K2 marine sales up 6 percent

CARLSBAD, Calif. – K2 Inc.’s (NYSE: KTO) Marine and Outdoors business segment saw modest growth in the fourth quarter ended Dec. 31, the company reported in a recent statement.

In its seasonally slowest quarter, Shakespeare fishing tackle and monofilament and Stearns marine and outdoor products generated net sales of $74.9 million, an increase of 6.5 percent from the comparable quarter in 2005. The fourth quarter sales increase 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, according to K2.

The decline in operating income for the fourth quarter from $4.8 million in 2005 to $3.2 million in 2006 was due to lower gross margins as a percentage of net sales due to product mix, and higher selling, general and administrative expenses as a percentage of net sales.

Sales growth reported company-wide

K2 Inc. reported total net sales for the fourth quarter ended Dec. 31 of $388.6 million versus $353.5 million in the prior year, an increase of 9.9 percent. Net sales for fiscal year 2006 were a record $1.4 billion or 6.2 percent higher than fiscal year 2005.

Adjusted net income for the fourth quarter of 2006 was $13.4 million, or $0.25 adjusted diluted earnings per share, compared to adjusted net income of $14.7 million, or $0.28 in the fourth quarter of 2005. Adjusted net income for fiscal year 2006 was $44.8 million, or $0.87 adjusted diluted earnings per share, compared to adjusted net income of $39.0 million, or $0.78 for fiscal year 2005, an increase of 14.8 percent in adjusted net income.

“Our 2006 performance validates the strength of our diversified brand portfolio, with adjusted diluted earnings per share growth of 11.5 percent and sales growth of 6.2 percent, driven by Action and Team Sports,” said Wayne Merck, president and CEO. “For 2007, we expect to continue to benefit from our diversified product and brand offerings, with our forecast for adjusted diluted earnings per share to grow despite an anticipated decline in winter products, due to the warm winter to date. We expect that our 2007 growth will be driven by continued gains in Team Sports, by a strong recovery in profit for Apparel and Footwear, and due to renewed profitability growth in Marine and Outdoor, which was relatively flat in 2006. We recently closed two highly strategic acquisitions of premier products and brands – Sevylor inflatable products in December and Penn fishing tackle in January. Although these new businesses are not material from a sales standpoint, they have the future potential to be accretive to our Marine and Outdoor segment after we have completed integration.”

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