10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly Report pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the Quarter Ended September 30, 2003

Commission File No. 1-4290

K2 INC.

(Exact name of registrant as specified in its charter)

DELAWARE	95-2077125
(State of Incorporation)	(I.R.S. Employer Identification No.)
2051 Palomar Airport Road Carlsbad, California	92009
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (760) 494-1000

Former name, former address and former fiscal year, if changed since last report:

Not applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes  x    No  ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of October 31, 2003

Common Stock, par value $1 28,521,798 Shares

FORM 10-Q QUARTERLY REPORT

PART – 1 FINANCIAL INFORMATION

Item 1. Financial Statements

STATEMENTS OF CONDENSED CONSOLIDATED INCOME

(Thousands, except per share figures)

	Three months ended September 30						Nine months ended September 30
	2003			2002			2003			2002
	(Unaudited)
Net sales	$	167,963		$	149,787		$	524,754		$	454,463
Cost of products sold		113,094			102,280			362,524			319,569
Gross profit		54,869			47,507			162,230			134,894
Selling expenses		29,500			23,337			83,114			65,166
General and administrative expenses		17,614			16,037			52,513			44,890
Operating income		7,755			8,133			26,603			24,838
Interest expense		2,640			2,263			7,248			7,130
Debt extinguishment costs		—			—			6,745			—
Other income, net		(54	)		(72	)		(1,654	)		(59	)
Income before income taxes		5,169			5,942			14,264			17,767
Provision for income taxes		1,808			2,079			4,992			6,218
Net income	$	3,361		$	3,863		$	9,272		$	11,549
Basic earnings per share:
Net income	$	0.12		$	0.22		$	0.39		$	0.64
Diluted earnings per share:
Net income	$	0.12		$	0.21		$	0.38		$	0.64
Basic shares outstanding		27,274			17,942			23,576			17,941
Diluted shares outstanding		34,487			18,012			26,623			17,975

See notes to consolidated condensed financial statements.

1

CONDENSED CONSOLIDATED BALANCE SHEETS

(Thousands, except number of shares)

	September 30 2003			December 31 2002
	(Unaudited)
Assets
Current Assets
Cash and cash equivalents	$	14,615		$	11,228
Accounts receivable, net		176,922			143,062
Inventories, net		200,756			144,246
Deferred taxes		37,975			17,225
Prepaid expenses and other current assets		12,903			8,163
Total current assets		443,171			323,924
Property, plant and equipment		182,905			169,937
Less allowance for depreciation and amortization		106,827			106,574
		76,078			63,363
Intangible assets, net		127,444			43,382
Other		13,085			7,741
Total Assets	$	659,778		$	438,410
Liabilities and Shareholders’ Equity
Current Liabilities
Bank loans	$	8,116		$	6,261
Accounts payable		52,004			44,915
Accrued payroll and related		26,623			17,459
Other accruals		57,300			29,815
Current portion of long-term debt		6,667			16,852
Total current liabilities		150,710			115,302
Long-term pension liabilities		12,553			12,553
Long-term debt		35,079			73,007
Deferred taxes		18,952			6,252
Convertible subordinated debentures		97,951			—
Commitments and Contingencies
Shareholders’ Equity
Preferred Stock, $1 par value, authorized 12,500,000 shares, none issued		—			—
Common Stock, $1 par value, authorized 60,000,000 shares, issued shares - 29,017,414 in 2003 and 18,689,310 in 2002		29,017			18,689
Additional paid-in capital		231,004			143,365
Retained earnings		105,465			96,193
Employee Stock Ownership Plan and stock option loans		(1,206	)		(1,380	)
Treasury shares at cost, 747,234 shares in 2003 and 2002		(9,117	)		(9,117	)
Accumulated other comprehensive loss		(10,630	)		(16,454	)
Total Shareholders’ Equity		344,533			231,296
Total Liabilities and Shareholders’ Equity	$	659,778		$	438,410

See notes to consolidated condensed financial statements.

2

STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS

(Thousands)

	Nine months ended September 30
	2003			2002
	(Unaudited)
Operating Activities
Net Income	$	9,272		$	11,549
Adjustments to reconcile net income from operations to net cash provided by operating activities:
Gain on sale of operating division		(1,504	)		—
Depreciation and amortization		14,275			11,273
Deferred taxes		0			2,366
Repurchase of previously securitized receivables		—			(51,827	)
Changes in noncash current assets and current liabilities		27,522			42,330
Net cash provided by operating activities		49,565			15,691
Investing Activities
Property, plant & equipment expenditures		(15,067	)		(5,863	)
Disposals of property, plant & equipment		21			(58	)
Cash merger costs for business acquisition, net of cash acquired		(3,654	)		—
Purchase of businesses, net of cash acquired		(12,646	)		—
Proceeds received from sale of operating division		20,132			—
Other items, net		1,137			(2,472	)
Net cash used in investing activities		(10,077	)		(8,393	)
Financing Activities
Issuance of convertible subordinated debentures		100,000			—
Borrowings under long-term debt		388,507			47,250
Net borrowings under (payments on) accounts receivable purchase facility		(25,702	)		20,702
Payments of long-term debt		(492,874	)		(81,990	)
Net increase in short-term bank loans		1,885			2,744
Debt issuance costs		(7,917	)		—
Net cash used in financing activities		(36,101	)		(11,294	)
Net increase (decrease) in cash and cash equivalents		3,387			(3,996	)
Cash and cash equivalents at beginning of year		11,228			11,416
Cash and cash equivalents at end of period	$	14,615		$	7,420

3

K2 INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

September 30, 2003

NOTE 1 – Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003.

The balance sheet at December 31, 2002 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The balance sheet at September 30, 2003 includes the balance sheet of Rawlings Sporting Goods Company, Inc. (“Rawlings”) and Worth, Inc. (“Worth”) which K2 acquired on March 26, 2003 and September 16, 2003, respectively, but the December 31, 2002 balance sheet does not reflect the acquisitions. As a result, certain balance sheet accounts such as accounts receivable, inventories, deferred taxes, intangible assets, accounts payable, accrued liabilities, common stock and additional paid in capital show significant increases from December 31, 2002.

The interim financial statements should be read in connection with the financial statements in K2 Inc.’s (“K2’s”) Annual Report on Form 10-K for the year ended December 31, 2002.

NOTE 2 – Balance Sheet Details and Summary of Significant Accounting Policies

Accounts Receivable and Allowances

Accounts receivable are net of allowances for doubtful accounts of $8,831,000 at September 30, 2003 and $7,838,000 at December 31, 2002.

Inventories

The components of inventories consisted of the following:

	September 30 2003		December 31 2002
	(Thousands)
Finished goods	$	158,986	$	104,204
Work in process		9,785		10,741
Raw materials		31,985		29,301
	$	200,756	$	144,246

4

K2 INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

September 30, 2003

NOTE 2 – Balance Sheet Details and Summary of Significant Accounting Policies (Continued)

Newly Adopted Accounting Standards

In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure.” SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 is effective for interim and annual periods beginning after December 15, 2002.

K2 applies the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” which allows entities to continue to apply the provisions of Accounting Principles Board (“APB”) Opinion No. 25 “Accounting for Stock Issued to Employees,” and related interpretations and provide pro forma net income and pro forma net income per share disclosures for employee stock option grants made as if the fair-value-based method defined in SFAS No. 123 had been applied. K2 has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123. As such, compensation expense for stock options issued to employees is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. Had compensation cost been determined based upon the fair value at the grant date for K2’s stock options under SFAS No. 123 using the Black Scholes option pricing model, pro forma net income and pro forma net income per share, including the following weighted average assumptions used in these calculations, would have been as follows:

	Three months ended September 30						Nine months ended September 30
	2003			2002			2003			2002
	(Thousands, except per share data, percentage data and expected life)
Net income as reported	$	3,361		$	3,863		$	9,272		$	11,549
Less: Total stock-based compensation expense determined under fair value based method for all awards, net of taxes		258			135			527			405
	$	3,103		$	3,728		$	8,745		$	11,144
Earnings per share:
Basic - as reported	$	0.12		$	0.22		$	0.39		$	0.64
Basic - pro forma	$	0.11		$	0.21		$	0.37		$	0.62
Diluted - as reported	$	0.12		$	0.21		$	0.38		$	0.64
Diluted - pro forma	$	0.11		$	0.21		$	0.36		$	0.62
Risk free interest rate		3.33	%		2.53	%		3.33	%		2.53	%
Expected life of options		5 years			5 years			5 years			5 years
Expected volatility		50.4	%		43.6	%		50.4	%		43.6	%

5

K2 INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

September 30, 2003

Note 3 – Acquisitions

Worth Acquisition

On September 16, 2003, K2 completed the acquisition of Worth, Inc. (“Worth”) in a cash and stock merger transaction. Worth, a privately held company founded in 1912, is a marketer and manufacturer of bats, balls, gloves and accessories for the softball and baseball industry. Additionally, through its deBeer division, Worth is a producer of equipment for lacrosse. Under the terms of the merger agreement, K2 acquired all of the issued and outstanding shares of Worth common stock and issued approximately 0.9 million shares of K2’s common stock to the former owners of Worth along with a cash payment of $12.6 million, resulting in a preliminary purchase price of approximately $27.4 million plus merger costs of approximately $1.4 million. The valuation of the common stock issued in connection with the acquisition was $17.078 per share based on the average of the quoted market price of K2 stock for the 5 trading days before the completion of the acquisition. In connection with the acquisition, K2 paid off Worth’s long-term and seasonal working capital debt of approximately $15 million.

The transaction was accounted for under the purchase method of accounting, accordingly, the purchased assets and liabilities assumed were recorded at their estimated fair values at the date of acquisition. The following table summarizes the total preliminary purchase price allocation of the fair value of the assets acquired and liabilities assumed:

	In thousands
Total preliminary purchase price, including estimated merger expenses (a)			$	28,798
Total current assets	$	21,087
Property, plant and equipment		6,334
Deferred taxes and other assets		1,488
Net tangible assets acquired (b)		28,909
Total liabilities assumed (c)		22,660
Net assets acquired (b) - (c) = (d)				6,249
Net intangible assets acquired (a) - (d)			$	22,549

6

K2 INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

September 30, 2003

Note 3 – Acquisitions (Continued)

This preliminary allocation assumes the excess purchase price will be allocated to goodwill, and is thus not amortized. The final allocation, however, could include identifiable assets with finite and indefinite lives separate from goodwill. Should there be assets with finite lives, those assets would be subject to amortization resulting in additional amortization expense. The final allocation of the preliminary purchase price will be completed during the 2003 fourth quarter based on K2’s final evaluation of such assets and liabilities. The results of the operations of Worth were included in the consolidated financial statements of K2 beginning on the date of acquisition. The September 30, 2003 balance sheet of Worth was included in the consolidated condensed financial statements of K2 at September 30, 2003.

