KSwiss Inc. (KSWS, Financial) filed Quarterly Report for the period ended 2009-09-30.
K-Swiss Inc. designs develops and markets a growing array of athleticfootwear for high performance sports use fitness activities and casual wear. They have emphasized in their marketing the commitment to produce products of high quality and enduring style. They plan to continue to emphasize the high quality and classic design of their products as it introduces new models of athletic footwear. Kswiss Inc. has a market cap of $269.9 million; its shares were traded at around $7.74 with and P/S ratio of 0.8. Kswiss Inc. had an annual average earning growth of 24.5% over the past 10 years.
KSwiss brand revenues decreased to $178,058,000 for the nine months ended September 30, 2009 from $263,967,000 for the nine months ended September 30, 2008, a decrease of $85,909,000 or 32.5%. KSwiss brand revenues decreased to $59,424,000 for the three months ended September 30, 2009 from $82,681,000 for the three months ended September 30, 2008, a decrease of $23,257,000 or 28.1%. The decrease for the nine and three months ended September 30, 2009 was the result of a decrease in the volume of footwear sold as well as lower average wholesale prices per pair. The volume of footwear sold decreased to 6,959,000 and 2,242,000 pair for the nine and three months ended September 30, 2009, respectively, from 9,193,000 and 2,982,000 pair for the nine and three months ended September 30, 2008, respectively. The decrease in the volume of footwear sold for the three months ended September 30, 2009 was primarily the result of decreased sales of the lifestyle category of 30.6%, offset by an increase in sales of the performance category of 19.1%. The average wholesale price per pair decreased to $23.86 for the nine months ended September 30, 2009 from $27.60 for the nine months ended September 30, 2008, a decrease of 13.6%, and to $24.56 for the three months ended September 30, 2009 from $26.44 for the three months ended September 30, 2008, a decrease of 7.1%. The decrease in the average wholesale prices per pair for the nine and three months ended September 30, 2009, resulted from the product mix of sales, which included a higher percentage of sales of closeout product, and from the geographic mix of sales, in which domestic sales generally sell at a lower price; and a general decline in worldwide selling prices.
Overall selling, general and administrative expenses decreased to $90,609,000 (45.6% of revenues) for the nine months ended September 30, 2009, from $110,326,000 (40.3% of revenues) for the nine months ended September 30, 2008, a decrease of $19,717,000 or 17.9%, and decreased to $30,329,000 (42.9% of revenues) for the three months ended September 30, 2009, from $36,409,000 (39.3% of revenues) for the three months ended September 30, 2008, a decrease of $6,080,000 or 16.7%. The decrease in selling, general and administrative expenses for the nine months ended September 30, 2009 is a result of decreases in advertising expenses, data processing expenses, legal expenses, compensation expenses and warehousing expenses. The decrease in selling, general and administrative expenses for the three months ended September 30, 2009 is a result of decreases in advertising expenses, compensation expenses and data processing expenses. Advertising expenses decreased 35.5% and 23.5% for nine and three months ended September 30, 2009, respectively, primarily due to decreases in both domestic and international markets as part of an effort to reduce costs as our business declines. Data processing expenses decreased 33.4% and 35.0% for the nine and three months ended September 30, 2009, respectively, as a result of the decreases in on-going maintenance expense for our SAP computer software system which resulted from the completion of the SAP implementation in certain international regions in the fourth quarter of 2008. Compensation expenses, which includes commissions, bonus/incentive related expenses and employee recruiting and relocation expenses, decreased 5.9% and 11.2% for the nine and three months ended September 30, 2009, respectively, as a result of decreases in headcount and other bonuses/incentive related expenses, offset by an increase in stock option compensation expenses. Legal expenses decreased 50.0% for the nine months ended September 30, 2009, as a result of the decreased expenses incurred to defend our trademarks. Warehousing expenses decreased 17.2% for the nine months ended September 30, 2009, as a result of lower level of sales. Corporate expenses of $14,642,000 and $4,621,000 for the nine and three months ended September 30, 2009, respectively, compared to $21,594,000 and $6,191,000 for the nine and three months ended September 30, 2008, respectively, are included in selling, general and administrative expenses and include expenses such as salaries and related expenses for executive management and support departments such as accounting and treasury, information technology and legal which benefit the entire Company. Corporate expenses decreased for the nine and three months ended September 30, 2009 as a result of a decrease in data processing expenses, legal expenses and accounting expenses. The decrease in data processing expenses and legal expenses are due to the reasons discussed above. The decrease in accounting expenses was a result of lower auditing fees for non-recurring 2008 events and a reduction of the outsourcing of certain accounting services. During the three months ended September 30, 2009, the decrease in corporate expenses were offset by an increase in compensation expenses resulting from an increase in stock option compensation expense.
