K-Swiss Reports Fourth Quarter Results

  K-Swiss Reports Fourth Quarter Results

Business Wire

WESTLAKE VILLAGE, Calif. -- February 27, 2013

K•Swiss Inc. (NASDAQ: KSWS) today announced results for the fourth quarter and
year ended December 31, 2012.

Financial Results

Net loss for the fourth quarter of 2012 was $14,516,000, or $0.41 per diluted
share, compared with a net loss of $25,185,000, or $0.71 per diluted share,
for the prior-year period. Net loss for the year ended December 31, 2012, was
$34,779,000, or $0.98 per diluted share, compared with a net loss of
$70,471,000, or $1.98 per diluted share, for the year ended December 31, 2011.

For the fourth quarter of 2012, total worldwide revenues decreased 17.8% to
$41,230,000 compared with $50,163,000 in the prior-year period. Domestic
revenues decreased 31.4% to $14,011,000 in the fourth quarter, and
international revenues decreased 8.5% to $27,219,000 for the same period.
Total worldwide revenues for 2012 decreased 17.0% to $222,851,000 from
$268,357,000 for 2011. Domestic revenues decreased 35.0% to $75,872,000 in
2012, and international revenues decreased 3.0% to $146,979,000.

Futures Orders

Worldwide futures orders with start ship dates from January through June 2013
increased 4.6% to $76,471,000 at December 31, 2012, from $73,138,000 the
previous year. Domestic futures orders increased 1.3% to $22,158,000 at
December 31, 2012, from $21,879,000 the previous year. International futures
orders increased 6.0% to $54,313,000 at December 31, 2012, from $51,259,000
the previous year.

Proposed Merger with E.Land

On January 16, 2013, the Company entered into a definitive agreement, which
was unanimously approved by K•Swiss’ Board of Directors, pursuant to which
E.Land World will acquire all of the outstanding common stock of K•Swiss for
$4.75 per share in cash, or a total equity value of approximately $170
million. The merger, which is expected to close during the second quarter of
2013, requires the approval of 80% of K•Swiss’ outstanding voting power and
applicable regulatory approvals in addition to other customary closing
conditions.

Additional Information about the Proposed Merger and Where to Find It

In connection with the proposed merger, K•Swiss plans to file with the
Securities and Exchange Commission (the “SEC”) and furnish to its stockholders
a proxy statement. BEFORE MAKING ANY VOTING DECISION, STOCKHOLDERS OF K•SWISS
INC. ARE URGED TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED MERGER AND RELATED MATTERS. Stockholders will be able to obtain free
copies of the proxy statement and other documents filed with the SEC by
K•Swiss through the website maintained by the SEC at www.sec.gov, at the
K•Swiss’ website at http://www.kswiss.com/customer/page/investors and from
K•Swiss by directing a written request to K•Swiss, 31248 Oak Crest Drive,
Westlake Village, CA 91361, Attention: Investor Relations.

K•Swiss and its executive officers and directors may be deemed to be
participants in the solicitation of proxies from the stockholders of K•Swiss
in connection with the proposed merger. Information about the interests of
these executive officers and directors in the transaction described herein
will be included in the proxy statement described above. Additional
information regarding these directors and executive officers is also included
in the Company’s Form 10-K, which is currently on file with the SEC. This
document is available free of charge at the SEC’s website at www.sec.gov and
from K•Swiss by contacting Investor Relations at the address set forth above.

About K•Swiss

Founded more than forty years ago in Van Nuys, California, K•Swiss introduced
the first all-leather tennis shoe, the K•Swiss “Classic” in 1966. Since its
inception, K•Swiss has rooted itself in California Sport with an aim to be the
most inspiring and innovative sports brand in the market. Today the Company
offers performance and lifestyle footwear and apparel for several categories
under its California Sports umbrella including Tennis Heritage, California Fit
(Running, Triathlon and Fitness) and California Youth. K•Swiss also designs,
develops and markets footwear under the Palladium brand. For more information
about K•Swiss, visit www.kswiss.com.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of
the “safe harbor” provisions of the Private Securities Litigation Reform Act
of 1995 about the expected timing for closing of the merger. These statements
are based on the current beliefs and expectations of K•Swiss’ management and
are subject to known and unknown risks and uncertainties, including, but not
limited to: (i) K•Swiss may be unable to obtain stockholder approval as
required for the merger; (ii) conditions to the closing of the merger may not
be satisfied or waived; (iii) the merger may involve unexpected costs,
liabilities or delays; (iv) the outcome of any legal proceeding relating to
the merger; (v) the ability and timing to obtain required regulatory
approvals; (vi) the occurrence of any event, change or other circumstances
that could give rise to the termination of the merger agreement; and (vii)
other risks to consummation of the merger, including the risk that the merger
will not be consummated within the expected time period or at all. A complete
description of these factors, as well as others which could affect the
Company's business is set forth in the Company's periodic filings, including
its Form 10-K for the year ended December 31, 2012, which is currently on file
with the SEC. Readers are cautioned not to place undue reliance on these
forward-looking statements. K•Swiss undertakes no obligation to publicly
update any forward-looking statement, whether as a result of new information,
future events, or otherwise.