Rawlings Acquisition

On March 26, 2003, K2 completed the acquisition of Rawlings Sporting Goods Company, Inc. (“Rawlings”), a designer, manufacturer and marketer of equipment and apparel for baseball, basketball and football, in an all-stock merger transaction. Under the terms of the merger, each share of Rawlings common stock was converted into 1.080 shares of K2 common stock. Based on the number of common shares outstanding of Rawlings, approximately 8.8 million shares of K2’s common stock were issued to the Rawlings shareholders, and the purchase price of the transaction was valued at approximately $76.8 million plus merger costs of approximately $5.1 million. The purchase price included K2 stock options issued in exchange for Rawlings stock options outstanding at the time of the acquisition valued at approximately $4.6 million. The valuation of the common stock issued in connection with the acquisition was $8.194 per share based on the average of the quoted market price K2 stock for the 5 trading days before the completion of the acquisition. The value of the K2 stock options issued in exchange for the Rawlings’ stock options outstanding was based on a Black-Scholes estimate using the following assumptions: risk free interest rate of 1.72%, volatility of K2 stock of 0.507 and expected life of 2.75 years. In connection with the acquisition, K2 paid off Rawlings’ long-term and seasonal working capital debt of approximately $64 million.

7

K2 INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

September 30, 2003

Note 3 – Acquisitions (Continued)

The Rawlings transaction was accounted for under the purchase method of accounting, accordingly, the purchased assets and liabilities assumed were recorded at their estimated fair values at the date of acquisition. The following table summarizes the total purchase price, estimated fair values of the assets acquired and liabilities assumed, and the resulting net intangible assets acquired at the date of the acquisition:

	In thousands
Total purchase price, including estimated merger expenses and value of K2 stock options issued in exchange for Rawlings’ stock options outstanding (a)			$	81,928
Total current assets	$	101,574
Property, plant and equipment		7,357
Deferred taxes and other assets		8,361
Net tangible assets acquired (b)		117,292
Total liabilities assumed (c)		95,328
Net assets acquired (b) - (c) = (d)				21,964
Net intangible assets acquired (a) - (d)			$	59,964

The purchase price allocation resulted in an excess of the purchase price over net tangible assets acquired of $60.0 million. Based on a valuation completed by K2 during the 2003 second quarter, this excess amount was allocated to intangible assets with definite and indefinite lives including: patents of $1.6 million with an average life of 9 years; customer contracts of $4.2 million with an average life of 11 years; licensing arrangements of $3.8 million with an average life of 6 years; tradenames/trademarks with indefinite lives not subject to amortization of $21.5 million; and goodwill not subject to amortization of $28.9 million.

8

K2 INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

September 30, 2003

Note 3 – Acquisitions (Continued)

The following summarized unaudited pro forma results of operations of K2 assume the acquisition of Rawlings and Worth had occurred as of the beginning of the respective periods. This pro forma information does not purport to be indicative of what would have occurred had the acquisition been made as of those dates, or of results which may occur in the future:

Pro Forma Information (Unaudited)

(Thousands, except per share amounts)

	For the three months ended September 30					For the nine months ended September 30
	2003		2002			2003		2002
Net sales	$	174,586	$	181,474		$	627,238	$	633,263
Operating income		5,417		1,544			35,590		31,506
Net income		1,756		(791	)		14,233		14,424
Diluted earnings per share	$	0.07	$	(0.01	)	$	0.49	$	0.50

During the nine months ended September 30, 2003, K2 also completed two additional acquisitions for a total combined purchase price of approximately $2.9 million. The Consolidated Financial Statements include the operating results of each business from the date of acquisition. Pro forma results of operations have not been presented because the effects of these additional acquisitions were not material on either an individual basis or aggregate basis to K2’s results.

9

K2 INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

September 30, 2003

NOTE 4 – Sale of Operating Division

On May 27, 2003, K2 completed the sale of the assets of the composite utility and decorative light pole product lines (the “Division”) of its industrial products segment to GTG Temporary, LLC, a subsidiary of Genlyte Thomas Group LLC. The Division was sold for approximately $20.1 million in cash and the assumption of certain liabilities by the buyer. The gain on the sale of the Division of $1.5 million ($1.0 million, net of taxes) includes an estimate of the costs of disposal and amounts related to the retention of certain liabilities by K2.

NOTE 5 – Intangible Assets

The components of intangible assets consisted of the following:

	September 30 2003		December 31 2002
	(Thousands)
Intangibles subject to amortization:
Net carrying amount:
Patents	$	3,677	$	1,873
Customer contracts		3,979		—
Licensing agreements		3,483		—
Intangibles not subject to amortization (by segment):
Net carrying amount:
Sporting goods		112,020		37,224
Other recreational		1,059		1,059
Industrial		3,226		3,226
		116,305		41,509
Total intangible assets, net	$	127,444	$	43,382

10

K2 INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

September 30, 2003

NOTE 6 – Borrowings and Other Financial Instruments

On June 10, 2003, K2 completed the placement of $75 million of 5.00% convertible senior debentures (“5% Debentures”) due June 2010. The 5% Debentures are convertible into 5,706,458 shares of K2 common stock at $13.143 per share. The net proceeds from the sale were used to pay off the outstanding balance under K2’s $205 million revolving credit facility with the remaining cash proceeds to be used for general corporate purposes. The debentures are redeemable by K2 in whole or in part at K2’s option on or after June 15, 2008 at the redemption prices set forth in the purchase agreement for these debentures.

On February 14, 2003, K2 completed the placement of $25.0 million of 7.25% convertible subordinated debentures (“7.25% Debentures”) due March 2010. The 7.25% Debentures are convertible into 2,097,315 shares of K2 common stock at $11.92 per share. Pursuant to the agreement for these debentures, the noteholders also initially received warrants to purchase 524,329 additional shares of K2’s common stock at $13.91 per share, exercisable within the five year period ended February 14, 2008 (“the Warrants”). On June 4, 2003, in consideration for an amendment to permit the issuance of the 5% Debentures, the Warrants were repriced to $11.92 per share and the noteholders were issued additional warrants to purchase 243,260 shares of K2’s common stock at $13.14 per share (“the Additional Warrants”). The Additional Warrants are exercisable within the three year period ended February 14, 2006. In connection with the amendment to the exercise price of the Warrants, a Black-Scholes option valuation model was used to calculate the additional fair market value related to the repricing of the Warrants. Based on a risk free interest rate of 2.13%, K2’s stock volatility of 35%, and the remaining term of the original five years, K2 assigned an additional fair market value of $267,000 to the repricing of the Warrants. K2 also assigned a fair market value of $358,000 to the Additional Warrants based on a risk free interest rate of 1.46%, K2’s stock volatility of 35%, and the three year term, placing the total fair market value of the Warrants and Additional Warrants at $2,303,000. The aggregate unamortized fair market value of $2,166,000 is reflected as a reduction of the face amount of the 7.25% Debentures on K2’s balance sheet which will be amortized using the effective interest method through the exercise periods, thereby increasing the carrying value of the debentures.

K2’s principal long-term borrowing facility is a $205 million revolving credit facility (“Credit Facility”), secured by all of K2’s assets in the United States, Canada and England. The Credit Facility is expandable to $230 million subject to certain conditions. The Credit Facility has a $75 million limit for the issuance of letters of credit. Actual borrowing availability under the Credit Facility is based on K2’s trade receivable and inventory levels in the United States, Canada and England, subject to eligibility criteria and defined advance rates. The Credit Facility expires on March 31, 2006.

11

K2 INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

September 30, 2003

NOTE 6 – Borrowings and Other Financial Instruments (Continued)

At September 30, 2003, there were $25.1 million of borrowings with an effective interest rate of 4.50% and $26.1 million of letters of credit outstanding under the Credit Facility. Pursuant to the terms of the Credit Facility, an additional $104.5 million was available for borrowing at September 30, 2003.

At September 30, 2003, in addition to the Credit Facility, K2 also had a $16.7 million term loan payable in equal monthly installments through March 31, 2006 with an effective interest rate of 5.15% and $8.1 million outstanding under foreign lending arrangements.

NOTE 7 – Accumulated Other Comprehensive Loss

The components of other comprehensive loss are as follows:

	Currency Translation Adjustments			Additional Minimum Pension Liability			Derivative Financial Instruments			Total
	(Thousands)
Balance at December 31, 2002	$	(11,080	)	$	(4,904	)	$	(470	)	$	(16,454	)
Currency translation adjustment		6,011			—			—			6,011
Reclassification adjustment for amounts recognized in cost of sales		—			—			470			470
Change in fair value of derivatives, net of $354 in taxes		—			—			(657	)		(657	)
Balance at September 30, 2003	$	(5,069	)	$	(4,904	)	$	(657	)	$	(10,630	)

Total comprehensive income was $7.1 million and $5.0 million for the three months ended September 30, 2003 and 2002, respectively. Total comprehensive income was $15.1 million and $18.4 million for the nine months ended September 30, 2003 and 2002, respectively. Total comprehensive income includes the net change in accumulated other comprehensive loss for the period.

12

K2 INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

September 30, 2003

NOTE 8 – Earnings Per Share Data

Basic earnings per share (“EPS”) is determined by dividing net income by the weighted average number of shares outstanding during the period. Diluted EPS reflects the potential dilutive effects of stock options and warrants, using the treasury stock method, and of the debentures using the “if converted” method. The following represents a reconciliation from basic shares to fully diluted shares for the respective periods. Options to purchase 3,249,084 and 1,929,961 shares of common stock were outstanding at September 30, 2003 and September 30, 2002, respectively. At September 30, 2003, shares of common stock issuable upon conversion of the $100 million of convertible debentures totaling 7,803,742 and warrants to purchase 767,589 of shares of common stock were outstanding. For the three and nine month periods ended September 30, 2003, 433,500 and 495,710 stock options, respectively were excluded since their inclusion would have been antidilutive. For nine month period ended September 30, 2003, 767,589 warrants were also excluded since their inclusion would have been antidilutive. The EPS calculation for the three and nine month period ended September 30, 2003 also excluded 2,097,282 shares from the issuance of $25 million convertible subordinated debentures in February 2003, since their inclusion would have also been antidilutive. For the three and nine month periods ended September 30, 2002, 928,461 and 1,175,265 stock options, respectively, were excluded since their inclusion would have been antidilutive.

