K2 Inc. marine product sales up

CARLSBAD, Calif. – First quarter sales of Shakespeare fishing tackle and monofilament, and Stearns marine and outdoor products were up 9 percent from the comparable quarter in 2003 – net of divestitures, reported K2 Inc. (NYSE: KTO) in a statement yesterday.

The marine and outdoor segment generated sales of $98.8 million in the first quarter of 2004, ended March 31. Sales increases were driven by strong growth in Pflueger reels, Ugly Stik combos, marine antennas, and children’s flotation devices, according to the company.

Company sales up 76 percent

K2 saw a sales increase of 76.6 percent to $277.4 million in the first quarter of the year, up from $157.1 million in the same period of 2003, while diluted earnings per share in the first quarter increased to $0.27, as compared to $0.01 in the year earlier period, and higher than guidance estimates of $0.25 previously provided, the company said.

Basic earnings per share were $0.31 for the 2004 first quarter as compared to $0.01 in the year earlier period, K2 reported.

“We are extremely pleased with the results of the first quarter which were driven by strength across all our divisions and product lines,” said K2 Chairman and CEO Richard Heckmann. “Our record performance is a reflection of our premier stable of sporting goods brands, continued successful integration of our recent acquisitions and the achievement of operating efficiencies across our businesses.”

K2 acquisitions

K2 said it had also recently acquired Worr Game Products, a manufacturer of premium paint ball markers, and Innovative Products, a manufacturer of outdoor gear racks and accessories for all terrain vehicles. Innovative Products will integrate with K2’s Stearns division, and will benefit from common manufacturing and distribution channels, according to the release.

The purchase price for the transactions consisted of a combination of K2 stock, cash, and the pay-off of certain debt. On an annualized run-rate, total sales for the two acquired companies are estimated at approximately $25 million in the next 12 months. The transactions are expected to be earnings per share neutral in 2004 and accretive to earnings in fiscal year 2005, K2 said.

“Consistent with our strategic plan, we recently completed two acquisitions that fit perfectly with K2’s other paintball brands, and our Stearns Marine division,” Heckmann said. “We continue to believe that we are well positioned to benefit from the consolidation of sporting goods retailers worldwide and to see additional opportunities that will drive consolidation on the equipment side of the business.”

As a result of those acquisitions, K2 said it had reclassified its business into the following three segments, based on similar product types and distribution channels: Marine and Outdoor, Team Sports, and Action Sports.

2004 Outlook

K2 also reconfirmed guidance for fiscal 2004, and provided guidance for the second quarter ended June 30. On a full year basis for fiscal 2004, the company said it expects sales of approximately $960 million, and basic earnings per share of approximately $0.94, assuming 34.8 million basis shares outstanding, and diluted earnings per share of approximately $0.82 on projected average diluted shares of 44.4 million as if the convertible debt were converted into shares.

For the quarter ended June 30, the company said it expects sales in the range of $230 to $240 million and basic earnings per share of approximately $0.18 assuming 34.9 million basic shares outstanding, and diluted earnings per share of approximately $0.16 assuming outstanding shares of 44.4 million as if the convertible debt were converted into shares.

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