On April 30, 2009, we sold certain Royal Elastics assets, consisting of its inventory located in Taiwan and its intangible trademarks, with an approximate net book value of $1.0 million, to Royal Elastics Holdings Ltd. (REH), a third party, in an arms length transaction for $4.0 million. We expect to receive $2.9 million in cash by April 30, 2010 from REH (of which the Company has received approximately $1.6 million as of September 30, 2009) and have also received a $1.1 million promissory note from REH for the remaining balance. In the third quarter of 2009, the Company recognized a reserve of approximately $486,000 relating to the remaining amount expected to be received by April 2010 (or approximately $1.3 million as of September 30, 2009), which reduced the overall gain on sale. Interest on the promissory note is payable quarterly at an interest rate of Wall Street Journal Prime plus 1%. The principal balance is due on April 30, 2016.
The net loss for the nine months ended September 30, 2009 was $15,474,000, or $0.44 per share (diluted loss per share), compared to net earnings of $34,599,000, or $0.98 per share (diluted earnings per share), for the nine months ended September 30, 2008. The net loss for the three months ended September 30, 2009 was $2,884,000, or $0.08 per share (diluted loss per share), compared to net earnings of $1,066,000, or $0.03 per share (diluted earnings per share), for the three months ended September 30, 2008. Net loss and diluted loss per share for the nine months ended September 30, 2009 included the pre-tax loss of $1,249,000 from the pre-tax loss on the purchase of the remaining 43% of Palladium, offset by the net pre-tax gain on the sale of certain Royal Elastics assets, described above, or $0.04 per diluted share (after tax). Net loss and diluteRead the The complete ReportKSWS is in the portfolios of Third Avenue Management.
K-Swiss Inc. designs develops and markets a growing array of athleticfootwear for high performance sports use fitness activities and casual wear. They have emphasized in their marketing the commitment to produce products of high quality and enduring style. They plan to continue to emphasize the high quality and classic design of their products as it introduces new models of athletic footwear. Kswiss Inc. has a market cap of $269.9 million; its shares were traded at around $7.74 with and P/S ratio of 0.8. Kswiss Inc. had an annual average earning growth of 24.5% over the past 10 years.
Highlight of Business Operations:
Our total revenues decreased 27.5% and 23.7% in the nine and three months ended September 30, 2009 from the nine and three ended September 30, 2008, respectively. Our overall gross profit margins, as a percentage of revenues, decreased to 35.7% and 37.2% for the nine and three months ended September 30, 2009 compared to 43.5% and 39.8% for the nine and three months ended September 30, 2008, respectively, as a result of product mix, including a higher percentage of closeout product sold during the nine and three months ended September 30, 2009 compared to the nine and three months ended September 30, 2008. The current downturn of the worldwide economy has had and will continue to have an adverse affect on our business. Our selling, general and administrative expenses decreased to $90,609,000 for the nine months ended September 30, 2009 from $110,326,000 for the nine months ended September 30, 2008, as a result of decreases in advertising expenses, data processing expenses, legal expenses, compensation expenses and warehousing expenses. Our selling, general and administrative expenses decreased to $30,329,000 for the three months ended September 30, 2009 from $36,409,000 for the three months ended September 30, 2008, as a result of decreases in advertising expenses, compensation expenses and data processing expenses. Included in other (expense)/income, net, for the nine months ended September 30, 2009, is a loss of $2,616,000 upon the purchase of the remaining 43% of Palladium, offset by a gain of $1,367,000 on the sale of certain assets related to the Royal Elastics brand, which is shown in the consolidated financial statements as a discontinued operation. During the three months ended September 30, 2009, an adjustment of $486,000 was recognized to reduce the gain on sale of certain assets of the Royal Elastics brand that occurred in the second quarter of 2009. During the nine months ended September 30, 2008, we received a settlement payment of $30,000,000 in connection with a lawsuit defending our trademarks, which is included in other (expense)/ income, net. At September 30, 2009, our total futures orders with start ship dates from October 2009 through March 2010 were $67,996,000, a decrease of 32.1% from September 30, 2008. Of this amount, domestic futures orders were $23,121,000, a decrease of 36.8%, and international futures orders were $44,875,000, a decrease of 29.3%. We incurred a net loss for the nine months ended September 30, 2009 of $15,474,000 (including net other expense described above), or $0.44 per diluted share, compared to net earnings and earnings per diluted share for the nine months ended September 30, 2008 of $34,599,000 (including the settlement payment described above), or $0.98 per diluted share. We incurred a net loss for the three months ended September 30, 2009 of $2,884,000 (including net other expense described above), or $0.08 per diluted share, compared to net earnings and earnings per diluted share for the three months ended September 30, 2008 of $1,066,000, or $0.03 per diluted share.KSwiss brand revenues decreased to $178,058,000 for the nine months ended September 30, 2009 from $263,967,000 for the nine months ended September 30, 2008, a decrease of $85,909,000 or 32.5%. KSwiss brand revenues decreased to $59,424,000 for the three months ended September 30, 2009 from $82,681,000 for the three months ended September 30, 2008, a decrease of $23,257,000 or 28.1%. The decrease for the nine and three months ended September 30, 2009 was the result of a decrease in the volume of footwear sold as well as lower average wholesale prices per pair. The volume of footwear sold decreased to 6,959,000 and 2,242,000 pair for the nine and three months ended September 30, 2009, respectively, from 9,193,000 and 2,982,000 pair for the nine and three months ended September 30, 2008, respectively. The decrease in the volume of footwear sold for the three months ended September 30, 2009 was primarily the result of decreased sales of the lifestyle category of 30.6%, offset by an increase in sales of the performance category of 19.1%. The average wholesale price per pair decreased to $23.86 for the nine months ended September 30, 2009 from $27.60 for the nine months ended September 30, 2008, a decrease of 13.6%, and to $24.56 for the three months ended September 30, 2009 from $26.44 for the three months ended September 30, 2008, a decrease of 7.1%. The decrease in the average wholesale prices per pair for the nine and three months ended September 30, 2009, resulted from the product mix of sales, which included a higher percentage of sales of closeout product, and from the geographic mix of sales, in which domestic sales generally sell at a lower price; and a general decline in worldwide selling prices.
