K-Swiss Inc. saw net earnings and net earnings per diluted share for the third quarter of 2003 increase 84.8% and 90.5%, respectively, to $15,106,000, or $0.80 per diluted share, compared with $8,173,000, or $0.42 per diluted share, in the prior-year period.
Net earnings and net earnings per diluted share for the nine months ended September 30, 2003, increased 73.0% and 80.2%, respectively, to $41,369,000, or $2.18 per diluted share, compared with $23,909,000, or $1.21 per diluted share, at September 30, 2002.
For the third quarter of 2003, total worldwide revenues increased 49.0% to $121,568,000 compared with $81,604,000 in the prior-year period. Domestic revenues increased 52.6% to $105,459,000 in the third quarter, and international revenues increased 29.1% to $16,109,000.
Total worldwide revenues for the first nine months of 2003 increased 47.3% to $349,332,000 compared with $237,143,000 in the first nine months of 2002. Domestic revenues increased 49.3% to $304,377,000 in the first nine months of 2003, while international revenues increased 35.4% to $44,955,000.
Worldwide futures orders with start ship dates from October 2003 through March 2004 increased 46.9% to $193,962,000 at September 30, 2003, compared with $132,043,000 at September 30, 2002. Domestic futures orders increased 46.4% to $171,252,000 at September 30, 2003, from $116,981,000 at September 30, 2002. International futures orders increased 50.8% to $22,710,000 at September 30, 2003, from $15,063,000 the previous year.
Stock Repurchase Program
The Company purchased 175,000 shares of Class A Common Stock during the third quarter of 2003 for a total expenditure of approximately $6,414,000 as part of its stock repurchase program. There remains authorization to repurchase $1,715,000 of stock under the Company's existing stock repurchase program. Since August 1996, K-Swiss has purchased under all of its repurchase programs a total of 11.5 million shares of Class A Common Stock for a total expenditure of $108.6 million.
The Company announced the Board of Directors authorized a new stock repurchase program to repurchase up to $25 million of the Company's Class A Common Stock. This program is in addition to the Company's October 2002 $25 million stock repurchase program that, as noted above, is almost completed. Under the new stock repurchase program, the Company may purchase through December 31, 2008, as market conditions warrant and from time to time on the open market, up to $25 million of its Class A Common Stock.
K-Swiss also issued guidance for the fourth quarter of 2003. The Company expects revenues to be approximately $75 to $80 million and earnings per diluted share to be in the range of $0.37 to $0.42. The Company expects full year revenues to be approximately $425 to $430 million and expects to report full year earnings per diluted share of approximately $2.55 to $2.60.
The Company's estimates for the fourth quarter and the year are based upon the following assumptions: gross margins will be in the range of 43% to 44% for the year; SG&A will not rise above $107 million for the year; cancellations will be moderate; and the Company's growth initiatives with respect to National Geographic and Royal Elastics will not exceed a net loss of $0.53 per share for the entire year ($0.45 of which has been recognized during the first nine months of 2003).
Commenting on the record third quarter results and outlook for the fourth quarter, Steven Nichols, Chairman of the Board and President, stated, “The enduring strength and appeal of the K-Swiss brand were once again very evident in our better-than-expected results for the quarter. While we are pleased with the continued growth of the K-Swiss brand, market share gains and improvements in our European and Asian operations, we are mindful of the temptation in today's market to give too much credence to short-term results or trends. Companies and investors alike can become enamored of their lofty performance and lose sight of long-term objectives. At K-Swiss we are constantly focused on long-term decisions and long-term value creation – whether it is through prudent investments in aggressive marketing of the K-Swiss brand, investments in new brands and product offerings or raising the value of our stockholders' investment through stock repurchases and dividend increases.”
Special Meeting of Stockholders
The Company announced the Board of Directors intends to call a special meeting of stockholders to be held in early to mid- December 2003 to seek stockholder approval to increase the authorized shares of the Company's Class A and Class B Common Stock from 36 and 10 million to 90 and 18 million, respectively. If stockholders approve the increased authorization, the Board of Directors intends immediately after the special meeting of stockholders to declare a two-for-one stock split for the Company's Class A and Class B Common Stock and to declare a 100% increase in the regular quarterly cash dividend from the present $0.02 per quarter to $0.02 per quarter on a split-adjusted basis. Assuming the requisite stockholder approval is obtained, the Company expects these actions to be completed in December 2003.
K-Swiss Inc. Consolidated Statements of Earnings
(In thousands, except earnings per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
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(Unaudited) (Unaudited)
2003 2002 2003 2002
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Revenues $121,568 $81,604 $349,332 $237,143
Cost of goods sold 68,742 44,134 196,198 131,013
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Gross profit 52,826 37,470 153,134 106,130
Selling, general and
administrative expenses 27,926 24,093 85,064 67,159
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Operating profit 24,900 13,377 68,070 38,971
Interest income, net 37 159 276 610
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Earnings before income
taxes 24,937 13,536 68,346 39,581
Income tax expense 9,831 5,363 26,977 15,672
-------- -------- -------- --------
Net earnings $15,106 $8,173 $41,369 $23,909
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Basic earnings per share $0.85 $0.45 $2.34 $1.30
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Diluted earnings per share $0.80 $0.42 $2.18 $1.21