13

K2 INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

September 30, 2003

NOTE 8 – Earnings Per Share Data (Continued)

The table below outlines the determination of the number of diluted shares of common stock used in the calculation of diluted earnings per share as well as the calculation of diluted earnings per share for the periods presented:

	Three months ended September 30				Nine months ended September 30
	2003		2002		2003		2002
	(Thousands, except per share amounts)
Determination of diluted number of shares:
Average common shares outstanding		27,274		17,942		23,576		17,941
Assumed conversion of dilutive stock options and warrants		1,507		70		722		34
Assumed conversion of subordinated debentures		5,706		—		2,325		—
Diluted average common shares outstanding (b)		34,487		18,012		26,623		17,975
Calculation of diluted earnings per share:
Net income	$	3,361	$	3,863	$	9,272	$	11,549
Add: interest component on assumed conversion of subordinated debentures, net of taxes		609		—		745		—
Net income, adjusted (a)	$	3,970	$	3,863	$	10,017	$	11,549
Diluted earnings per share (a/b)	$	0.12	$	0.21	$	0.38	$	0.64

14

K2 INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

September 30, 2003

NOTE 9 – Segment Information

The segment information presented below is for the three months ended September 30:

	Net Sales to Unaffiliated Customers*				Intersegment Sales*				Operating Profit (Loss)*
	2003		2002		2003		2002		2003			2002
	(Millions)
Sporting goods	$	134.1	$	115.4	$	23.0	$	17.7	$	8.2		$	11.0
Other recreational		14.7		8.5		0.4		0.4		0.6			(3.1	)
Industrial		19.1		25.9		0.1		0.0		1.0			1.6
Total segment data	$	167.9	$	149.8	$	23.5	$	18.1		9.8			9.5
Corporate expenses, net										(2.0	)		(1.3	)
Interest expense										(2.6	)		(2.3	)
Income before provision for income taxes									$	5.2		$	5.9

* Results for the three months ended September 30, 2003 include the sales and operating profit of Rawlings which was acquired by K2 on March 26, 2003.

The segment information presented below is for the nine months ended September 30:

	Net Sales to Unaffiliated Customers*				Intersegment Sales*				Operating Profit (Loss)*
	2003		2002		2003		2002		2003			2002
	(Millions)
Sporting goods	$	409.2	$	343.0	$	59.5	$	57.5	$	25.7		$	25.8
Other recreational		35.3		26.9		1.2		1.3		(0.3	)		(4.7	)
Industrial		80.2		84.6		0.3		0.3		7.2			8.0
Total segment data	$	524.7	$	454.5	$	61.0	$	59.1		32.6			29.1
Corporate expenses, net										(5.9	)		(4.2	)
Gain on sale of operating division										1.5			—
Debt extinguishment costs										(6.7	)		—
Interest expense										(7.2	)		(7.1	)
Income before provision for income taxes									$	14.3		$	17.8

* Results for the nine months ended September 30, 2003 include the sales and operating profit of Rawlings which was acquired by K2 on March 26, 2003.

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K2 INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

September 30, 2003

NOTE 10 – Contingencies

K2 is subject to various legal actions and proceedings in the normal course of business. While the ultimate outcome of these matters cannot be predicted with certainty, management does not believe these matters will have a material adverse effect on K2’s business, financial condition or results of operations.

K2 is one of several named potentially responsible parties (“PRP”) in three Environmental Protection Agency matters involving discharge of hazardous materials at old waste sites in South Carolina and Michigan. Although environmental laws technically impose joint and several liability upon each PRP at each site, the extent of K2’s required financial contribution to the cleanup of these sites is expected to be limited based upon the number and financial strength of the other named PRPs and the volume and types of waste involved which might be attributable to K2.

Environmental and related remediation costs are difficult to quantify for a number of reasons including the number of parties involved, the difficulty in determining the extent of the contamination, the length of time remediation may require, the complexity of environmental regulation and the continuing advancement of remediation technology. K2 accrues for liabilities of this nature when it is probable a liability has been incurred and the amount can be reasonably estimated. At September 30, 2003 and December 31, 2002, K2 had recorded an estimated liability of approximately $1,100,000 and $1,308,000, respectively, for environmental liabilities with no insurance recovery expected. The estimates are based on K2’s share of the costs to remediate as provided by the PRP’s consultants and in ongoing discussions with the EPA or other environmental agencies. The ultimate outcome of this matter cannot be predicted with certainty, however, and taking into consideration reserves provided, management does not believe this matter will have a material adverse effect on K2’s financial statements.

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K2 INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

September 30, 2003

NOTE 11 – Subsequent Events

On October 17, 2003, K2 completed the acquisition of certain assets and the assumption of certain liabilities of WinterQuest LLC (“WinterQuest”), a privately held company founded in 1906, which is a marketer and manufacturer of snowshoes under the Tubbs and Atlas brands. The transaction was completed through a new wholly-owned subsidiary of K2, K2 Snowshoes, Inc. The preliminary purchase price consisted of $7.5 million in cash and the payoff of $9.1 million in permanent and seasonal debt. The purchase price of the transaction will be finalized in the 2004 second quarter subject to earn out provisions as specified in the asset purchase agreement. This transaction will be accounted for under the purchase method of accounting, accordingly the purchased assets and liabilities will be recorded at their estimated fair values at the date of acquisition. The purchase price allocation is expected to result in an excess of cost over net tangible assets acquired. The allocation of the purchase price will be completed during the 2003 fourth quarter. The results of the operations of K2 Snowshoes will be included in the consolidated financial statements of K2 beginning on the date of acquisition.

On October 22, 2003, K2 announced the signing of a definitive merger agreement with Brass Eagle Inc. (“Brass Eagle”) in which Brass Eagle would become a wholly-owned subsidiary of K2. Brass Eagle is the worldwide leader in the manufacturing, marketing, and distribution of paintball products, including markers, loaders, masks, paintballs and accessories under several brand names including Brass Eagle, Viewloader and JT. Each outstanding share of Brass Eagle common stock will be exchanged for 0.6036 shares of K2 common stock, which is expected to result in the issuance of approximately 4.5 million shares of K2 common stock. Based on the closing price of K2’s stock for the 30 trading days ending October 20, 2003, the value of the transaction is $77.8 million, for Brass Eagle shareholders, plus merger costs and assumed liabilities by K2. This transaction will be accounted for under the purchase method of accounting, accordingly the purchased assets and liabilities assumed will be recorded at their estimated fair values at the date of acquisition. The purchase price allocation is expected to result in an excess of cost over net tangible assets acquired. The allocation of the purchase price will be completed during the 2003 fourth quarter. The results of the operations of Brass Eagle will be included in the consolidated financial statements of K2 beginning on the date of acquisition. The proposed transaction is subject to regulatory review and other customary conditions, and is expected to be completed by the end of 2003.

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ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Comparative Third Quarter Results of Operations

Net sales of K2 for the three months ended September 30, 2003 were $168.0 million as compared with $149.8 million in the year-earlier period. Net income for the third quarter of 2003 was $3.4 million, or $.12 per diluted share, as compared with $3.9 million, or $.21 per diluted share, in the third quarter of 2002.

Net Sales. In the sporting goods segment, net sales totaled $134.1 million in the 2003 third quarter as compared with $115.4 million in the prior year’s third quarter. The overall improvement resulted from the addition of Rawlings sales of $20.2 in the 2003 third quarter (as the result of the acquisition of Rawlings at the end of the 2003 first quarter), and from increased sales of skis and Ride snowboards.

In the other recreational products segment, net sales increased to $14.7 million as compared to $8.5 million in the prior year’s quarter due to increased sales of skateboard shoes of $6.6 million, reflecting strong sell through of the Adio shoe brand and an expanded retail distribution network.

Net sales of the two businesses in the industrial products group were $19.1 million for the 2003 third quarter as compared with $25.9 million in the prior year’s quarter. The sales decrease was attributable to the sale of the composite utility and decorative light pole product lines on May 27, 2003. Excluding the impact of the sale, net sales grew due to higher shipments of Shakespeare cutting line and monofilament products of $1.7 million. For additional discussion on the sale of the composite utility and decorative light pole product lines, see Note 4 of Notes to Consolidated Condensed Financial Statements.

Gross profit. Gross profit for the third quarter of 2003 increased 15.6% to $54.9 million, or 32.7% of net sales, as compared with $47.5 million, or 31.7% of net sales, in the prior year quarter. The improvement in gross profit dollars for the quarter was attributable to the increase in third quarter sales volume and an increase in gross profit as a percentage of net sales. The improvement in gross profit percentage was due to fewer close-out sales in the current year’s quarter as compared to the prior year, continued product cost reductions associated with the China manufacturing facility and an increase in the sales of higher-margin products.

Costs and Expenses. Selling expenses for the 2003 third quarter were $29.5 million, or 17.6% of net sales, as compared with $23.3 million, or 15.6% of net sales, in the prior year’s third quarter. General and administrative expenses for the 2003 third quarter were $17.6 million, or 10.5% of net sales, as compared with $16.0 million, or 10.7% of net sales, in the prior year’s third quarter. The increase in selling and general and administrative expenses in dollars and as a percentage of net sales for the 2003 third quarter was attributable to the Rawlings acquisition at the end of the 2003 first quarter resulting in increased selling expenses and general and administrative of $6.5 and $2.4 million, respectively.

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Operating Income. Operating income for the third quarter was $7.8 million, or 4.6% of net sales, as compared to operating income of $8.1 million, or 5.4% of net sales, in the year ago third quarter. The decline in operating income dollars was due to the higher selling, general and administrative expenses as the result of the acquisition of Rawlings at the end of the 2003 first quarter, partially offset by increases in sales volume and an improvement in the gross profit percentage as compared to the prior year.

Interest Expense. Interest expense increased $0.3 million to $2.6 million in the third quarter of 2003 as compared to $2.3 million in the year-earlier period. The increase in interest expense for the 2003 quarter was primarily attributable to higher average borrowing levels during the period resulting from K2’s refinancing of $64 million of Rawlings short and long-term debt in conjunction with the acquisition in the 2003 first quarter, partially offset by lower average interest rates on borrowings.

Comparative Nine-Month Results of Operations

Net sales for the nine months ended September 30, 2003 were $524.8 million as compared with $454.5 million in the year-earlier period. Net income for the first nine months of 2003 was $9.3 million or $.38 per diluted share, as compared with $11.5 million, or $.64 per diluted share, in the first nine months of 2002.

Net Sales. In the sporting goods segment, net sales for the 2003 first nine months were $409.2 million, an increase from $343.0 million in the 2002 period. The overall improvement resulted from the addition of Rawlings in the 2003 second and third quarters (as the result of the acquisition of Rawlings at the end of the 2003 first quarter) of $56.5 million and higher sales of in-line skates of $7.9 million, Stearns outdoor products of $3.2 million and snowboard products of $0.7 million, due to strong first half demand in the European in-line skate marke, higher demand for rain gear and children’s flotation devices and from the popularity of the Ride snowboard line.

