K-Swiss Inc. saw net earnings and per share earnings for the second quarter of 2003 increase 108.0% and 123.3%, respectively, to $12,619,000, or $0.67 per diluted share, compared with $6,068,000, or $0.30 per diluted share, in the prior-year period.
Net earnings and net earnings per diluted share for the six months ended June 30, 2003, increased 66.9% and 76.0%, respectively, to $26,263,000, or $1.39 per diluted share, compared with $15,736,000, or $0.79 per diluted share, at June 30, 2002.
For the second quarter of 2003, total worldwide revenues increased 49.4% to $111,831,000 compared with $74,868,000 in the prior-year period. Domestic revenues increased 51.8% to $98,104,000 in the second quarter, and international revenues increased 34.1% to $13,727,000. Total worldwide revenues for the first six months of 2003 increased 46.4% to $227,764,000 compared with $155,539,000 in the first six months of 2002. Domestic revenues increased 47.6% to $198,918,000 in the first half of 2003, while international revenues increased 39.1% to $28,846,000.
Worldwide futures orders with start ship dates from July through December 2003 increased 82.7% to $159,073,000 at June 30, 2003, compared with $87,087,000 at June 30, 2002. Domestic futures orders increased 88.8% to $140,868,000 at June 30, 2003, from $74,634,000 at June 30, 2002. International futures orders increased 46.2% to $18,205,000 at June 30, 2003, from $12,453,000 the previous year.
The Company purchased 40,000 shares of Class A Common Stock during the second quarter of 2003 for a total expenditure of approximately $1,196,000 as part of its stock repurchase program. Since August 1996, K-Swiss has purchased a total of 11.4 million shares of Class A Common Stock for a total expenditure of $102.8 million.
K-Swiss also announced that the Board of Directors has approved a 100% increase in the Company's cash dividend. The cash dividend will be increased from the annual rate of $0.04 per share to $0.08 per share and will commence with the quarterly cash dividend that will be declared as of September 30, 2003.
Commenting on the announcement, Steven Nichols, Chairman of the Board and President, stated, “The combination of great brand positioning, strong demand for our Classics products, improved results from our Training category, as well as higher gross margins, led to stellar earnings growth. With the sustained growth in margins, there clearly is a benefit to keeping our products exclusive for our retail partners as new offerings continue to sell through well at retail. We have been very active and focused in our efforts to support this demand and will continue to concentrate on keeping the K-Swiss brand fresh and exciting through great products and marketing.”
K-Swiss also issued guidance for the third quarter of 2003 and raised its guidance for 2003. The Company expects revenues for the third quarter of 2003 will be in the range of $100 to $108 million and earnings per diluted share to be in the range of $0.43 to $0.50. The Company expects full year revenues to be $395 to $405 million and expects to report full year earnings per diluted share of approximately $2.20 to $2.30.
These estimates for the third quarter and the year reflect continued investments in marketing, sales, and product development for the National Geographic and Royal Elastics brands as well as the expansion of European operations. They are based upon the following assumptions: gross margins will be in the 44% range for the year; SG&A will not rise above $108 million for the year; cancellations will be moderate; and the Company's growth initiative with respect to National Geographic and Royal Elastics will not exceed a net loss of $0.48 per share for the entire year ($0.34 of which has been recognized in the first half of 2003).
Mr. Nichols added, “Based upon the results for the second quarter, and the pace of our futures order backlog, we are pleased to again raise our earnings guidance for the year. We have posted strong increases in both our third and fourth quarter backlog, which has produced a favorable outlook for us. The continued momentum from the K-Swiss brand allows us to focus on initiatives that should begin to make meaningful contributions in 2004 and beyond, mainly investments in our European operations and Royal Elastics. We are pleased with the progress we have made in building international sales and backlog.”
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)
2003 2002 2003 2002
-------- -------- -------- --------
Revenues $111,831 $74,868 $227,764 $155,539
Cost of goods sold 61,994 42,239 127,456 86,879
-------- -------- -------- --------
Gross profit 49,837 32,629 100,308 68,660
Selling, general and
administrative expenses 29,103 23,065 57,138 43,066
-------- -------- -------- --------
Operating profit 20,734 9,564 43,170 25,594
Interest income, net 123 254 239 451
-------- -------- -------- --------
Earnings before income
taxes 20,857 9,818 43,409 26,045
Income tax expense 8,238 3,750 17,146 10,309
-------- -------- -------- --------
Net earnings $12,619 $6,068 $26,263 $15,736
======== ======== ======== ========
Basic earnings per share $0.72 $0.33 $1.48 $0.85
======== ======== ======== ========
Diluted earnings per share $0.67 $0.30 $1.39 $0.79
