K-Swiss net earnings and net earnings per diluted share for the third quarter of 2005 increased 1.8% and 3.5%, respectively, to $21.1 million, or 59 cents per diluted share, compared with $20.7 million, or 57 cents per diluted share, in the prior-year period. Net earnings and net earnings per diluted share for the nine months ended September 30, 2005, increased 14.5% and 17.1%, respectively, to $63,691,000, or $1.78 per diluted share, compared with $55,637,000, or $1.52 per diluted share, at September 30, 2004.

For the third quarter of 2005, total worldwide revenues increased 0.6% to $136.7 million compared with $135.8 million in the prior-year period. Domestic revenues decreased 6.7% to $103.5 million in the third quarter, and international revenues increased 33.6% to $33.2 million. Total worldwide revenues for the first nine months of 2005 increased 5.2% to $416,285,000 compared with $395,723,000 in the first nine months of 2004. Domestic revenues decreased 3.9% to $316,151,000 in the first nine months of 2005, while international revenues increased 50.1% to $100,134,000.

Worldwide futures orders with start ship dates from October 2005 through March 2006 increased 0.2% to $193,038,000 at September 30, 2005, compared with $192,702,000 at September 30, 2004. Domestic futures orders decreased 11.2% to $136,644,000 at September 30, 2005, from $153,922,000 at September 30, 2004. International futures orders increased 45.4% to $56,394,000 at September 30, 2005, from $38,780,000 the previous year.

Stock Repurchase Program

The Company purchased approximately 67,000 shares of Class A Common Stock during the third quarter of 2005 for a total expenditure of approximately $1,997,000 as part of its stock repurchase program. At September 30, 2005, there remains authorization to repurchase approximately 4,141,000 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 $162.3 million.

K-Swiss also issued guidance for the fourth quarter of 2005 and full year 2005. The Company expects revenues for the fourth quarter of 2005 to be approximately $86 to $91 million and earnings per diluted share to be in the range of $0.22 to $0.26. The Company expects full year revenues to be approximately $502 to $507 million and expects to report full year earnings per diluted share of approximately $2.00 to $2.04.

The Company's estimates for the fourth 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. The estimates are based upon the following assumptions: gross margins will be approximately 46%; SG&A will not rise above $29 million for the fourth quarter of 2005 or $131 million for the full year 2005; customer order cancellations will be moderate; and the Company's growth initiatives with respect to Royal Elastics will not exceed a net loss of $0.06 to $0.08 per share for the full year.

Steven Nichols, Chairman of the Board and President, stated, “Revenues were in line with our expectations for the third quarter as international operations continued to outpace domestic sales, and earnings were above our guidance on lower expenses and a favorable tax rate. We recognize that the continued decline in sales of our Limited Edition product in the U.S. is the primary reason for the small increase in consolidated sales and backlog. The Classic category remains by far the largest, strongest component of our business and will be heavily advertised in the fourth quarter, but the Limited Edition styles require greater effort on our part to achieve clear winners.” 

           K-Swiss Inc. Consolidated Statements of Earnings
            (In thousands, except earnings per share data)

                              Three Months Ended    Nine Months Ended
                                September 30,         September 30,
                             -------------------   -------------------
                                 (Unaudited)           (Unaudited)
                               2005       2004       2005       2004
                             --------   --------   --------   --------
Revenues                     $136,668   $135,799   $416,285   $395,723
Cost of goods sold             73,100     74,050    221,908    214,455
                             --------   --------   --------   --------
  Gross profit                 63,568     61,749    194,377    181,268
Selling, general and
 administrative expenses       34,093     31,406    101,378     93,920
                             --------   --------   --------   --------
  Operating profit             29,475     30,343     92,999     87,348
Interest income, net              908        252      2,091        552
                             --------   --------   --------   --------
Earnings before income taxes   30,383     30,595     95,090     87,900
Income tax expense              9,321      9,914     31,399     32,263
                             --------   --------   --------   --------
  Net earnings                $21,062    $20,681    $63,691    $55,637
                             ========   ========   ========   ========
Basic earnings per share        $0.62      $0.59      $1.86      $1.59
                             ========   ========   ========   ========
Diluted earnings per share      $0.59      $0.57      $1.78      $1.52
                             ========   ========   ========   ========
Weighted average number of
 shares outstanding
  Basic                        34,091     34,818     34,239     35,065
  Diluted                      35,478     36,276     35,692     36,576