In the other recreational products segment, net sales for the 2003 nine months increased to $35.3 million as compared to $26.9 million in the prior year’s quarter due to increased sales of skateboard shoes of $9.6 million, reflecting strong sell through of the Adio shoe brand and an expanded retail distribution network.

Net sales of the industrial products group were $80.2 million for the first nine months as compared with $84.6 million in the prior year’s period. The sales decrease was attributable to of the composite utility and decorative light pole product line on May 27, 2003. Excluding the impact of the sale, net sales grew due to higher shipments of Shakespeare cutting line and monofilament products of $6.4 million. For additional discussion on the sale of the composite utility and decorative light pole product lines, see Note 4 of Notes to Consolidated Condensed Financial Statements.

Gross profit. Gross profit for the first nine months of 2003 was $162.2 million, or 30.9% of net sales, as compared with $134.9 million, or 29.7% of net sales, in the prior year period. The improvement in gross profit dollars for the period was attributable to the increase in sales volume and the improvement in gross profit as a percentage of net sales. The improvement in gross profit percentage was due to fewer close-out sales in the current year’s nine months as compared to the prior year, continued product cost reductions associated with the China manufacturing facility and an increase in the sales of higher margin products.

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Costs and Expenses. Selling expenses for the first nine months of 2003 were $83.1 million or 15.8% of net sales, as compared with $65.2 million, or 14.3% of net sales, in the prior year. General and administrative expenses for the 2003 nine months were $52.5 million, or 10.0% of net sales as compared with $44.9 million or 9.9% of net sales, in the prior year. The increase in selling expenses was attributable to the Rawlings acquisition at the end of the 2003 first quarter, increased volume-related expenses for the period and an additional investment in advertising and marketing. The increase in general and administrative expenses for the 2003 nine months was also attributable to the inclusion of the Rawlings expenses and the impact of stronger foreign currencies on translated expenses as compared to 2002.

Operating Income. Operating income for the first nine months increased 7.3% to $26.6 million, or 5.1% of net sales as compared with $24.8 million, or 5.5% of net sales in the prior year. The increase in operating income reflects higher sales volume and an improvement in gross profit percentage, partially offset by higher selling and general and administrative expenses. The decline in operating income as a percentage of net sales was due to higher selling, general and administrative expenses as a percentage of net sales, partially offset by higher gross profits as a percentage of net sales.

Other Income, net. Other income, net for the 2003 first nine months was $1.7 million as compared to $0.1 million in the prior year. Other income for the 2003 first nine months included a $1.5 million gain on the May 27, 2003 sale of the assets of the composite utility and decorative light pole product lines of its industrial products segment. For additional discussion, see Note 4 of Notes to Consolidated Condensed Financial Statements.

Interest Expense. Interest expense increased to $7.2 million for the first nine months of 2003, as compared with $7.1 million in the year-earlier period. The increase in interest expense for the 2003 period was primarily attributable to higher average borrowing levels during the period resulting from the Rawlings acquisition at the end of the 2003 first quarter, partially offset by lower average interest rates on borrowings.

Debt Extinguishment Costs. K2 expensed approximately $2.0 million ($1.3 million, or $.05 per diluted share, after tax) in the 2003 first quarter of capitalized debt costs related to the repayment of the amounts outstanding under its existing debt facilities, and an additional $4.7 million ($3.1 million, or $.11 per diluted share, after tax) make-whole premium related to the prepayment of K2’s $58.9 million of senior notes.

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Liquidity and Sources of Capital

K2’s operating activities provided $49.6 million of cash in the 2003 first nine months as compared to net cash provided of $15.7 million in the prior period. Included in the prior year’s period was a repurchase of $51.8 million of securitized receivables resulting from K2’s replacement of a former asset securitization program. The former program accounted for the receivable transfers as sales of receivables and accordingly, received off-balance sheet treatment. When the program was replaced, K2 repurchased the receivables previously sold under the program. The improvement in cash provided by operations in 2003 was primarily attributable to higher collections of accounts receivable of $29.3 million as K2 collected Rawlings seasonal accounts. Partially offsetting these improvements was smaller reduction in inventory during the 2003 period as compared to the 2002 period of $42.5 million.

Net cash used in investing activities was $10.1 million in the 2003 first nine months, as compared to cash used of $8.4 million in the prior year. The $1.7 million increase in cash used was due to higher capital expenditures of $9.0 million and $16.3 million in cash used for acquisitions, partially offset by $20.1 million in cash proceeds received from the sale of the composite utility and decorative light pole product lines discussed in Note 4 of Notes to Consolidated Condensed Financial Statements. There were no material commitments for capital expenditures at September 30, 2003.

Net cash used in financing activities was $36.1 million in the 2003 first nine months, as compared to cash used of $11.3 million in the prior year. The increase in cash used was due to higher cash provided from operations which allowed for higher net repayments of debt in 2003 as compared to 2002.

K2’s principal long-term borrowing facility is a $205 million revolving credit facility (“Credit Facility”), secured by all of K2’s assets in the United States, Canada and England. The Credit Facility has a $75 million limit for the issuance of letters of credit. The Credit Facility expires on March 31, 2006. At September 30, 2003, there were $25.1 million borrowings under the Credit Facility, $26.1 million of outstanding letter of credit issuances and $104.5 million of available borrowing capacity. At September 30, 2003, K2 also had outstanding a $16.7 million term loan, payable in monthly equal principal payments through March 31, 2006, $25.0 million of 7.25% convertible subordinated debentures due March 2010 and $75.0 million of 5.00% convertible senior debentures due June 2010. At September 30, 2003, K2 had $8.1 million outstanding under various foreign lending arrangements.

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The following summarizes the outstanding borrowings and long-term contractual obligations of K2 at September 30, 2003 and the effects such obligations are expected to have on liquidity and cash flow in future periods.

Obligations	Total		1 year		1-3 years		4-5 years		5 years and beyond
	(Thousands)
Long-term debt	$	41,746	$	6,667	$	35,079	$	—	$	—
Convertible subordinated debentures		97,951		—		—		—		97,951
Operating leases		21,504		5,250		7,019		4,740		4,495
Total contractual cash obligations	$	161,201	$	11,917	$	42,098	$	4,740	$	102,446

K2 believes that the credit availability under the Credit Facility, together with cash flow from operations, will be sufficient for K2’s business needs through September 30, 2004. K2’s ability to arrange debt financing from other sources, should such additional financing become necessary, could be limited by the fact that substantially all of K2’s assets are the subject of security interests pursuant to existing indebtedness.

Subsequent Events

On October 17, 2003, K2 completed the acquisition of certain assets and the assumption of certain liabilities of WinterQuest LLC (“WinterQuest”), a privately held company founded in 1906, which is a marketer and manufacturer of snowshoes under the Tubbs and Atlas brands. For additional discussion, see Note 11 of Notes to Consolidated Condensed Financial Statements.

On October 22, 2003, K2 announced the signing of a definitive merger agreement with Brass Eagle Inc. (“Brass Eagle”) in which Brass Eagle would become a wholly-owned subsidiary of K2. Brass Eagle is a leader in the manufacturing, marketing, and distribution of paintball products, including markers, loaders, masks, paintballs and accessories under several brand names including Brass Eagle, Viewloader and JT. For additional discussion, see Note 11 of Notes to Consolidated Condensed Financial Statements.

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liabilities by K2. This transaction will be accounted for under the purchase method of accounting, accordingly the purchased assets and liabilities assumed will be recorded at their estimated fair values at the date of acquisition. The purchase price allocation is expected to result in an excess of cost over net tangible assets acquired. The allocation of the purchase price will be completed during the 2003 fourth quarter. The results of the operations of Brass Eagle will be included in the consolidated financial statements of K2 beginning on the date of acquisition. The proposed transaction is subject to regulatory review and other customary conditions, and is expected to be completed by the end of 2003.

Sale of Operating Division

On May 27, 2003, K2 completed the sale of the assets of the composite utility and decorative light poles and other product lines (the “Division”) of its industrial products segment to GTG Temporary, LLC, a subsidiary of Genlyte Thomas Group LLC. The Division was sold for approximately $20.1 million in cash and the assumption of certain liabilities by the buyer. The gain on sale of the Division of $1.5 million ($1.0 million, net of taxes) includes an estimate of the costs of disposal and amounts related to the retention of certain liabilities by K2.

Critical Accounting Policies

K2’s discussion and analysis of its financial condition and results of operations are based upon K2’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires K2 to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.

Discussed below are several significant accounting policies, which require the use of judgments and estimates that may materially affect the consolidated financial statements.

The estimates described below are reviewed from time to time and are subject to change if the circumstances so indicate. The effect of any such change is reflected in results of operations for the period in which the change is made. Establishment of the reserves affecting inventories and the allowance for doubtful accounts are among the most important.

Revenue Recognition

K2 recognizes revenue from product sales upon shipment to its customers, net of reserves for estimated returns. As a general matter, customers have no right of return, however returns do occur from time to time for a variety of reasons, including local business practices in one of the foreign countries in which K2 does business. Reserves for estimated returns are established based upon historical return rates and recorded as reductions of sales.

Warranty

K2 records the estimated cost of product warranties at the time sales are recognized. K2 estimates warranty obligation by reference to historical product warranty return rates, material

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usage and service delivery costs incurred in correcting the product. Should actual product warranty return rates, material usage or service delivery costs differ from the historical rates, revisions to the estimated warranty liability would be required.

Accounts Receivable and Allowances

K2 evaluates the collectibility of accounts receivable based on a combination of factors. In circumstances where there is knowledge of a specific customer’s inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the net recognized receivable to the amount that is reasonably believed to be collected. For all other customers, reserves are established based on historical bad debts, customer payment patterns and current economic conditions. The establishment of these reserves requires the use of judgment and assumptions regarding the potential for losses on receivable balances. If the financial condition of K2’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required resulting in an additional charge to expenses when made.

Inventories

Inventories are valued at the lower of cost or market value. Cost is substantially determined by the first-in, first-out (FIFO) method, including material, labor and factory overhead. K2 records adjustments to its inventory for estimated obsolescence or diminution in market value equal to the difference between the cost of inventory and the estimated market value, based on market conditions from time to time. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from actual experience if future economic conditions, levels of consumer demand, customer inventory levels or competitive conditions differ from expectations.

Long-Lived and Definite Lived Intangible Assets

Long-lived assets, including, among others, amortizable intangible assets (including the amortizable intangible assets acquired in the Rawlings acquisition completed in March 2003) and property, plant and equipment are reviewed periodically to determine if the carrying values are impaired. K2 evaluates the recoverability of the carrying amount of these long-lived and definite lived assets at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. An impairment of long-lived assets is assessed when the undiscounted expected future cash flows derived from an asset are less than its carrying amount. If the carrying value exceeds the estimate of future undiscounted cash flows, the impairment is calculated as the excess of the carrying value of the asset over the estimate of its fair value.

