K-Swiss Inc. reported sales slumped 34.8% in the second quarter to $54 million from $82.9 million a year ago. The company reported a net loss of $11.5 million, or 33 cents a share, in the period.
Results for the 2009 period include a pre-tax non-operating loss of $2.6 million, 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 $1.9 million, or $0.05 per diluted share (after tax), from the sale of Royal Elastics in April 2009. he sale of Royal Elastics on April 30, 2009, is being accounted for as a discontinued operation in the Companys financial results and is excluded from futures orders data for the current and prior-year periods.
In the year-ago quarter, K-Swiss earned $26.4 million, or 75 cents a share, a year ago after a pre-tax gain of $30 million, or 52 cents a share, related to the settlement of litigation.
Domestic revenues in the quarter decreased 18.7% to $28.7 million in the second quarter, and international revenues decreased 46.8% to $25.3 million.
The net loss for the six months ended June 30, 2009, was $12.6 million, or 36 cents per diluted share, compared with net earnings of $33 million, or 95 cents, a year ago.
Total worldwide revenues for the first six months of 2009 decreased 29.4% to $128.1 million compared with $181.3 million, in the first six months of 2008. Domestic revenues decreased 22.3% to $59.1 million in the first half of 2009, and international revenues decreased 34.4% to $69 million.
Futures Orders
Worldwide futures orders with start ship dates from July through December 2009 were $70.6 million at June 30, 2009, compared with $101,852,000 at June 30, 2008, a decline of 30.6%. Domestic futures orders decreased 43.0% to $21.4 million at June 30, 2009, from $37 million, the previous year. International futures orders decreased 23.4% to $49.3 million at June 30, 2009, from $64.3 million the previous year. Excluding Palladium, our international backlog would have been $37.9 million at June 30, 2009, or a decrease of 41.0%.
Palladium
For the quarter ended June 30, 2009, Palladium brand revenues were $2.1 million with a net loss of $1.74 million. Futures orders with start ship dates from July through December 2009 were $11.5. million at June 30, 2009. Revenues, financial results and futures orders for Palladium are included in the consolidated results above for the 2009 periods. On June 16, 2009, the Company completed the acquisition of the remaining 43% equity interest in Palladium SAS for 5.0 million Euros in cash plus a potential earn out based on Palladiums EBITDA for 2012. KSwiss had previously acquired a 57% equity interest in Palladium in July 2008, as well as the trademarks to the brand in the United States and Canada earlier in 2008.
Sale of Royal Elastics
On April 30, 2009, the Company completed the sale of Royal Elastics, the Companys laceless fashion footwear brand. The sale resulted in a pre-tax gain of approximately $1.9 million, or 5 cents per diluted share, in the second quarter of 2009.
Earnings Guidance
The company expects full-year revenues to be approximately $215 million to $230 million and expects to report a full-year loss per diluted share of approximately $0.70 to $0.90. Full-year SG&A expenses are currently projected to be approximately $121 million, but are expected to fluctuate based on strategic decisions made during the year as well as general trends in the retail marketplace.
Steven Nichols, chairman and president, stated, “The environment at retail, as well as our brands popularity, remain challenging and are evident in the continued year-over-year decline in sales, earnings and backlog. We are managing this environment with firm control of our administrative cost structure, but with an eye on the future as we continue product development investments establishing K-Swiss as an innovator in Classic, Tennis and Running. It is just beginning to pay off with athletes winning in our products. We are slowly beginning to attain the brand recognition we desire.”
| KSwiss Inc. Consolidated Statements of Earnings | ||||||||||||||||||
| (In thousands, except earnings per share data) | ||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||
| June 30, | June 30, | |||||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||||
| Revenues | $ | 54,032 | $ | 82,885 | $ | 128,076 | $ | 181,286 | ||||||||||
| Cost of goods sold | 37,772 | 46,513 | 83,524 | 98,978 | ||||||||||||||
| Gross profit | 16,260 | 36,372 | 44,552 | 82,308 | ||||||||||||||
| Selling, general and administrative expenses | 30,304 | 33,556 | 60,280 | 73,917 | ||||||||||||||
| Operating (loss) profit | (14,044 | ) | 2,816 | (15,728 | ) | 8,391 | ||||||||||||
| Other (expense) income, net | (763 | ) | 30,000 | (763 | ) | 30,000 | ||||||||||||
| Interest Income, net | 468 | 1,864 | 344 | 4,156 | ||||||||||||||
| (Loss) earnings before income taxes and discontinued operations | (14,339 | ) | 34,680 | (16,147 | ) | 42,547 | ||||||||||||
| Income tax (benefit) expense | (3,274 | ) | 6,959 | (3,477 | ) | 7,696 | ||||||||||||
| (Loss) earnings before discontinued operations | (11,065 | ) | 27,721 | (12,670 | ) | 34,851 | ||||||||||||
| Earnings (loss) from discontinued operations, less applicable income tax | (432 | ) | (1,298 | ) | 80 | (1,318 | ||||||||||||
| Net (loss) earnings | $ | (11,497 | ) | $ | 26,423 | $ | (12,590 | ) | $ | 33,533 | ||||||||
| Basic (loss) earnings per share | $ | (0.33 | ) | $ | 0.76 | $ | (0.36 | ) | $ | 0.97 | ||||||||
| Diluted (loss) earnings per share | $ | (0.33 | ) | $ | 0.75 | $ | (0.36 | ) | $ | 0.95 | ||||||||
| Weighted average number of shares outstanding | ||||||||||||||||||
| Basic | ||||||||||||||||||
