K2 Reports Sales and Earnings for the Third Quarter Ended September 30, 1999

LOS ANGELES–Oct. 21, 1999–K2 Inc. (NYSE:KTO) today reported results for its third quarter and nine-month periods ended September 30, 1999, reflecting continued strong performance in the face of a challenging sporting goods market.

For the 1999 third quarter, K2 reported income from continuing operations of $3.3 million, or $.20 per diluted share. In the third quarter a year ago, K2 reported a loss from continuing operations of $7.9 million, or $.48 per diluted share, which included an aftertax charge of $9.4 million, or $.57 per diluted share. Sales from continuing operations rose 4.5% to $139.9 million, from $133.9 million a year ago.

Including the discontinued operations, net income was $3.3 million, or $.20 per diluted share for the quarter, compared with a net loss in the third quarter a year ago of $8.4 million, or $.51 per diluted share.

Excluding the non-recurring charge a year ago, gross profit margins increased to 31.2% in the current third quarter from 29.8% a year earlier, reflecting an improved product mix and fewer close outs. Selling expenses as a percentage of sales rose to 16.6% from 16.1%, principally reflecting the late 1998 acquisition of K2’s Japanese subsidiary. General and administrative expenses declined as K2 continued its expense reduction efforts throughout the Company.

For the first nine months of 1999, K2 had income from continuing operations of $13.5 million, or $.82 per diluted share, compared with income from continuing operations a year earlier of $2.2 million, or 13 per diluted share, including the previously mentioned aftertax charge.

After giving effect to the discontinued operations, net income was $14.6 million, or $.88 per diluted share, compared with net income in the year-earlier period of $2.9 million or $.17 per diluted share. Sales from continuing operations rose 4.4% to $461.2 million from $441.7 million a year ago.

“Sporting goods sales rose 9%, reflecting the broad-based strength of our Company despite the tough conditions worldwide for recreational products,” said Richard M. Rodstein, president and chief executive officer.

Rodstein continued, “Sales in the quarter benefited from strong double-digit percentage increases from our snowboard, fishing tackle, Stearns and bike businesses, partially offset by decreases in sales of our skis and in-line skates. Snowboard volume reflected K2’s expanding market share, which has benefited from the recent acquisitions of the Morrow and Ride brands.

“Our Shakespeare fishing tackle operation turned in another strong quarter led by the popularity of the Ugly Stik, packaged rods and reels and new product introductions. Sales of our Stearns products increased over the prior year, reflecting higher shipments of our flotation and new outdoor products, and we continue to see the positive impact of our restructuring in the bike division.

“Our ski shipments declined during the quarter due to the impact of a mild winter on preseason orders and lower domestic market share. The recent introduction of our new MOD ski technology should enhance our worldwide market position. Sales of ski and snowboard products were negatively impacted by manufacturing delays from the factory, and margins declined from higher manufacturing costs.

“The Company is nearing completion of an extensive planning process intended to improve K2’s manufacturing and procurement processes. Alternative opportunities for significant improvement have been identified and an announcement of the Company’s plan will be made when the improvement plan is completed during the fourth quarter.

“Although year-to-date shipments of in-line skates increased 11%, in-line skates declined for the quarter as retailers became more cautious in maintaining in-line skate inventory levels.”

Sales of K2’s industrial product group declined 3.3% in the 1999 third quarter to $27.4 million from $28.3 million a year ago. The lower sales reflected reduced demand for monofilament line used in the paper industry. Partially offsetting this were improved sales of specialty resins and marine antennas.

Rodstein concluded, “We have continued to focus on growing our strong brands in the marketplace, despite challenging market conditions in the sporting goods industry. Shakespeare fishing tackle products and K2 softboot in-line skates in particular, are gaining market share in key markets. Recent acquisitions, such as Ride and Morrow snowboards, will allow us to consolidate our position in a core category for K2, which we intend to utilize as a springboard for continued growth.”

K2 Inc. is a leading designer, manufacturer and marketer of brand name sporting goods, other recreational and industrial products. The Company’s sporting goods products include well-known names such as K2 and Olin alpine skis; K2, Ride and Morrow snowboards, boots and bindings; K2 in-line skates; Stearns sports equipment; Shakespeare fishing tackle; K2 bikes; and Dana Design backpacks.

K2’s other recreational products include Planet Earth apparel, Adio skateboard shoes and Hilton corporate casuals. K2’s industrial products include Shakespeare extruded monofilaments, marine antennas and fiberglass light poles.