                                                             
K•Swiss Inc. Consolidated Statements of Loss
(In thousands, except loss per share data)
                                                                      
                      Three Months Ended              Year Ended
                      December 31,                    December 31,
                      2012            2011            2012            2011
                      (unaudited)
Revenues              $ 41,230        $ 50,163        $ 222,851       $ 268,357
Cost of goods          27,949        37,322        145,726       175,735 
sold
Gross profit            13,281          12,841          77,125          92,622
Selling, general
and                     25,864          33,006          107,895         153,626
administrative
expenses
Impairment of          -             2,986         -             2,986   
goodwill
Operating loss          (12,583 )       (23,151 )       (30,770 )       (63,990 )
Other income            -               -               -               3,000
Interest
(expense)/income,      (750    )      124           (812    )      219     
net
Loss before
income taxes and        (13,333 )       (23,027 )       (31,582 )       (60,771 )
discontinued
operations
Income tax             1,183         1,847         3,197         3,751   
expense
Loss from
continuing              (14,516 )       (24,874 )       (34,779 )       (64,522 )
operations
Loss from
discontinued
operations, less       -             (311    )      -             (5,949  )
applicable income
tax
Net loss              $ (14,516 )     $ (25,185 )     $ (34,779 )     $ (70,471 )
Basic loss per        $ (0.41   )     $ (0.71   )     $ (0.98   )     $ (1.98   )
share
Diluted loss per      $ (0.41   )     $ (0.71   )     $ (0.98   )     $ (1.98   )
share
Weighted average
number of shares
outstanding
Basic                   35,607          35,599          35,603          35,510
Diluted                 35,607          35,599          35,603          35,510
                                                                      
                                                                      
K•Swiss Inc. Condensed Balance Sheets
(In thousands)
                                                                      
                                                      December 31,
                                                      2012            2011
ASSETS
CURRENT ASSETS
Cash and cash                                         $ 42,711        $ 28,701
equivalents
Restricted cash
and cash
equivalents and
restricted                                              200             22,602
investments
available for
sale
Investments
available for                                           -               2,057
sale
Accounts                                                25,740          31,449
receivable, net
Inventories, net                                        69,343          90,380
Prepaid expenses
and other current                                       2,934           4,927
assets
Income taxes                                           -             770     
receivable
Total current                                           140,928         180,886
assets
PROPERTY, PLANT
AND EQUIPMENT,                                          17,402          19,593
NET
OTHER ASSETS
Intangible assets                                       11,562          11,482
Deferred income                                         2,308           2,914
taxes
Other                                                  4,523         4,736   
Total other                                            18,393        19,132  
assets
                                                      $ 176,723      $ 219,611 
                                                                      
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
LIABILITIES
Bank lines of                                         $ 998           $ 9,716
credit
Current portion                                         152             250
of long-term debt
Current portion
of long-term                                            103             -
capital leases
Trade accounts                                          20,420          18,101
payable
Accrued income                                          246             372
taxes payable
Current portion
of contingent                                           2,644           -
purchase price
Accrued                                                11,640        13,500  
liabilities
Total current                                           36,203          41,939
liabilities
OTHER LIABILITIES
Long-term debt                                          -               148
Long-term capital                                       190             -
leases
Contingent                                              -               3,739
purchase price
Other liabilities                                      8,716         7,816   
Total other                                             8,906           11,703
liabilities
STOCKHOLDERS'                                          131,614       165,969 
EQUITY
                                                      $ 176,723      $ 219,611 

Contact:

K•Swiss Inc.
George Powlick, 818-706-5100
Chief Financial Officer
 
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