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Indefinite Lived Intangible Assets

Effective January 1, 2002, K2 adopted new accounting standards on “Business Combinations,” and “Goodwill and Other Intangible Assets.” In accordance with these new standards, goodwill and intangible assets with indefinite lives are no longer amortized but instead are measured for impairment at least annually, or when events indicate that an impairment exists. As required by the new standards, the impairment tests for goodwill and other indefinite-lived intangible assets are assessed for impairment using fair value measurement techniques. Specifically, goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a K2 reporting unit with the net book value (or carrying amount), including goodwill. If the fair value of the reporting unit exceeds the carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of the reporting unit exceeds the fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit. The impairment test for other intangible assets consists of a comparison of the fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

Determining the fair value of a reporting unit under the first step of the goodwill impairment test and determining the fair value of individual assets and liabilities of a reporting unit under the second step of the goodwill impairment test is judgmental in nature and often involves the use of significant estimates and assumptions. These estimates and assumptions could have a significant impact on whether or not an impairment charge is recognized and also the extent of such charge. K2’s estimates of fair value utilized in goodwill and other indefinite-lived intangible asset tests may be based upon a number of factors, including assumptions about the projected future cash flows, discount rate, growth rate, determination of market comparables, technological change, economic conditions, or changes to K2’s business operations. Such changes may result in impairment charges recorded in future periods.

Income Taxes

Income taxes are recorded using the liability method. K2 estimates actual current tax exposure together with temporary differences that result from differing treatment of items for tax and accounting purposes. These temporary differences result in deferred tax assets and liabilities. K2 then assesses the likelihood that deferred tax assets will be recovered from future taxable income and to the extent that recovery is unlikely, a valuation allowance must be established. A significant portion of K2’s deferred tax assets relate to net operating loss carryforwards for both domestic and foreign purposes. The realization of these assets is based upon estimates of future taxable income. In those jurisdictions where the realization of these carryforwards is not likely, a valuation allowance has been established. If actual results are less favorable than those projected by management, additional income tax expense may be required.

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Pensions

K2 sponsors several trusteed noncontributory defined benefit pension plans covering most of its domestic employees. Pension costs and liabilities are actuarially calculated. These calculations are based on assumptions related to the discount rate, projected compensation increases and expected return on assets. K2 evaluates the assumptions used on a periodic basis and makes adjustments as necessary. As of December 31, 2002, K2’s assumption related to the discount rate, projected compensation increases and expected return on assets was 6.75%, 4.00% and 8.75%, respectively. A variance in the discount rate, rate of compensation increase and expected return on plan assets could have a significant impact on the pension costs recorded.

For the 2002 year, difficult market conditions resulted in negative asset returns on the pension assets for the 2002 year. These negative returns will result in an increase in 2003 pension expense of approximately $1.5 million as compared to the 2002 year. The reduction in the discount rate assumption at the end of 2002 is estimated to result in an additional increase to 2003 pension expense of approximately $0.5 million as compared to the 2002 year. Finally, because of the declines in the pension asset values, K2 estimates a required cash contribution of approximately $3.0 million to the pension plans in 2004.

Based on the negative asset returns realized during 2002, the accumulated benefit obligation of the pension plans exceeded the fair value of the plan assets by $13.1 million at December 31, 2002. These asset shortfalls resulted in K2 recording a non-cash charge to Other Comprehensive Income, a component of K2’s shareholder’s equity, of $7.5 million ($4.9 million, net of taxes) during 2002. Based on this amount recorded, K2 had $12.6 million of net long-term pension liabilities as of September 30, 2003 and December 31, 2002, consisting of $13.1 million in asset shortfalls and an intangible asset for the unrecognized prior service cost of $0.5 million.

Stock-Based Compensation and Other Equity Instruments

K2 accounts for employee and directors’ stock option grants using the intrinsic method. Generally, the exercise price of K2’s employee stock options equals or exceeds the market price of the underlying stock on the date of grant and no compensation expense is recognized. If the option price is less than the market value at the date of grant, K2 records compensation expense over the vesting period of the option. For further discussion, see Note 2 of Notes to Consolidated Condensed Financial Statements.

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Foreign Currency Translation

The functional currency for most foreign operations is the local currency. The financial statements of foreign subsidiaries have been translated into United States dollars. Asset and liability accounts have been translated using the exchange rate in effect at the balance sheet date. Revenue and expense accounts have been translated using the average exchange rate for the year. The gains and losses associated with the translation of the financial statements resulting from the changes in exchange rates from year to year have been reported in the other comprehensive income or loss account in shareholders’ equity. To the extent assets and liabilities of the foreign operations are realized or the foreign operations pay back intercompany debt, amounts previously reported in other comprehensive income or loss account would be included in net income or loss in the period in which the transaction occurs. Transaction gains or losses, other than those related to intercompany accounts and investments deemed to be of a long-term nature, are included in net income or loss in the period in which they occur.

Statement Regarding Forward-Looking Disclosure

This Form 10-Q contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent K2’s expectations concerning future events, many of which are beyond the control of K2, including, but not limited to, the following: statements regarding future sales and earnings, marketing efforts and trends concerning products sold by K2, foreign exchange rate fluctuations, debt reduction, conditions impacting the pension obligations, inventory levels at retail, product acceptance and demand, growth efforts, cost savings and economies of scale, dependence on foreign manufacturing, margin enhancement efforts, product development efforts, success of new product introductions future acquisitions and dispositions and overall market trends which involve substantial risks and uncertainties. K2 cautions these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to, weather, economic conditions, the financial condition of K2’s customers, unfavorable political developments, rapid changes in marketing strategies, product design, styles and tastes, competitive pricing and the impact of foreign exchange on product costs, and other risks described in K2’s Annual Report on Form 10-K for the year ended December 31, 2002, in the Annual Report on Form 10-K for the year ended August 31, 2002 of Rawlings Sporting Goods Company, Inc. (other than the risks entitled “Credit Agreement Restrictions” and “Consideration of Strategic Alternatives”), and the section entitled “Risk Factors and Trends Affecting the Combined Company” in the Registration Statement on Form S-4 filed with the Securities Exchange Commission on February 25, 2003. Additionally, a resurgence of the severe acute respiratory syndrome (“SARS”) virus in southern China and Hong Kong could impact K2’s ability to manufacture and source products. Most of K2’s factories, as well as those with which K2 contracts, are located in southern China and K2’s Asian offices are located in Hong Kong. Any significant interruption in K2’s ability to send personnel to those areas to inspect and develop product or samples, or a high absenteeism rate at the factories or at K2’s offices, could have an adverse effect on K2’s ability to finalize, manufacture and ship its products.

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ITEM 3 Quantitative and Qualitative Disclosures of Market Risk

Fluctuations in foreign currency exchange rates can affect K2’s earnings and cash flows. K2 manages its exposures to changes in foreign currency exchange rates on certain firm purchase commitments and anticipated, but not yet committed purchases, by entering into some foreign currency forward contracts. K2’s risk management objective is to reduce its exposure to the effects of changes in exchange rates on the cost of products sold over quarterly time horizons. Foreign currency exchange rate movements also affect K2’s competitive position, as exchange rate changes may affect business practices and/or pricing strategies of non-U.S. based competitors and may affect the profitability and pricing strategies of K2 as well. K2’s foreign currency risk policies entail entering into foreign currency derivative instruments only to manage risk of currency fluctuations over a given period of time, not for speculative investments.

Considering both the anticipated cash flows from firm purchase commitments and anticipated purchases for the next quarter and the foreign currency derivative instruments in place at year end, a hypothetical 10% weakening of the U.S. dollar relative to other currencies would not materially adversely affect expected fourth quarter 2003 earnings or cash flows. This analysis is dependent on actual purchases during the next quarter occurring within 90% of budgeted forecasts. The effect of the hypothetical change in exchange rates ignores the effect this movement may have on other variables including competitive risk. If it were possible to quantify this competitive impact, the results could well be different than the sensitivity effects shown above. In addition, it is unlikely currencies would uniformly strengthen or weaken relative to the U.S. dollar. In reality, some currencies may weaken while others may strengthen.

ITEM 4 Controls and Procedures

An evaluation was conducted under the supervision and with the participation of K2’s management, including K2’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of K2’s disclosure controls and procedures as of September 30, 2003, pursuant to Exchange Act Rule 13a-15. Based on that evaluation, K2’s CEO and CFO concluded that K2’s disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed in the reports that K2 files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Such officers also confirm that there was no change in K2’s internal control over financial reporting during the quarter ended September 30, 2003 that has materially affected, or is reasonably likely to materially affect, K2’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 5 OTHER INFORMATION

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ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.1 Form of Indemnification Agreement dated August 7, 2003 entered into with each member of the Company’s Board of Directors and executive officers.

10.2 In October 2003, the Company entered into a Reimbursement Agreement with Mr. Richard J. Heckmann, Chairman and Chief Executive Officer, for the reimbursement of expenses incurred by Mr. Heckmann in the operation of his private plane when used for K2 business. The Reimbursement is effective for expenses incurred by Mr. Heckmann for K2 business purposes as Mr. Heckmann had incurred significant expenses since December 2002 and an agreement in principle was reached in September 2003. A copy of the agreement is attached hereto as an exhibit.

31.1 Certification of Chief Executive Officer Pursuant Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

32 Certification of the Chief Executive Officer and Chief Financial Officer under rule 13a-14(b) of the Securities and Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350.

(b) Reports on Form 8-K filed in the third quarter ended September 30, 2003.

Report on Form 8-K dated July 21, 2003, furnished by the Company, containing the Company’s press release dated July 21, 2003 announcing the Company’s 2003 second quarter results.

Report on Form 8-K dated July 22, 2003, furnished by the Company, under Item 9, Regulation FD Disclosure, certain statements made by the Company in connection with the Company’s 2003 second quarter conference call and filing of its earnings release dated July 21, 2003.

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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	K2 INC.
	(registrant)
Date: November 14, 2003	s/ JOHN J. RANGEL
	John J. Rangel
	Senior Vice President and
	Chief Financial Officer

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EX-10.1

EXHIBIT 10.1

INDEMNIFICATION AGREEMENT

THIS AGREEMENT (this “Agreement”) is entered into, effective as of August 7, 2003, between K2 Inc., a Delaware corporation (the “Corporation”) and                                  (“Indemnitee”).