Overall selling, general and administrative expenses decreased to $90,609,000 (45.6% of revenues) for the nine months ended September 30, 2009, from $110,326,000 (40.3% of revenues) for the nine months ended September 30, 2008, a decrease of $19,717,000 or 17.9%, and decreased to $30,329,000 (42.9% of revenues) for the three months ended September 30, 2009, from $36,409,000 (39.3% of revenues) for the three months ended September 30, 2008, a decrease of $6,080,000 or 16.7%. The decrease in selling, general and administrative expenses for the nine months ended September 30, 2009 is a result of decreases in advertising expenses, data processing expenses, legal expenses, compensation expenses and warehousing expenses. The decrease in selling, general and administrative expenses for the three months ended September 30, 2009 is a result of decreases in advertising expenses, compensation expenses and data processing expenses. Advertising expenses decreased 35.5% and 23.5% for nine and three months ended September 30, 2009, respectively, primarily due to decreases in both domestic and international markets as part of an effort to reduce costs as our business declines. Data processing expenses decreased 33.4% and 35.0% for the nine and three months ended September 30, 2009, respectively, as a result of the decreases in on-going maintenance expense for our SAP computer software system which resulted from the completion of the SAP implementation in certain international regions in the fourth quarter of 2008. Compensation expenses, which includes commissions, bonus/incentive related expenses and employee recruiting and relocation expenses, decreased 5.9% and 11.2% for the nine and three months ended September 30, 2009, respectively, as a result of decreases in headcount and other bonuses/incentive related expenses, offset by an increase in stock option compensation expenses. Legal expenses decreased 50.0% for the nine months ended September 30, 2009, as a result of the decreased expenses incurred to defend our trademarks. Warehousing expenses decreased 17.2% for the nine months ended September 30, 2009, as a result of lower level of sales. Corporate expenses of $14,642,000 and $4,621,000 for the nine and three months ended September 30, 2009, respectively, compared to $21,594,000 and $6,191,000 for the nine and three months ended September 30, 2008, respectively, are included in selling, general and administrative expenses and include expenses such as salaries and related expenses for executive management and support departments such as accounting and treasury, information technology and legal which benefit the entire Company. Corporate expenses decreased for the nine and three months ended September 30, 2009 as a result of a decrease in data processing expenses, legal expenses and accounting expenses. The decrease in data processing expenses and legal expenses are due to the reasons discussed above. The decrease in accounting expenses was a result of lower auditing fees for non-recurring 2008 events and a reduction of the outsourcing of certain accounting services. During the three months ended September 30, 2009, the decrease in corporate expenses were offset by an increase in compensation expenses resulting from an increase in stock option compensation expense.
On April 30, 2009, we sold certain Royal Elastics assets, consisting of its inventory located in Taiwan and its intangible trademarks, with an approximate net book value of $1.0 million, to Royal Elastics Holdings Ltd. (REH), a third party, in an arms length transaction for $4.0 million. We expect to receive $2.9 million in cash by April 30, 2010 from REH (of which the Company has received approximately $1.6 million as of September 30, 2009) and have also received a $1.1 million promissory note from REH for the remaining balance. In the third quarter of 2009, the Company recognized a reserve of approximately $486,000 relating to the remaining amount expected to be received by April 2010 (or approximately $1.3 million as of September 30, 2009), which reduced the overall gain on sale. Interest on the promissory note is payable quarterly at an interest rate of Wall Street Journal Prime plus 1%. The principal balance is due on April 30, 2016.
The net loss for the nine months ended September 30, 2009 was $15,474,000, or $0.44 per share (diluted loss per share), compared to net earnings of $34,599,000, or $0.98 per share (diluted earnings per share), for the nine months ended September 30, 2008. The net loss for the three months ended September 30, 2009 was $2,884,000, or $0.08 per share (diluted loss per share), compared to net earnings of $1,066,000, or $0.03 per share (diluted earnings per share), for the three months ended September 30, 2008. Net loss and diluted loss per share for the nine months ended September 30, 2009 included the pre-tax loss of $1,249,000 from the pre-tax loss on the purchase of the remaining 43% of Palladium, offset by the net pre-tax gain on the sale of certain Royal Elastics assets, described above, or $0.04 per diluted share (after tax). Net loss and diluteRead the The complete ReportKSWS is in the portfolios of Third Avenue Management.
