K-Swiss reported a loss in the fourth quarter of $12.5 million, or 36 cents a share, from $13.7 million, or 39 cents, a year ago. The latest period included a pre-tax impairment charge of $4.83 million, or 13 cents, related to the goodwill and intangible assets related to the trademarks of Palladium. Revenues in the quarter decreased 21.4% to $42 million from $53.5 million.

Domestic revenues decreased 31.8% to $18.1 million, and
international revenues decreased 11.2% to $23.9 million.

In the full year ended Dec. 31, the net loss was $28
million, or 80 cents a share, compared with net earnings of $20.9 million, or
59 cents, a year earlier. Results for the latest year include the Palladium
impairment charge, plus a pre-tax non-operating loss of $2.62 million, or 8
cents, from the acquisition of the remaining interest in Palladium SAS in June
2009, and a pre-tax gain of $1.37 million, or 3 cents, from the sale of Royal
Elastics in April 2009. Earnings for 2008 include a pre-tax gain of $30
million, or 52 cents per diluted share (after tax), related to the settlement
of litigation.

Total worldwide revenues for 2009 decreased 26.5% to $240.7 million
29,000, compared with $327.4 million in 2008. Domestic revenues decreased 26.9%
to $101.2 million, and international revenues decreased 26.2% to $139.5 million.

Worldwide futures orders with start ship dates from January
through June 2010 decreased 12.6% to $80.9 million at Dec. 31, 2009, compared
with $92.6 million at the same time a year ago. Domestic futures orders
decreased 6.6% to $29.6 million from $31.7 million the previous year.
International futures orders decreased 15.7% to $51.3 million  from $60.9 million the previous year.

Stock Repurchase Authorization

In November 2009, the Board of Directors authorized a new
stock repurchase program for the company to repurchase up to $70 million of the
company’s Class A Common Stock through Dec. 31, 2014. The program replaced the company’s
previous 2004 stock repurchase authorization for up to 5,000,000 shares that
expired on Dec. 31, 2009.

2010 Guidance Policy

Due to uncertainty surrounding the projected marketing
investment for 2010, the potential for a deferred tax asset reserve in the
second half of the year and a post-year-end decline in second quarter 2010
backlog relative to the prior year, the company will only issue revenue
guidance and certain key assumptions for 2010.

For 2010, the company expects full year consolidated
revenues to be comparable to 2009. On a year-over-year basis, the company
expects to report a decline in the first quarter, a flat comparison in the
second quarter and increases in the third and fourth quarters. The uncertainty
about forecasting revenues is illustrated by the unusual, subsequent decline in
second quarter 2010 backlog, relative to the prior year, from December 31, 2009,
to now.

Consolidated gross margin is expected to increase to
approximately 40% compared with 35.8% in 2009 due to expected lower closeout
sales during 2010 compared to 2009.

Selling, general & administrative expenses are expected
to rise to $135 million to $140 million due to increased marketing
expenditures. These expenditures will be continually evaluated and could change
over time, including the possibility of even greater marketing expenditures
depending on available branding opportunities.

The tax benefit rate is projected to be approximately 30%.
Should the company be unable to substantiate evidence for realizing the benefit
of its deferred tax assets in the second half of the year, the company might be
required to establish a reserve of $8 million at December 31, 2010, plus any
deferred tax assets established in 2010.

Steven Nichols, Chairman of the Board and President, stated, “We continued to make progress in the quarter with managing overhead and
inventories tightly, allocating resources to revitalize our brands and securing
strategic sponsorships in tennis and running. As evidenced by our guidance for
2010, we will continue to invest in marketing, design, development and
technologies to position the K-Swiss and Palladium brands for success in 2011.”

K�Swiss Inc. Consolidated Statements of Earnings/Loss

(In thousands, except earnings per share data)



Three Months Ended

Year Ended

December 31,

December 31,







$ 42,020



$ 240,729




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