RECITALS

WHEREAS, it is essential to the Corporation to retain and attract as directors, officers and agents the most capable persons available;

WHEREAS, Indemnitee is a director, officer or agent of the Corporation;

WHEREAS, both the Corporation and Indemnitee recognize the increased risk of litigation and other claims currently being asserted against directors, officers and agents of corporations; and

WHEREAS, in recognition of Indemnitee’s need for substantial protection against personal liability, in order to enhance Indemnitee’s continued and effective service to the Corporation, and in order to induce Indemnitee to provide services to the Corporation as a director, officer or agent, the Corporation wishes to provide in this Agreement for the indemnification and advancement of expenses to Indemnitee to the fullest extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the coverage of Indemnitee under the Corporation’s directors’, officers’ and agents’ liability insurance policies.

NOW, THEREFORE, in consideration of the above premises and of Indemnitee’s continuing to serve the Corporation directly or, at its request, with another enterprise, and intending to be legally bound hereby, the parties agree as follows:

AGREEMENT

1. Certain Definitions:

(a) Board: the Board of Directors of the Corporation.

(b) Change in Control: shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or a corporation owned directly or indirectly by the shareholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, is or becomes the “Beneficial Owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Corporation representing 20% or more of the total voting power represented by the Corporation’s then outstanding Voting Securities, or (ii) during any period of

two consecutive years, individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Corporation’s shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies of consents by or on behalf of a Person other than the Board, or (iii) the shareholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation that would result in the Voting Securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation (in one transaction or a series of transactions) of all or substantially all of the Corporation’s assets.

(c) Disinterested Director: a director of the Corporation who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee and has no financial interest in the outcome of the Proceeding (except insofar as such outcome may financially affect or has financially affected the Corporation itself).

(d) Expenses: any expense, including attorneys’ costs and fees, amounts paid or to be paid in settlement, judgments, fines, ERISA excise taxes and penalties, any interest, assessments, or other charges imposed thereon, and any federal, state, local, or foreign taxes imposed as a result of the actual or deemed receipt of any payments under this Agreement, paid or incurred in connection with investigating, defending, being a witness in, or participating in (including on appeal), or preparing for any of the foregoing in, any Proceeding relating to any Indemnifiable Event, including any expenses described above relating to establishing a right to indemnification or to enforce the terms hereof as set forth in Section 5.

(e) Indemnifiable Event: any event or occurrence that takes place either prior to or after the execution of this Agreement, related to the fact that Indemnitee is or was a director, officer or agent of the Corporation, or while a director, officer or agent, is or was serving at the request of the Corporation as a director, officer, employee, trustee, agent, limited partner, member or fiduciary of another foreign or domestic corporation, partnership, joint venture, employee benefit plan, trust, or other enterprise, or was a director, officer, employee, or agent of a foreign or domestic corporation that was a predecessor corporation of the Corporation (including any corporation acquired by the Corporation) or of another enterprise at the request of such predecessor corporation, or related to anything done or not done by Indemnitee in any such capacity, whether or not the basis of the Proceeding is alleged action in an official capacity as a director, officer, employee, or agent or in any other capacity while serving as a director, officer, employee, or agent of the Corporation, as described above.

(f) Independent Counsel: a law firm, a member of a law firm, or an independent practitioner that has not performed services for the Corporation or the Indemnitee in

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the previous five years, that is experienced in matters of corporation law and shall include any person who, under the applicable standards of professional conduct then prevailing, would not have a conflict of interest in representing either the Corporation or the claimant in an action to determine the claimant’s rights hereunder.

(g) Potential Change in Control: shall be deemed to have occurred if (i) the Corporation enters into an agreement or arrangement, the consummation of which would result in the occurrence of a Change in Control; (ii) any person (including the Corporation) publicly announces an intention to take or to consider taking actions that, if consummated, would constitute a Change in Control; (iii) any person (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation acting in such capacity or a corporation owned, directly or indirectly, by the shareholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation), who is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation representing 10% or more of the combined voting power of the Corporation’s then outstanding Voting Securities, increases his beneficial ownership of such securities by 5% or more over the percentage so owned by such person on the date hereof, or (iv) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

(h) Proceeding: any threatened, pending, or completed action, suit, arbitration, alternative dispute mechanism, inquiry, administrative or legislative hearing, investigation or any other actual, threatened or completed proceeding, including any and all appeals, whether conducted by the Corporation or any other party, whether civil, criminal, administrative, investigative, or other, and in each case whether or not commenced prior to the date of this Agreement, that relates to an Indemnifiable Event.

(i) Reviewing Party: the person or body appointed in accordance with Section 3.

(j) Voting Securities: any securities of the Corporation entitled to vote generally in the election of directors.

2. Agreement to Indemnify.

(a) Generally. In the event Indemnitee was, is, or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Proceeding by reason of (or arising in part out of) an Indemnifiable Event, the Corporation shall indemnify Indemnitee from and against any and all Expenses, liability and loss to the fullest extent permitted by applicable law, as the same exists or may hereafter be amended or interpreted (but in the case of any such amendment or interpretation, to the extent the following is permissible, only to the extent that such amendment or interpretation permits the Corporation to provide broader indemnification rights than were permitted prior thereto). The parties hereto intend that this Agreement shall provide for indemnification in excess of the minimum permitted by statute.

(b) Expense Advances. If so requested by Indemnitee, the Corporation shall advance any and all Expenses to Indemnitee (an “Expense Advance”) within thirty (30) calendar days

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after the receipt by the Corporation of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be made without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the provisions of this Agreement except in the case of Proceedings solely with respect to items described in Section 4(c) (2), (3) or (4). The Indemnitee shall qualify for advances solely upon the execution and delivery to the Corporation of an undertaking in form and substance reasonably satisfactory to the Corporation providing that the Indemnitee undertakes to repay the advances if and to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Corporation. If Indemnitee has commenced legal proceedings in a court of competent jurisdiction in the State of Delaware to secure a determination that Indemnitee should be indemnified under applicable law, as provided in Section 4(b) below, any determination made by the Reviewing Party as defined in Section 3 below that Indemnitee would not be permitted to be indemnified hereunder shall not be binding and Indemnitee shall not be required to reimburse the Corporation for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or have lapsed). Indemnitee’s obligation to reimburse the Corporation for Expense Advances shall be unsecured and no interest shall be charged thereon.

(c) Mandatory Indemnification. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits in defense of any Proceeding relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, Indemnitee shall be indemnified against all Expenses incurred in connection therewith.

(d) Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Corporation for some or a portion of Expenses, but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

3. Reviewing Party.

(a) Prior to any Change in Control, the person, persons or entity (the “Reviewing Party”) that shall determine whether Indemnitee is entitled to indemnification in the first instance shall be (a) the Board of the Corporation acting by a majority vote of Disinterested Directors, whether or not such majority constitutes a quorum of the Board; (b) a committee of Disinterested Directors designated by a majority vote of such directors, whether or not such majority constitutes a quorum; or (c) if there are no Disinterested Directors, or if the Disinterested Directors so direct, by Independent Counsel (as described below in Section 3(b)) in a written opinion to the Board, a copy of which shall be delivered to Indemnitee.

(b) After a Change in Control, the Reviewing Party shall be the Independent Counsel referred to below. With respect to all matters arising following a Change in Control (other than a Change in Control approved by a majority of the directors on the Board who were directors immediately prior to such Change in Control) concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement or under applicable law or the Corporation’s certificate of incorporation or by-laws

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now or hereafter in effect relating to indemnification for Indemnifiable Events, the Corporation shall seek legal advice only from Independent Counsel selected by Indemnitee and approved by the Corporation (which approval shall not be unreasonably withheld) (the “Independent Counsel”). Such counsel, among other things, shall render its written opinion to the Corporation and Indemnitee as to whether and to what extent the Indemnitee should be permitted to be indemnified hereunder. The Corporation agrees to pay the reasonable fees of the Independent Counsel and to indemnify fully such counsel against any and all expenses (including attorneys’ fees and expenses), claims, liabilities, loss, and damages arising out of or relating to this Agreement or the engagement of Independent Counsel pursuant hereto.

4. Indemnification Process and Appeal.

(a) Indemnification Payment. Indemnitee shall be entitled to indemnification of Expenses actually and reasonably paid by Indemnitee, and shall receive payment thereof, from the Corporation in accordance with this Agreement within thirty (30) calendar days after Indemnitee has made written demand on the Corporation for indemnification (which written demand shall include such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification), unless the Reviewing Party has provided a written determination to the Corporation that Indemnitee is not entitled to indemnification hereunder. The Reviewing Party making the determination with respect to Indemnitee’s entitlement to indemnification shall notify Indemnitee of such determination no later than two (2) business days after the determination is made.

(b) Suit to Enforce Rights. If (i) no determination of entitlement to indemnification shall have been made within thirty (30) calendar days after Indemnitee has made a demand in accordance with Section 4(a), (ii) payment of indemnification pursuant to Section 4(a) is not made within thirty (30) calendar days after a determination has been made that Indemnitee is entitled to indemnification, (iii) the Reviewing Party determines pursuant to Section 4(a) that Indemnitee is not entitled to indemnification under this Agreement, or (iv) Indemnitee has not received advancement of Expenses within thirty (30) calendar days after making such a request in accordance with Section 2(b), then Indemnitee shall have the right to enforce its indemnification rights under this Agreement by commencing litigation in any court in the State of Delaware having subject matter jurisdiction thereof and in which venue is proper seeking an initial determination by the court or challenging any determination by the Reviewing Party or any aspect thereof. The Corporation hereby consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party not challenged by the Indemnitee on or before the first anniversary of the date of the Reviewing Party’s determination shall be binding on the Corporation and Indemnitee.

(c) Defense to Indemnification. No payment pursuant to this Agreement shall be made by the Corporation and it shall be a defense to any action brought by Indemnitee against the Corporation to enforce this Agreement (other than an action brought to enforce a claim for Expenses incurred in defending a Proceeding in advance of its final disposition where the required undertaking has been tendered to the Corporation) to indemnify Indemnitee for any Expenses in connection with any Proceeding

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(1) where it is not permissible under applicable law for the Corporation to indemnify Indemnitee for the amount claimed;

(2) for which payment has actually been made to Indemnitee under a valid and collectible insurance policy except in respect of any excess beyond the amount of payment under such insurance;

(3) for an accounting of profits made from the purchase or sale by Indemnitee of securities of the Corporation pursuant to the provisions of Section 16(b) of the Exchange Act, the rules and regulations promulgated thereunder and amendments thereto or similar provisions of any federal, state, or local statutory law; or

(4) initiated by Indemnitee against the Corporation or any director, officer or agent of the Corporation unless (i) the Corporation has joined in or the Board has consented to the initiation of such Proceeding; (ii) the Proceeding is one to enforce indemnification rights under Section 5 herein; or (iii) the Proceeding is instituted after a Change in Control.

