Tubbs & Atlas Snow Shoes Parent Company, K2 Inc., Files Fourth Quarter Earnings Report

Parent company of Tubbs Snowshoes and Atlas Snow Shoes, K2 Inc., recently reported net sales for the fourth quarter ended December 31, 2004 of $338.9 million, an increase of 75% from $193.8 million in the prior year, and diluted earnings per share of $0.18, a 157% increase over the fourth quarter of 2003. Operating income in the fourth quarter of 2004 was $21.5 million, a 294% increase from the 2003 comparable period, and net income was $8.8 million, a 310% increase from the fourth quarter of 2003.

Net sales for the twelve month period ended December 31, 2004 were $1.2 billion, an increase of 67% over the 2003 comparable period, and diluted earnings per share of $0.86, an increase of 95% over the 2003 comparable period. Operating income for the twelve month period ended December 31, 2004 was $81.0 million, a 153% increase over the 2003 comparable period, and net income was $38.9 million, a 241% increase over the 2003 comparable period.

Chairman and CEO, Richard Heckmann, stated, "2004 was an excellent year for K2 as evidenced by organic sales growth of approximately 9%, excluding the previously forecast decline in in-line skate sales, and dramatic growth in margins and profitability. Our acquisitions of Volkl and Marker have significantly strengthened our global winter products business, and Marmot and Ex Officio are the cornerstones of our technical apparel platform. For our 2005 guidance, comparability with the first and second quarters of 2004 is complicated by two key factors. The first is the timing of the acquisitions of Volkl, Marker and Marmot at mid-year. They are highly seasonal businesses and normally generate losses in the first six months of the year, which are not reflected in our full year 2004 GAAP financial figures. Secondly, we are incurring non-cash amortization charges related to recent acquisitions, non-cash stock compensation expense, and significant expenses associated with compliance under Section 404 of the Sarbanes-Oxley Act. While we believe we have just begun to realize the revenue and operational synergies available as a result of our recent transactions, we remain cautious about the timing of their impact. We have seen our EBITDA grow from $41.2 million in 2002 to $50.6 million in 2003 and $114.1 million in 2004, and we project over $120 million in 2005. Given the complexity of the industry's seasonal business, we operate with particular attention to EBITDA and free cash flow. In 2004, K2 generated approximately $53 million in free cash flow, defined as net income plus non-cash taxes before acquisitions and growth in working capital."

K2's Board of Directors authorized the repurchase of the Company's common stock as a means to enhance shareholder value. Depending on market conditions, K2 may repurchase up to $50 million of the Company's common stock periodically in open market or privately negotiated transactions in accordance with applicable laws. The Company will use its available cash resources to fund the stock repurchase program.

K2's net sales in the fourth quarter of 2004 were $210.9 million, excluding the net sales from businesses acquired by K2 during 2004 and the incremental net sales from the Brass Eagle acquisition which closed at the end of the 2003 fourth quarter. K2's net sales in the fourth quarter of 2003 were $193.8 million, which reflects a sales increase of 8.8% excluding the impact of acquisitions, for the 2004 fourth quarter.

Due to the acquisitions of Ex Officio and Marmot in the 2004 second and third quarters, respectively, K2 formed an Apparel and Footwear segment in the 2004 third quarter that also includes Earth Products. Earth Products was formerly included in the Action Sports segment.

Sales of skis, snowboards, in-line skates, bikes, snowshoes and paintball products totaled $178.4 million in the fourth quarter of 2004, an increase of 130.1% over the 2003 fourth quarter. Growth was driven by double digit increases in sales of K2 skis and Tubbs & Atlas snowshoes, improved sales of snowboards, and the acquisitions of Volkl and Marker at the beginning of the third quarter of 2004.