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Press release from Business Wire

K-Swiss Reports Fourth Quarter Results

Wednesday, February 27, 2013

K-Swiss Reports Fourth Quarter Results06:45 EST Wednesday, February 27, 2013 WESTLAKE VILLAGE, Calif. (Business Wire) -- 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 EndedYear EndedDecember 31,December 31,2012201120122011(unaudited) Revenues $41,230 $ 50,163 $222,851 $ 268,357 Cost of goods sold   27,949     37,322     145,726     175,735   Gross profit 13,281 12,841 77,125 92,622 Selling, general and administrative expenses 25,864 33,006 107,895 153,626 Impairment of goodwill   -     2,986     -     2,986   Operating loss (12,583) (23,151 ) (30,770) (63,990 ) Other income - - - 3,000 Interest (expense)/income, net   (750)   124     (812)   219   Loss before income taxes and discontinued operations (13,333) (23,027 ) (31,582) (60,771 ) Income tax expense   1,183     1,847     3,197     3,751   Loss from continuing operations (14,516) (24,874 ) (34,779) (64,522 ) Loss from discontinued operations, less applicable income tax   -     (311 )   -     (5,949 ) Net loss $(14,516) $ (25,185 ) $(34,779) $ (70,471 ) Basic loss per share $(0.41) $ (0.71 ) $(0.98) $ (1.98 ) Diluted loss per share $(0.41) $ (0.71 ) $(0.98) $ (1.98 ) 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 31,20122011 ASSETS CURRENT ASSETS Cash and cash equivalents $42,711 $ 28,701 Restricted cash and cash equivalents and restricted investments available for sale 200 22,602 Investments available for sale - 2,057 Accounts receivable, net 25,740 31,449 Inventories, net 69,343 90,380 Prepaid expenses and other current assets 2,934 4,927 Income taxes receivable   -     770   Total current assets 140,928 180,886 PROPERTY, PLANT AND EQUIPMENT, NET 17,402 19,593 OTHER ASSETS Intangible assets 11,562 11,482 Deferred income taxes 2,308 2,914 Other   4,523     4,736   Total other assets   18,393     19,132   $176,723   $ 219,611     LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Bank lines of credit $998 $ 9,716 Current portion of long-term debt 152 250 Current portion of long-term capital leases 103 - Trade accounts payable 20,420 18,101 Accrued income taxes payable 246 372 Current portion of contingent purchase price 2,644 - Accrued liabilities   11,640     13,500   Total current liabilities 36,203 41,939 OTHER LIABILITIES Long-term debt - 148 Long-term capital leases 190 - Contingent purchase price - 3,739 Other liabilities   8,716     7,816   Total other liabilities 8,906 11,703 STOCKHOLDERS' EQUITY   131,614     165,969   $176,723   $ 219,611   K?Swiss Inc.George Powlick, 818-706-5100Chief Financial Officer