3Q results show a net sales increase for K2

CARLSBAD, Calif. – Net sales for K2 Inc.’s marine and outdoor segment, were $80.8 million in the third quarter of 2006, ended Sept. 30, an increase of 2.1 percent from the comparable quarter in 2005, the company reported in a release this week.

K2 said the increase in its marine and outdoor segment – which is comprised of Shakespeare fishing tackle and monofilament and Stearns marine and outdoor products – was due to increased sales of fishing kits and combos, Ugly Stik rods and immersion suits, offset by declines in military antennas, cutting line, Hodgman waders and drywear.

Operating profits for the third quarter of 2006 were $8.3 million, down from $9.9 million in 2005 due to lower gross profit as a percentage of sales and higher selling, general and administrative expenses as a percentage of sales.

For the company as a whole, net sales for the third quarter were $356.9 million versus $340.4 million in the prior year, an increase of 4.9 percent. Adjusted net income for the third quarter of 2006 was $23.0 million, or $0.43 adjusted diluted earnings per share, compared to adjusted net income of $18.1 million, or $0.34 in the third quarter of 2005.

Adjusted net income for the first nine months of 2006 was $31.4 million, or $0.62 adjusted diluted earnings per share, compared to adjusted net income of $24.4 million, or $0.49 in the first nine months of 2005.

“Overall K2 achieved a new milestone in the third quarter of 2006, with sales of $356.9 million, operating income of $38.7 million, and an improvement of 180 basis points in our gross margin and 140 basis points in operating margin over the third quarter of 2005,” said Richard Heckmann, chairman and CEO. “We also continued our progress in reducing total debt, which is down $23.7 million from the same quarter in 2005, providing us with significant flexibility for future growth.

“The strong results in the third quarter reflected a record winter business for K2 Inc., driven by K2 and Volkl ski and snowboard products, and Marmot winter and performance apparel. As we move towards year end, we are extremely proud of the performance of all of our divisions during the course of the year, which reflects all of the hard work from previous years in integrating acquisitions, launching new products, improving relationships with retailers and consumers, and improved efficiencies in manufacturing and operations. We believe that 2006 is a foundation year from which we will continue to build a leading franchise in sporting goods.”

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