1990 Stock Incentive Plan (incorporated by reference to exhibit 10.2 to the Registrant’s Form 10-K for the year ended December 31, 2002)
10.3	K-Swiss Inc. 1999 Stock Incentive Plan, as amended through October 28, 2002 (incorporated by reference to exhibit 10.3 to the Registrant’s Form 10-K for the year ended December 31, 2002)
10.4	Form of Amendment No. 1 to K-Swiss Inc. Employee Stock Option Agreement Pursuant to the 1999 Stock Incentive Plan (incorporated by reference to exhibit 10.4 to the Registrant’s Form 10-K for the year ended December 31, 2002)
10.5	K-Swiss Inc. Profit Sharing Plan, as amended (incorporated by reference to exhibit 10.3 to the Registrant’s Form S-1 Registration Statement No. 33-34369)
10.6	Amendment to K-Swiss Inc. 401(k) and Profit Sharing Plan (incorporated by reference to exhibit 10.35 to the Registrant’s Form 10-K for the fiscal year ended December 31, 1993)
10.7	Amendment to K-Swiss Inc. 401(k) and Profit Sharing Plan dated May 26, 1994 (incorporated by reference to exhibit 10.32 to the Registrant’s Form 10-K for the fiscal year ended December 31, 1994)
10.8	Amendment to K-Swiss Inc. 401(k) and Profit Sharing Plan dated January 1, 2000 (incorporated by reference to exhibit 10.30 to the Registrant’s Form 10-K for the fiscal year ended December 31, 1999)
10.9	Amendment to K-Swiss Inc. 401(k) and Profit Sharing Plan (incorporated by reference to exhibit 10 to the Registrant’s Form 10-Q for the quarter ended March 31, 2002)
10.10	Amendment to K-Swiss Inc. 401(k) and Profit Sharing Plan dated January 10, 2003 (incorporated by reference to exhibit 10.23 to the Registrant’s Form 10-Q for the quarter ended June 30, 2003)
10.11	Form of Indemnity Agreement entered into by and between K·Swiss Inc. and directors (incorporated by reference to exhibit 10.4 to the Registrant’s Form S-1 Registration Statement No. 33-34369)
10.12	Employment Agreement between the Registrant and Steven B. Nichols dated as of May 18, 2000 (incorporated by reference to exhibit 10.31 to the Registrant’s Form 10-Q for the quarter ended June 30, 2000)
10.13	Lease Agreement dated March 11, 1997 by and between K-Swiss Inc. and Space Center Mira Loma, Inc. (incorporated by reference to exhibit 10 to the Registrant’s Form 10-Q for the quarter ended March 31, 1997)
10.14	Business Loan Agreement (incorporated by reference to exhibit 10 to the Registrant’s Form 10-Q for the quarter ended June 30, 2001)
10.15	Amendment No. 2 to Business Loan Agreement, dated May 27, 2003, between the Company and Bank of America (incorporated by reference to exhibit 10.22 to the Registrant’s Form 10-Q for the quarter ended June 30, 2003)

15

10.16	K-Swiss Inc. Deferred Compensation Plan, Master Plan Document (incorporated by reference to exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended March 31, 1998)
10.17	K-Swiss Inc. Deferred Compensation Plan, Master Trust Agreement (incorporated by reference to exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended March 31, 1998)
14.1	K-Swiss Inc. Code of Ethics for the Chief Executive Officer, Senior Financial Officers and Board of Directors (incorporated by reference to exhibit 14 to the Registrant’s Form 10-K for the year ended December 31, 2003)
14.2	K-Swiss Inc. Code of Ethics for Directors, Officers and Employees
31.1	Certification of President and Chief Executive Officer Pursuant to Exchange Act Rule 13a-14
31.2	Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14
32	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

None.

16

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	K-Swiss Inc.
Date: April 28, 2004	By:	/s/ George Powlick
		George Powlick, Vice President Finance and Chief Financial Officer

17

EXHIBIT INDEX

Exhibit
14.2	K-Swiss Inc. Code of Ethics for Directors, Officers and Employees
31.1	Certification of President and Chief Executive Officer Pursuant to Exchange Act Rule 13a-14
31.2	Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14
32	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to the Sarbanes-Oxley Act of 2002

18

EX-14.2

EXHIBIT 14.2

K-SWISS INC.

