Domestic futures orders increase in Q2, K-Swiss

09 Aug '10

4 min read

K-Swiss Inc. announced results for the second quarter ended June 30, 2010. The sale of Royal Elastics on April 30, 2009, is accounted for as a discontinued operation in the Company's financial results and is excluded from futures orders data for the current and prior-year periods.

Financial Results
Net loss for the second quarter of 2010 was $14,545,000, or $0.41 per diluted share, compared with a net loss of $11,497,000, or $0.33 per diluted share, for the prior-year period. Results for the second quarter of 2010 include a one-time charge of $3,320,000 for recognition of the net present value of the €3,000,000 future purchase price of Palladium SAS, which was revised in May 2010. Net loss for the six months ended June 30, 2010, was $19,243,000, or $0.55 per diluted share, compared with a net loss of $12,590,000, or $0.36 per diluted share, for the six months ended June 30, 2009.

For the second quarter of 2010, total worldwide revenues decreased 13.3% to $46,831,000 compared with $54,032,000 in the prior-year period. Domestic revenues decreased 21.0% to $22,704,000 in the second quarter, and international revenues decreased 4.6% to $24,127,000 for the same period. Total worldwide revenues for the first six months of 2010 decreased 12.0% to $112,701,000 compared with $128,076,000 in the first six months of 2009. Domestic revenues decreased 21.1% to $46,644,000 in the first half of 2010, and international revenues decreased 4.2% to $66,057,000.

Futures Orders
Worldwide futures orders with start ship dates from July through December 2010 decreased 8.6% to $64,601,000 at June 30, 2010. Domestic futures orders increased 17.1% to $25,034,000 at June 30, 2010, from $21,374,000 the previous year. International futures orders decreased 19.7% to $39,567,000 at June 30, 2010, from $49,270,000 the previous year.

Thailand Contract Sourcing
In May 2010, the Company disclosed its contract manufacturer in Thailand, one of only three manufacturers utilized by the Company in its global supply chain, ceased operations in April 2010. This manufacturer was scheduled to produce approximately 700,000 pairs during the second and third quarters of 2010. The Company has secured temporary production capacity in other facilities to partially replace this lost capacity and by October 2010, the lost capacity will be fully replaced.

FORM Athletics Acquisition and Formation of K-Swiss Orange County
In July 2010, the Company announced it had acquired FORM Athletics, a progressive MMA and lifestyle apparel brand with a distinct surf-and-skate aesthetic. Terms of the acquisition were not disclosed. FORM Athletics is now a division of K-Swiss and will be led by its founder, Mark Miller, who will also become President of K-Swiss Orange County, a new division of the K-Swiss brand focused on the youth consumer.

Steven Nichols, Chairman of the Board and President, stated, “The progress we are making to propel the K-Swiss and Palladium brands forward through investments in innovation and marketing remains largely underneath the surface in our reported results so far. We are having more measurable impacts to date where it matters the most in preparing for 2011 and beyond – increasing awareness of our California heritage, gaining acceptance and recognition for our running product and building on our base in tennis. The acquisition of FORM Athletics and the formation of K-Swiss Orange County are part of the natural evolution of our positioning of K-Swiss as the California Sports Company.”

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