(d) Admissibility of Determinations. Neither the failure of the Reviewing Party or the Corporation (including its Board, independent legal counsel, or its shareholders) to have made a determination prior to the commencement of such action by Indemnitee that indemnification of the claimant is proper under the circumstances because he has met the standard of conduct set forth in applicable law, nor an actual determination by the Reviewing Party or Corporation (including its Board, independent legal counsel, or its shareholders) that the Indemnitee had not met such applicable standard of conduct, shall be admissible as evidence in any such action for any purpose.

(e) Presumptions. To the maximum extent permitted by applicable law in making a determination with respect to entitlement to indemnification (or advancement of expenses) hereunder, the Reviewing Party shall presume that an Indemnitee is entitled to indemnification (or advancement of expenses) under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 4(a) of this Agreement, and the Corporation shall have the burden of proof to overcome that presumption in connection with the making by the Reviewing Party of any determination contrary to that presumption. For purposes of this Agreement, the termination of any Proceeding, by judgment, order, settlement (whether with or without court approval), conviction, or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.

5. Indemnification for Expenses Incurred in Enforcing Rights. The Corporation shall indemnify Indemnitee against any and all Expenses described in Subsections (i), (ii) and (iii) below and, if requested by Indemnitee, shall advance such Expenses to Indemnitee on such terms and conditions as the Board deems appropriate, that are incurred by Indemnitee in connection with any claim asserted against or action brought by Indemnitee for

(i) enforcement of this Agreement,

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(ii) indemnification of Expenses or Expense Advances by the Corporation under this Agreement or any other agreement or under applicable law or the Corporation’s articles of incorporation or by-laws now or hereafter in effect relating to indemnification for Indemnifiable Events, and/or

(iii) recovery under directors’, officers’ and agents’ liability insurance policies maintained by the Corporation.

6. Notification and Defense of Proceeding.

(a) Notice. Indemnitee shall, as a condition precedent to his or her right to be indemnified under this Agreement, give to the Corporation notice in writing as soon as practicable of any Proceeding for which indemnity will or could be sought under this Agreement. Notice to the Corporation shall be directed to K2 Inc., 2051 Palomar Airport Road, Carlsbad, CA 92009, Attention: General Counsel (or such other address as the Corporation shall designate in writing to Indemnitee). Notice shall be deemed received three (3) days after the date postmarked if sent by prepaid mail, properly addressed. In addition, Indemnitee shall give the Corporation such information and cooperation as it may reasonably require and as shall be within Indemnitee’s power.

(b) Defense. With respect to any Proceeding as to which Indemnitee notifies the Corporation of the commencement thereof, the Corporation will be entitled to participate in the Proceeding at its own expense and except as otherwise provided below, to the extent the Corporation so wishes, it may assume the defense thereof with counsel reasonably satisfactory to Indemnitee. After notice from the Corporation to Indemnitee of its election to assume the defense of any Proceeding, the Corporation will not be liable to Indemnitee under this Agreement or otherwise for any Expenses subsequently incurred by Indemnitee in connection with the defense of such Proceeding other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ his own counsel in such Proceeding, but all Expenses related thereto incurred after notice from the Corporation of its assumption of the defense shall be at Indemnitee’s expense unless: (i) the employment of counsel by Indemnitee has been authorized by the Corporation; (ii) Indemnitee has reasonably determined that there may be a conflict of interest between Indemnitee and the Corporation in the defense of the Proceeding; (iii) after a Change in Control, the employment of counsel by Indemnitee has been approved by the Independent Counsel; or (iv) the Corporation shall not within sixty (60) calendar days in fact have employed counsel to assume the defense of such Proceeding, in each of which cases all Expenses of the Proceeding shall be borne by the Corporation; and (v) if the Corporation has selected counsel to represent Indemnitee and other current and former directors and officers of the Corporation in the defense of a Proceeding, and a majority of such persons, including Indemnitee, reasonably object to such counsel selected by the Corporation pursuant to this Section 6(b), then such persons, including Indemnitee, shall be permitted to employ one (1) additional counsel of their choice and the reasonable fees and expenses of such counsel shall be at the expense of the Corporation; provided, however, that such counsel shall be chosen from amongst the list of counsel, if any, approved by any company with which the Corporation obtains or maintains insurance. In the event separate counsel is retained by an Indemnitee pursuant to this Section 6(b), the Corporation shall cooperate with Indemnitee with respect to the defense of the Proceeding, including making documents,

7

witnesses and other reasonable information related to the defense available to the Indemnitee and such separate counsel pursuant to joint-defense agreements or confidentiality agreements, as appropriate. The Corporation shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Corporation or as to which Indemnitee shall have made the determination provided for in (ii) above. The foregoing shall not apply to actions by Indemnitee under Section 5 herein.

(c) Settlement of Claims. The Corporation shall not be liable to indemnify Indemnitee under this Agreement or otherwise for any amounts paid in settlement of any Proceeding effected without the Corporation’s written consent; provided, however, that if a Change in Control has occurred, the Corporation shall be liable for indemnification of Indemnitee for amounts paid in settlement if the Independent Counsel has approved the settlement. The Corporation shall not settle any Proceeding in any manner that would impose any penalty or limitation on Indemnitee without Indemnitee’s written consent. Neither the Corporation nor the Indemnitee will unreasonably withhold their consent to any proposed settlement. The Corporation shall not be liable to indemnify the Indemnitee under this Agreement with regard to any judicial award if the Corporation was not given a reasonable and timely opportunity, at its expense, to participate in the defense of such action.

7. Establishment of Trust. In the event of a Change in Control or a Potential Change in Control, the Corporation shall, upon written request by Indemnitee, create a Trust for the benefit of the Indemnitee and from time to time upon written request of Indemnitee shall fund the Trust in an amount sufficient to satisfy any and all Expenses reasonably anticipated at the time of each such request to be incurred in connection with investigating, preparing for, participating in, and/or defending any Proceeding relating to an Indemnifiable Event. The amount or amounts to be deposited in the Trust pursuant to the foregoing funding obligation shall be determined by the Reviewing Party. The terms of the Trust shall provide that upon a Change in Control, (i) the Trust shall not be revoked or the principal thereof invaded, without the written consent of the Indemnitee, (ii) the Trustee shall advance, within ten (10) business days of a request by the Indemnitee, any and all Expenses to the Indemnitee (and the Indemnitee hereby agrees to reimburse the Trust under the same circumstances for which the Indemnitee would be required to reimburse the Corporation under Section 2(c) of this Agreement), (iii) the Trust shall continue to be funded by the Corporation in accordance with the funding obligation set forth above, (iv) the Trustee shall promptly pay to the Indemnitee all amounts for which the Indemnitee shall be entitled to indemnification pursuant to this Agreement or otherwise, and (v) all unexpended funds in the Trust shall revert to the Corporation upon a final determination by the Reviewing Party or a court of competent jurisdiction, as the case may be, that the Indemnitee has been fully indemnified under the terms of this Agreement and/or the Proceeding for which the Trust was funded has been fully and finally determined or withdrawn. The Trustee shall be chosen by the Indemnitee. Nothing in this Section 7 shall relieve the Corporation of any of its obligations under this Agreement. All income earned on the assets held in the Trust shall be reported as income by the Corporation for federal, state, local, and foreign tax purposes. The Corporation shall pay all costs of establishing and maintaining the Trust and shall indemnify the Trustee against any and all expenses (including attorneys’ fees), claims, liabilities, loss, and damages arising out of or relating to this Agreement or the establishment and maintenance of the Trust other than those attributable to the bad faith or gross negligence of the Trustee.

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8. Non-Exclusivity. The rights of Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the laws of the State of Delaware, the certificate of incorporation, by-laws, applicable law, or otherwise. To the extent that a change in applicable law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Corporation’s certificate of incorporation, by-laws, applicable law, or this Agreement, it is the intent of the parties that Indemnitee enjoy by this Agreement the greater benefits so afforded by such change.

9. Liability Insurance. To the extent the Corporation maintains an insurance policy or policies providing directors’, officers’ or agents’ liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any Corporation director, officer or agent.

10. Period of Limitations. No legal action shall be brought and no cause of action shall be asserted by or on behalf of the Corporation or any affiliate of the Corporation against Indemnitee, Indemnitee’s spouse, heirs, executors, or personal or legal representatives after the expiration of two (2) years from the date of accrual of such cause of action, or such longer period as may be required or permitted by federal or state law under the circumstances. Any claim or cause of action of the Corporation or its affiliate shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action the shorter period shall govern.

11. Amendment of this Agreement. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall operate as a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in exercising any right or remedy hereunder shall constitute a waiver thereof.

12. Subrogation. In the event of payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Corporation effectively to bring suit to enforce such rights.

13. No Duplication of Payments. The Corporation shall not be liable under this Agreement to make any payment in connection with any claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, by law, or otherwise) of the amounts otherwise indemnifiable hereunder.

14. Binding Effect. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation, or otherwise to all or substantially all of the business and/or assets of the Corporation, heirs, executors, estate and personal and legal representatives. The Corporation shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation, or otherwise) to all, substantially

9

all, or a substantial part, of the business and/or assets of the Corporation, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director, officer or agent of the Corporation or of any other enterprise at the Corporation’s request.

15. Severability. If any provision (or portion thereof) of this Agreement shall be held by a court of competent jurisdiction to be invalid, void, or otherwise unenforceable, the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of this Agreement containing any provision held to be invalid, void, or otherwise unenforceable, that is not itself invalid, void, or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, void, or unenforceable.

17. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such State without giving effect to the principles of conflicts of laws.

18. Consent to Jurisdiction. The Corporation and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be brought only in the state courts of the State of Delaware.

19. Notices. All notices, demands, and other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered by hand, against receipt, or mailed, postage prepaid, certified or registered mail, return receipt requested, and addressed to the Corporation at:

K2 Inc.

2051 Palomar Airport Road

Carlsbad, CA 92009

Attn: General Counsel

and to Indemnitee at:

Notice of change of address shall be effective only when done in accordance with this Section. All notices complying with this Section shall be deemed to have been received on the date of delivery or on the third business day after mailing.

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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the day specified above.

Corporation:	K2 INC., a Delaware corporation
	By:
		Name: Title
Indemnitee:	By:

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EX-10.2

EXHIBIT 10.2

REIMBURSEMENT AGREEMENT

THIS REIMBURSEMENT AGREEMENT (the “Agreement”) is made and entered into as of this 28^th day of October 2003, by and between Richard J. Heckmann (“Heckmann”), and K2, Inc., a Delaware corporation (“K2”).