CODE OF ETHICS

FOR

DIRECTORS, OFFICERS AND EMPLOYEES

1. Purpose.

The Board of Directors (the “Board”, and each member of the Board, a “Director”) of K-Swiss Inc., a Delaware corporation (the “Company”) has adopted the following Code of Ethics (the “Code”) to apply to the Directors, officers and employees of the Company. The Code is intended to promote ethical conduct and compliance with laws and regulations, to provide guidance with respect to the handling of ethical issues, to implement mechanisms to report unethical conduct, to foster a culture of honesty and accountability, to deter wrongdoing and to ensure fair and accurate financial reporting.

No code or policy can anticipate every situation that may arise. Accordingly, this Code is intended to serve as a source of guiding principles. You are encouraged to bring questions about particular circumstances that may involve one or more of the provisions of this Code to the attention of the Company’s Corporate Counsel (in-house) or the Chair of the Audit Committee, who may consult with the Company’s outside legal counsel as appropriate.

Directors who also serve as officers of the Company, the Chief Executive Officer, and the Chief Financial Officer and Controllers (the Chief Financial Officer and Controllers are hereinafter referred to as the “Senior Financial Officers”) are also subject to, and expected to comply with, the Company’s Policy on Avoidance of Insider Trading and certain provisions of the Associates Handbook.

2. Introduction.

Each Director, officer and employee is expected to adhere to a high standard of ethical conduct. The reputation and good standing of the Company depend on how the Company’s business is conducted and how the public perceives that conduct. Unethical actions, or the appearance of unethical actions, are not acceptable. In addition to each of the directives set forth below, Directors, officers and employees shall be guided by the following principles in carrying out their duties and responsibilities on behalf of the Company:

Loyalty, Honesty and Integrity. Directors, officers and employees must not be, or appear to be, subject to influences, interests or relationships that conflict with the best interests of the Company.

Observance of Ethical Standards. When carrying out their duties and responsibilities on behalf of the Company, Directors, officers and employees must adhere to the high ethical standards described in this Code.

Accountability. Directors, officers and employees are responsible for their own adherence and the adherence of the other Directors, officers and employees to whom this Code applies. They should familiarize themselves with each provision of this Code and those set forth in the Company’s Policy on Avoidance of Insider Trading and certain provisions of the Associates Handbook, as applicable.

3. Integrity of Records and Financial Reporting.

Directors, officers and employees (where applicable) should promote and are responsible for the accurate and reliable preparation and maintenance of the Company’s financial and other records. Accurate and reliable preparation of financial and other records is of critical importance to proper management decisions and the fulfillment of the Company’s financial, legal and reporting obligations. As a public company, the Company files annual and periodic reports and makes other filings with the Securities and Exchange Commission (the “SEC”). It is critical that these reports be timely and accurate. The Company expects those officers and employees who have a role in the preparation and/or review of information included in the Company’s SEC filings to report such information accurately and honestly. Reports and documents the Company files with or submits to the SEC, as well as other public communications made by the Company, should contain full, fair, accurate, timely and understandable disclosure.

The Chief Executive Officer and Senior Financial Officers, and employees (where applicable) are also responsible for establishing, and together with the Directors, overseeing adequate disclosure controls and procedures and internal controls and procedures, including procedures which are designed to enable the Company to: (a) accurately document and account for transactions on the books and records of the Company and its subsidiaries; and (b) maintain reports, vouchers, bills, invoices, payroll and service records, performance records and other essential data with care and honesty.

4. Conflicts of Interest.

Directors, officers and employees must not participate in any activity that could conflict with their duties and responsibilities to the Company. A “conflict of interest” arises when one’s personal interests or activities appear to or may influence that person’s ability to act in the best interests of the Company. Any material transaction or relationship that reasonably could be expected to give rise to a conflict of interest should be disclosed to the Company’s Corporate Counsel promptly. In addition, because conflicts of interest are not always obvious, Directors, officers and employees are encouraged to bring questions about particular situations to the attention of the Company’s Corporate Counsel.

This Code does not describe all possible conflicts of interest that could develop. For additional guidance, please refer to the related provisions of the Associates Handbook. Some of the more common conflicts from which you must refrain are set forth below:

Family members. You may encounter a conflict of interest when doing business with or competing with organizations in which you have an ownership interest or your family member has an ownership or employment interest. “Family members” include a spouse, parents, children, siblings and in-laws. You must not conduct business on behalf of the Company with family members or an organization with which your family member is associated, unless such business relationship has been disclosed and authorized by the Chair of the Audit Committee.

Improper conduct and activities. You may not engage in any conduct or activities that are inconsistent with the Company’s best interests or that disrupt or impair the Company’s relationship with any person or entity with which the Company has or proposes to enter into a business or contractual relationship.

Compensation from non-Company sources. You may not accept compensation in any form for services performed for the Company from any source other than the Company.

