K-Swiss Reports Second Quarter Results

K•Swiss Inc. (NASDAQ: KSWS) today announced results for the second quarter ended June 30, 2012. The operations of FORM Athletics are accounted for as a discontinued operation in the Company’s financial results and are excluded from futures orders data for the prior-year periods.

Financial Results

Net loss for the second quarter of 2012 was $11,631,000, or $0.33 per diluted share, compared with a net loss of $20,026,000, or $0.56 per diluted share, for the prior-year period. Net loss for the six months ended June 30, 2012, was $18,337,000, or $0.52 per diluted share, compared with a net loss of $29,868,000, or $0.84 per diluted share, for the six months ended June 30, 2011.

For the second quarter of 2012, total worldwide revenues decreased 31.5% to $44,752,000 compared with $65,297,000 in the prior-year period. Domestic revenues decreased 42.1% to $18,748,000 in the second quarter, and international revenues decreased 20.9% to $26,004,000 for the same period. Total worldwide revenues for the first six months of 2012 decreased 17.2% to $114,070,000 from $137,738,000 for the first six months of 2011. Domestic revenues decreased 37.9% to $39,560,000 in the first half of 2012, and international revenues increased 0.6% to $74,510,000.

Futures Orders

Worldwide futures orders with start ship dates from July to December 2012 decreased 21.8% to $70,283,000 at June 30, 2012, from $89,907,000 the previous year. Domestic futures orders decreased 41.8% to $21,532,000 at June 30, 2012, from $37,016,000 the previous year. International futures orders decreased 7.8% to $48,751,000 at June 30, 2012, from $52,891,000 the previous year.

Steven Nichols, Chairman of the Board and President, stated, “The past several years, domestic K•Swiss has suffered from declining future orders and sales. We have been aggressively addressing these trends with new product initiatives. While there was a positive impact from these initiatives in our June 30, 2012 backlog, it was not evident due to the declining trends in the overall domestic business. We are starting to see some overall positive results in our early domestic K•Swiss first quarter 2013 futures bookings. Additionally, we continue to execute on our focus initiatives for 2012, which are to reduce inventory and costs as well as drive improved performance from our Palladium brand.”

2012 Guidance

For 2012, the Company is presently forecasting full year consolidated revenues to be approximately $215 million to $220 million. Consolidated gross margin is expected to be approximately 36% to 37%. Selling, general and administrative expenses are expected to be about $107 to $109 million.

Investor Conference Call and Web Simulcast

K•Swiss will conduct a conference call on its second quarter 2012 results today, at 11:00 a.m. ET. The number to call for this interactive teleconference is (212) 231-2901. A replay of this conference call will be available until August 9, 2012, by dialing (402) 977-9140 and entering the passcode, 21575276.

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 August 9, 2012.

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. 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: non-achievement of the assumptions discussed herein, general and regional economic conditions, and the Company’s ability to reduce the Company’s operating losses and inventory levels, 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 concerns related to the Company’s liquidity is set forth in the Company's periodic filings, including its Form 10-Q for the quarter ended June 30, 2012, 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 Loss
(In thousands, except loss per share data)
 
Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012 2011
(unaudited) (unaudited)
Revenues $ 44,752 $ 65,297 $ 114,070 $ 137,738
Cost of goods sold   31,207     42,863     74,268     86,782  
Gross profit 13,545 22,434 39,802 50,956
Selling, general and administrative expenses   24,863     38,710     56,226     78,263  
Operating loss (11,318 ) (16,276 ) (16,424 ) (27,307 )
Other income - - - 3,000
Interest income/(expense), net   652     (86 )   (43 )   (147 )
Loss before income taxes and discontinued operations (10,666 ) (16,362 ) (16,467 ) (24,454 )
Income tax expense   965     1,038     1,870     1,562  
Loss from continuing operations (11,631 ) (17,400 ) (18,337 ) (26,016 )
Loss from discontinued operations, less applicable income tax   -     (2,626 )   -     (3,852 )
Net loss $ (11,631 ) $ (20,026 ) $ (18,337 ) $ (29,868 )
Basic loss per share $ (0.33 ) $ (0.56 ) $ (0.52 ) $ (0.84 )
Diluted loss per share $ (0.33 ) $ (0.56 ) $ (0.52 ) $ (0.84 )
Weighted average number of shares outstanding
Basic 35,601 35,475 35,601 35,433
Diluted 35,601 35,475 35,601 35,433
 
   
K•Swiss Inc. Condensed Balance Sheets
(In thousands)
 
June 30,
2012 2011
ASSETS (unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 41,138 $ 45,185
Restricted cash and cash equivalents and restricted investments available for sale 750 22,698
Investments available for sale - 17,730
Accounts receivable, net 31,294 40,401
Inventories, net 74,645 101,120
Prepaid expenses and other current assets   3,271   5,544
Total current assets 151,098 232,678
PROPERTY, PLANT AND EQUIPMENT, NET 18,479 19,663
OTHER ASSETS
Intangible assets 11,433 14,715
Deferred income taxes 2,659 4,730
Other   4,882   10,140
Total other assets   18,974   29,585
$ 188,551 $ 281,926
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank lines of credit $ 1,539 $ 11,281
Current portion of long-term debt 152 316
Current portion of long-term capital leases 61 -
Trade accounts payable 15,523 28,336
Accrued income taxes payable 931 916
Current portion of contingent purchase price 3,702 -
Accrued liabilities   10,721   12,375
Total current liabilities 32,629 53,224
OTHER LIABILITIES
Long-term debt - 173
Long-term capital leases 84 -
Contingent purchase price - 4,148
Other liabilities   8,334   14,907
Total other liabilities 8,418 19,228
STOCKHOLDERS' EQUITY   147,504   209,474
$ 188,551 $ 281,926
 

Copyright Business Wire 2010

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