In consideration of the mutual promises, agreements, covenants, warranties, representations and provisions contained herein, the parties agree as follows:

1. Reimbursement of Aircraft Expense. Subject to the terms and conditions contained herein, if during the Term (as defined hereafter) Heckmann uses his aircraft in connection with his travel on K2 business, K2 agrees to reimburse to Heckmann the expense of such use. Heckmann’s aircraft is identified as a Challenger CL600-2B16 aircraft, serial number 5111, Federal Aviation Administration registration number N502HE (the “Aircraft”).

2. Term. The term of this Agreement (the “Term”) shall commence on September 3, 2003 (the “Commencement Date”) and end on December 31, 2003 (the “Initial Term Expiration Date”) – it is intended that this Agreement shall reimburse Heckmann as set forth below for the period from September 3, 2003 until the date hereof provided that this reimbursement is no more than $100,000 in the aggregate. Notwithstanding the foregoing, and unless this Agreement has earlier been terminated in accordance with its terms, the Term shall continue after the Initial Term Expiration Date on an annual basis. Either party may terminate this Agreement any time during the Term upon not less than thirty (30) days written notice to the other. This Agreement shall terminate on the termination of Heckmann’s employment by K2.

3. Base of the Aircraft. K2 acknowledges that Heckmann currently bases the Aircraft at Palm Springs International Airport, Palm Springs, California (the “Base”), and that Heckmann’s use of the Aircraft for K2 business travel shall include ferry flights to and from the Base at the beginning and end of such business travel.

4. Reimbursement.

(a) K2 shall reimburse to Heckmann in connection with his use of the Aircraft during the Term for K2 business travel the following amounts (referred to collectively as the “Reimbursement Amounts”) within 30 days of receipt of an invoice from Heckmann or his representative with respect to such use:

(i) $2,200 per operating hour for use of the Aircraft, as such rate may be adjusted periodically by the mutual consent of the parties;

(ii) all fees, including fees for landing, parking, hangar, tie-down, handling, customs, use of airways and permission for overflight;

(iii) all expenses for in-flight catering;

(iv) all travel expenses for pilots, flight attendants and other flight support personnel, if any, including food, lodging and ground transportation; and

(v) all communications charges, including in-flight telephone.

Heckmann’s invoices shall include the date, departure point, arrival point, number of passengers and number of operating hours for each flight by K2 and documentation of the other expenses to be reimbursed hereunder.

(b) In no event shall the amount reimbursed under this Agreement on an annual basis exceed $1.0 million without the further written consent of K2’s Board of Directors.

5. Pilots. For all flights of the Aircraft by K2 pursuant to this Agreement, Heckmann shall cause the Aircraft to be operated by pilots who are duly qualified under the Federal Aviation Regulations, including without limitation, with respect to currency and type-rating, whose licenses and certificates are in good standing, and who meet all other requirements established and specified by the FAA and the insurance policies required hereunder.

6. Operation and Maintenance Responsibilities of Heckmann. This Agreement is not intended to constitute a lease of the Aircraft. Heckmann shall be in operational control of the Aircraft at all times during the Term. Heckmann shall be solely responsible for the operation and maintenance of the Aircraft and shall operate and maintain such Aircraft in compliance with all applicable laws and regulations.

7. Insurance. Heckmann shall maintain in effect at his own expense throughout the Term, insurance policies containing such provisions and providing such coverages as Heckmann deems appropriate. Notwithstanding the foregoing, Heckmann shall maintain property damage and personal injury aviation liability insurance with coverage in the amount of no less than $50,000,000 combined single limit per occurrence (the “Required Insurance”). Heckmann shall cause the policies providing the Required Insurance to (a) name K2 as an additional insured, (b) not be subject to any offset by any other insurance carried by Heckmann or K2, (c) contain a waiver by the insurer of any subrogation rights against K2, (d) insure the interest of K2, regardless of any breach or violation by the Heckmann or of any other person (other than is solely attributable to the gross negligence or willful misconduct of K2) of any warranty, declaration or condition contained in such policies, (e) include a severability of interests endorsement providing that such policy shall operate in the same manner (except for the limits of coverage) as if there were a separate policy covering each insured and (f) not be subject to cancellation

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or material modification without at least 30 days’ written notice to K2. K2 acknowledges that Heckmann does not maintain and is not required to maintain insurance against perils covered by “war risk” insurance, including acts of war, hijacking, nuclear detonation, strikes, sabotage, confiscation, and terrorism.

8. Indemnity; Loss or Damage

(a) Heckmann shall indemnify, defend and hold harmless K2 and its officers, directors, agents and employees from and against any and all liabilities, claims (including, without limitation, claims involving or alleging K2’s negligence and claims involving strict or absolute liability in tort), demands, suits, causes of action, losses, penalties, fines, expenses (including, without limitation, attorneys’ fees) or damages (collectively, “Claims”), to the extent relating to or arising out of Heckmann’ breach of this Agreement if and to the extent that K2 would have had the benefit of insurance coverage for such Claims but for Heckmann’ breach but not including circumstances in which a Claim is solely attributable to the gross negligence or willful misconduct of K2. K2 agrees to seek recovery for any Claims from all available insurance before seeking indemnification from Heckmann hereunder. The maximum amount of Heckmann’ liability hereunder shall be $50,000,000.

(b) K2 shall indemnify, defend and hold harmless Heckmann and his agents and employees from and against any and all Claims to the extent relating to or arising out of K2’s breach of this Agreement.

(c) In the event of loss or destruction of all or a portion of the Aircraft, or in the event of confiscation or seizure of the Aircraft, this Agreement shall automatically terminate; provided, however, that such termination of this Agreement shall not affect K2’s obligation to pay Heckmann all unpaid Reimbursement Amounts.

9. General Provisions

(a) Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the construction or interpretation of this Agreement.

(b) Partial Invalidity. If any provision of this Agreement, or the application thereof to any person, place or circumstance, shall be held by a court of competent jurisdiction to be illegal, invalid, unenforceable or void, then such provision shall be enforced to the extent that it is not illegal, invalid, unenforceable or void, and the remainder of this Agreement, as well as such provision as applied to other persons, shall remain in full force and effect.

(c) Waiver. With regard to any power, remedy or right provided in this Agreement or otherwise available to any party, (i) no waiver or extension of time

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shall be effective unless expressly contained in a writing signed by the waiving party, (ii) no alteration, modification or impairment shall be implied by reason of any previous waiver, extension of time, delay or omission in exercise or other indulgence, and (iii) waiver by any party of the time for performance of any act or condition hereunder does not constitute waiver of the act or condition itself.

(d) Notices. Any notice or other communication required or permitted under this Agreement shall be in writing and shall be deemed duly given upon actual receipt, if delivered personally, by overnight courier or by telecopy; or three (3) days following deposit in the United States mail, if deposited with postage pre-paid, return receipt requested, and addressed to such address as may be specified in writing by the relevant party from time to time, and which shall initially be as follows:

To Heckmann at:	Richard J. Heckmann c/o K2 Inc. 2051 Palomar Airport Road Carlsbad, CA Tel.: (760) 494-1000 Fax: (760) 494-1099
To K2 at:	K2 Inc. 2051 Palomar Airport Road Carlsbad, CA Attn: General Counsel Tel.: (760) 494-1000 Fax: (760) 494-1099

No objection may be made to the manner of delivery of any notice or other communication in writing actually received by a party.

(e) California Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California, regardless of the choice of law provisions of California or any other jurisdiction.

(f) Entire Agreement. This Agreement constitutes the entire agreement between the parties pertaining to the subject matter contained in this Agreement and supersedes any prior or contemporaneous agreements, representations and understandings, whether written or oral, of or between the parties with respect to the subject matter of this Agreement. There are no representations, warranties, covenants, promises or undertakings, other than those expressly set forth or referred to herein.

(g) Amendment. This Agreement may be amended only by a written agreement signed by all of the parties.

(h) Binding Effect; Assignment. This Agreement shall be binding on, and shall inure to the benefit of, the parties to it and their respective successors

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and assigns; provided, however, that K2 may not assign any of its rights under this Agreement, and any such purported assignment shall be null, void and of no effect.

(i) Attorneys’ Fees. Should any action (including any proceedings in a bankruptcy court) be commenced between any of the parties to this Agreement or their representatives concerning any provision of this Agreement or the rights of any person or entity thereunder, solely as between the parties or their successors, the party or parties prevailing in such action as determined by the court shall be entitled to recover from the other party all of its costs and expenses incurred in connection with such action (including, without limitation, fees, disbursements and expenses of attorneys and costs of investigation).

(j) Remedies Not Exclusive. No remedy conferred by any of the specific provisions of this Agreement is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity by statute or otherwise. The election of any one or more remedies shall not constitute a waiver of the right to pursue other remedies.

(k) No Third Party Rights. Nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any person other than the parties to this Agreement and their respective successors and assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, nor shall any provision give any third person any right of subrogation or action over or against any party to this Agreement.

(l) Counterparts. This Agreement may be executed in one or more counterparts, each of which independently shall be deemed to be an original, and all of which together shall constitute one instrument.

(m) Relationship of the Parties. Nothing contained in this Agreement shall in any way create any association, partnership, joint venture, or principal-and-agent relationship between the parties hereto or be construed to evidence the intention of the parties to constitute such.

(n) Limitation of Damages. Each party waives any and all claims, rights and remedies against the other, whether express or implied, or arising by operation of law or in equity, for any punitive, exemplary, indirect, incidental or consequential damages whatsoever.

(o) Survival. All representations, warranties, covenants and agreements, set forth in Sections 4, 7, 8 and 9 contained in this Agreement shall survive the expiration or termination of this Agreement.

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IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be duly executed effective as of the day and year first written above.

HECKMAN	K2:
	K2 INC.
	By:
Richard J. Heckman
	Its:

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EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Richard J. Heckmann, Chairman and Chief Executive Officer of K2 Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of K2 Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case on an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2003

s/ RICHARD J. HECKMANN

Richard J. Heckmann

Chairman and Chief Executive Officer

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EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, John J. Rangel, Senior Vice President and Chief Financial Officer of K2 Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of K2 Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case on an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2003

s/ JOHN J. RANGEL

John J. Rangel

Senior Vice President and

Chief Financial Officer

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EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, in his capacity as an officer of K2 Inc. (the “Company”), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

• the Quarterly Report of the Company on Form 10-Q for the period ended September 30, 2003 fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

• the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This written statement is being furnished to the Securities and Exchange Commission as an exhibit to such Form 10-Q. A signed original of this statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date: November 14, 2003	/s/ RICHARD J. HECKMANN
	Richard J. Heckmann
	Chairman and Chief Executive Officer

Date: November 14, 2003	/s/ JOHN J. RANGEL
	John J. Rangel
	Senior Vice President and Chief Financial Officer

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