KSwiss Inc. reported a 60.5% drop in first quarter net earnings $7.1 million from $18.0 million for the year-ago period. In diluted earnings per share terms, earnings decline to 20 cents from 51 cents last year.
For the first quarter of 2008, total worldwide revenues decreased 16.0% to $102.9 million from $122.6 million in the prior-year period. Domestic revenues decreased 33.6% to $41.4 million in the first quarter, and international revenues increased 2.1% to $61.5 million.
Futures Orders
Worldwide futures orders with start ship dates from April through September were $128.3 million at March 31, 2008, compared with $172.2 million at March 31, 2007. Domestic futures orders decreased 46.8% to $47.2 million from $88.7 million the previous year. International futures orders decreased 2.8% to $81.1 million from $83.5 million the previous year.
Stock Repurchase Program
The company purchased 149,456 shares of Class A Common Stock during the first quarter of 2008 for a total expenditure of $2.1 million. At March 31, 2008, there remains authorization to repurchase 3,911,289 shares under the company's existing stock repurchase program. Since August 1996, KSwiss has purchased a total of 25.5 million shares of Class A Common Stock for a total expenditure of $166.8 million.
Earnings Guidance
KSwiss also issued guidance for the second quarter. The company expects revenues for the second quarter of 2008 to be approximately $70 million to $80 million and earnings per diluted share to be in the range of a loss of 5 cents to earnings of 5 cents. The company expects full-year revenues to be approximately $305 million to $330 million and expects to report full-year earnings per diluted share of approximately 5 cents to 25 cents.
The company's estimates for the second quarter of 2008 and full-year 2008 reflect a significant decline in domestic revenues; substantial investments in product development and marketing for the KSwiss brand; slow down of international operations; and continued investment in the Royal Elastics brand. The estimates are based upon the following assumptions: gross margins will be approximately 46.5%; SG&A will not rise above $37 million for the second quarter of 2008 and $150 million for the full-year 2008; customer order cancellations will be moderate; and the bompany's growth initiatives with respect to Royal Elastics will not exceed a net loss of 6 cents per share for the full year.
Steven Nichols, bhairman of the board and president, stated, “We have worked hard to re-establish positive trends in our domestic business through premium sports branding initiatives and the support of such innovative sports as free running. The feedback we are receiving has been favorable, but we have much work to be done to prove ourselves to customers again. Unfortunately, based on initial indications in our futures orders, the long-term momentum we have enjoyed internationally appears to be coming to an end. As a result, we have trimmed our full year 2008 estimates to account for this development.”
KSwiss Inc. Consolidated Statements of Earnings | ||||||||
| (In thousands, except earnings per share data) | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2008 | 2007 | |||||||
| (Unaudited) | ||||||||
| Revenues | $ | 102,909 | $ | 122,568 | ||||
| Cost of goods sold | 54,936 | 65,020 | ||||||
| Gross profit | 47,973 | 57,548 | ||||||
| Selling, general and administrative expenses | 42,623 | 36,877 | ||||||
| Operating profit | 5,350 | 20,671 | ||||||
| Interest income, net | 1,935 | 2,211 | ||||||
| Earnings before income taxes | 7,285 | 22,882 | ||||||
| Income tax expense | 175 | 4,885 | ||||||
| Net earnings | $ | 7,110 | $ | 17,997 | ||||
| Basic earnings per share | $ | 0.20 | $ | 0.52 | ||||
| Diluted earnings per share | $ | 0.20 | $ | 0.51 | ||||
| Weighted average number of shares outstanding | ||||||||
| Basic | 34,730 | 34,623 | ||||||
| Diluted | 35,315 | 35,481 | ||||||
