K-Swiss Inc. reported that net earnings for the second quarter of 2005 increased 27.1% to $16.8 million, or 47 cents per diluted share, compared with $13.2 million, or 35 cents per diluted share, in the prior-year period.
Total worldwide revenues increased 17.2% to $126.5 million compared with $107.9 million in the prior-year period. Domestic revenues increased 7.5% to $95.1 million in the second quarter, and international revenues increased 61.7% to $31.4 million.

Net earnings and net earnings per diluted share for the six months ended June 30, 2005, increased 22.0% and 28.0%, respectively, to $42.6 million, or $1.19 per diluted share, compared with $35.0 million, or 93 cents per diluted share, at June 30, 2004.

Total worldwide revenues for the first six months of 2005 increased 7.6% to $279.6 million compared with $259.9 million in the first six months of 2004. Domestic revenues decreased 2.5% to $212.7 million in the first half of 2005, while international revenues increased 59.9% to $66.9 million.

Worldwide futures orders with start ship dates from July through December increased 12.3% to $185.2 million at June 30, 2005, compared with $165.0 million at June 30, 2004. Domestic futures orders increased 1.9% to $137.5 million at June 30, 2005, from $134.9 million at June 30, 2004. International futures orders increased 58.5% to $47.7 million at June 30, 2005, from $30.1 million the previous year.


The Company purchased approximately 381,000 shares of Class A Common Stock during the second quarter of 2005 for a total expenditure of approximately $12.2 million as part of its stock repurchase program. At June 30, 2005, there remains authorization to repurchase approximately 4,208,000 shares under the Company's existing stock repurchase program. Since August 1996, K-Swiss has purchased a total of 25.2 million shares of Class A Common Stock for a total expenditure of $160.3 million.

K-Swiss also issued guidance for the third quarter of 2005 and full year 2005. The Company expects revenues for the third quarter of 2005 to be approximately $133 million to $138 million and earnings per diluted share to be in the range of 42 cents to 47 cents. The Company expects full year revenues to be approximately $500 million to $515 million and expects to report full year earnings per diluted share of approximately $1.85 to $1.95.

The company's estimates for the third quarter of 2005 and full year 2005 reflect the continued investments in marketing, sales and product development for the Royal Elastics brand as well as the expansion of European operations. They are based upon the following assumptions: gross margins will be between 45% and 46%; SG&A will not rise above $39 million for the quarter (the majority of the year-over-year increase in SG&A is marketing related) and $136 million for the year; customer order cancellations will be moderate; and the Company's growth initiatives with respect to Royal Elastics will not exceed a net loss of 7 cents to 8 cents per share for the year.

Steven Nichols, Chairman of the Board and President, stated, “The highlights for this quarter were continued strong international operations, particularly in Europe, and better-than-expected domestic at-once sales. We are also on schedule for the launch of L.A.M.B. footwear this month in high-end boutiques and better department stores and have sustained momentum in our Classics with important domestic and international customers. While we are pleased with the record second quarter results, the magnitude of the year-over-year increase was enhanced by the easier comparison due to the implementation of our direct delivery shipping program to customers in the second quarter of 2004 that moved about $10 million of sales from the second quarter to the third quarter of 2004. Conversely this situation makes the current third quarter comparison to the prior year more difficult.” 

           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)
                               2005       2004       2005       2004
                             --------   --------   --------   --------
Revenues                     $126,474   $107,904   $279,617   $259,924
Cost of goods sold             67,648     58,151    148,808    140,405
                             --------   --------   --------   --------
  Gross profit                 58,826     49,753    130,809    119,519
Selling, general and
 administrative expenses       34,946     28,307     67,285     62,514
                             --------   --------   --------   --------
  Operating profit             23,880     21,446     63,524     57,005
Interest income, net              665        173      1,183        300
                             --------   --------   --------   --------
Earnings before income taxes   24,545     21,619     64,707     57,305
Income tax expense              7,780      8,431     22,078     22,349
                             --------   --------   --------   --------
  Net earnings                $16,765    $13,188    $42,629    $34,956
                             ========   ========   ========   ========
Basic earnings per share        $0.49      $0.38      $1.24      $0.99
                             ========   ========   ========   ========
Diluted earnings per share      $0.47      $0.35      $1.19      $0.93