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 Breaking Headlines

K2 Net Income Rose 27% In 3Q

OCTOBER 20, 2005 -- K2 reported net 3Q sales of $340.4 million versus $333.5 million in the prior year. GAAP diluted EPS were 32¢ in 3Q05, as compared to 26¢ in 3Q04. Operating income was $32.0 million, as compared to $27.6 million, and net income was $16.7 million, as compared to $13.2 million.

YTD net sales were $960.1 million, an increase of 11.4%, and operating profit for the period was $50.4 million as compared to $59.5 million for the '04 period. Lower profitability in the YTD as compared to 2004 is principally attributable to lower paintball sales and the acquisitions of Volkl, Marker and Marmot in 3Q04, as these product lines have higher levels of fixed expenses as compared to K2's other business lines, and are seasonally slow from a sales standpoint in the 1H. GAAP diluted EPS were 42¢ for the first nine months of '05.

Richard Heckmann, COB/CEO, said, "We generated strong results in the third quarter, with a 16% increase in operating income and a 23% increase in GAAP diluted EPS over the comparable '04 period, despite the previously announced and continuing weakness in paintball. The biggest profit contributors in the third quarter were K2, Volkl, and Marker winter products as we experienced significant profit growth in those product lines due to our ongoing integration efforts and back-office efficiencies. Apparel and footwear continued their previous trend line of consistent growth in sales and operating income, and marine and outdoor and team sports segments, despite a seasonally slow quarter, also generated strong results.

"As we had previously forecast, SG&A expenses remained flat on a percentage basis over '04 levels. As we look forward to the remainder of the year, we are optimistic about the strength of our brands, but we continue to have concerns about consumer confidence given the uncertainties of higher fuel and energy costs, rising interest rates, and general economic conditions."

For FY05, K2 forecasts GAAP diluted EPS of 66¢-68¢ and adjusted diluted EPS of 75¢-77¢, in each case based on assumed fully diluted shares outstanding of 55.2 million. For the same period, K2 forecasts GAAP basic EPS of 70¢-73¢ and adjusted basic EPS of 81¢-84¢, in each case based on assumed basic shares outstanding of 46.2 million.

For 4Q05, K2 forecasts GAAP diluted EPS of 23¢-25¢.



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K2 Inc.
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