K-Swiss Inc. reported worldwide revenues in the second quarter decreased 16.9% to $85.2 million from $102.5 million. Domestic revenues decreased 32.7% to $36.1 million, and international revenues .increased 0.5% to $49 million. Boosted by a pre-tax gain of $30 million, or 52 cents per share, related to the settlement of litigation. earnings more than tripled in the second quarter ended June 30, to $26.4 million, or 75 cents a share, from $7.7 million, or 22 cents, a year ago.
The company also predicted that third quarter earnings would range between break even results to a loss of 15 cents a share.
Net earnings in the half improved 30.9% to $33.5 million, or 95 cents a share, from $25.7 million, or 72 cents, a year ago. per diluted share, in the six months ended June 30, 2007.
Total worldwide revenues for the first six months of 2008 decreased 16.4% to $188,064,000 compared with $225,019,000 in the first six months of 2007. Domestic revenues decreased 33.2% to $77,571,000 in the first half of 2008, while international revenues increased 1.4% to $110,493,000.
Worldwide futures orders with start ship dates from July through December were $104.2 million, at June 30, 2008, compared with $154.1 million at June 30, 2007. Domestic futures orders decreased 50.7% to $38 million at June 30, 2008, from $77.2 million the previous year. International futures orders decreased 14.1% to $66.1 million at June 30, 2008, from $76.9 million the previous year.
The company purchased no shares of Class A Common Stock during the second quarter of 2008. At June 30, 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.
K-Swiss said it expects revenues for the third quarter of 2008 to be approximately $65 to $80 million and earnings per diluted share to be in the range of break even to a loss of 15 cents a share. The company expects full-year revenues to be approximately $300 to $320 million and expects to report full-year earnings per diluted share of approximately 50 cents to 65 cents a share.
The company’s estimates for the third quarter of 2008 and full-year 2008 reflect a significant decline in domestic revenues; substantial investments in product development and marketing for the K-Swiss 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 45.0%; SG&A will not rise above $38 million for the third quarter of 2008 and $150 million for the full-year 2008; customer order cancellations will be moderate; and the company’s growth initiatives with respect to Royal Elastics will not exceed a net loss of 9 cents per share for the full year.
Steven Nichols, chairman and president, stated, “As guided, domestic and international operations in the second quarter continued to reflect the long lead time required to establish positive trends from our branding efforts. While we are hopeful in the future payoff from our ongoing brand investments, we are increasingly less optimistic about the likelihood of a favorable retail climate in the near term. Fortunately, we continue to be blessed with a strong balance sheet-recently bolstered by a litigation settlement-to execute a long-term focused plan.”