Gifts. You and members of your immediate family may not accept gifts from persons or entities if such gifts are being made in order to influence you in your capacity as an employee or Director of the Company, or if acceptance of such gifts could create the appearance of a conflict of interest.

Personal use of Company assets. Directors and officers may not use Company assets, labor or information for personal use, other than incidental personal use, unless approved by the Chair of the Audit Committee or as part of a compensation or expense reimbursement program.

5. Corporate Opportunities.

Directors, officers and employees are prohibited from: (a) taking for themselves personally opportunities related to the Company’s business; (b) using the Company’s property, information, or position for personal gain; or (c) competing with the Company for business opportunities; provided, however, if the Company’s disinterested Directors determine the Company will not pursue such opportunity, after disclosure of all material facts by the individual seeking to pursue the opportunity, the individual may do so.

6. Confidentiality.

Directors, officers and employees should maintain the confidentiality of information entrusted to them by the Company and any other confidential information about the Company, its business, customers or suppliers, from whatever source, except when disclosure is authorized or legally mandated. For purposes of this Code, “confidential information” includes all non-public information relating to the Company, its business, customers or suppliers.

7. Compliance with Laws, Rules and Regulations.

It is the policy of the Company to comply with all applicable laws, rules and regulations, and the Company expects its Directors, officers and employees to carry out their responsibilities on behalf of the Company in accordance with such laws, rules and regulations and to refrain from illegal conduct. Transactions in Company securities are governed by the Company’s Policy on Avoidance of Insider Trading and certain provisions of the Associates Handbook.

2

8. Encouraging the Reporting of any Illegal or Unethical Behavior.

The Company is committed to operating according to the highest standards of business conduct and ethics and to maintaining a culture of ethical compliance. The Chief Executive Officer, Senior Financial Officers and Directors should promote an environment in which the Company: (a) encourages employees to talk to supervisors, managers and other appropriate personnel when in doubt about the best course of action in a particular situation; (b) encourages employees to report violations of laws, rules and regulations to appropriate personnel; and (c) informs employees that the Company will not allow retaliation for reports made in good faith. If a Director, officer or employee believes that he or she has been discharged, disciplined or otherwise penalized for reporting a violation in good faith, he or she should immediately report that belief to the Chair of the Audit Committee.

If an employee has concerns regarding accounting or auditing matters, the employee may submit those concerns directly to the Audit Committee by calling the Audit Committee Hotline at 1-866-591-8015. Calls to the Audit Committee Hotline may be made anonymously and will be treated as confidential. Directors and officers should communicate any actual or suspected violations of this Code (and any concerns regarding accounting or auditing matters) to the Chair of the Audit Committee.

Violations of this Code will be investigated by the Board or by a person or persons designated by the Board, and appropriate disciplinary action will be taken in the event of any violations of this Code, up to and including termination.

9. Fair Dealing.

The Chief Executive Officer, Senior Financial Officers and Directors should deal fairly with the Company’s customers, suppliers, competitors and employees. It is the policy of the Company to prohibit any person from taking unfair advantage of another through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other unfair dealing practice.

10. Waivers.

It is the Company’s policy that waivers of this Code for directors or executive officers will not be granted except in exigent circumstances. Any waivers of this Code may only be granted by a majority of the Board after disclosure of all material facts by the individual seeking the waiver. Any waiver of this Code for directors or executive officers will be promptly disclosed as required by law regulation or applicable listing standards.

11. Conclusion.

You should communicate any suspected violations of this Code promptly to the Chair of the Audit Committee or to the Company’s Corporate Counsel. Violations will be taken seriously and investigated by the Board or by a person or persons designated by the Board and appropriate disciplinary action will be taken in the event of any violations of the Code.

3

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Steven Nichols, certify that:

1. I have reviewed this quarterly report on Form 10-Q of K-Swiss Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 28, 2004

By:	/s/ Steven Nichols
	Steven Nichols
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, George Powlick, certify that:

1. I have reviewed this quarterly report on Form 10-Q of K-Swiss Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 28, 2004

By:	/s/ George Powlick
	George Powlick
	Vice President of Finance and
	Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, in his capacity as an officer of K-Swiss Inc. (the “Company”), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

• The Quarterly Report of the Company on Form 10-Q for the period ended March 31, 2004 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

• The information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: April 28, 2004

/s/ Steven Nichols
Name:	Steven Nichols
Title:	President and Chief Executive Officer

/s/ George Powlick
Name:	George Powlick
Title:	Vice President of Finance and
	Chief Financial Officer