K2 Inc. net sales for the fourth quarter were $388.6 million versus $353.5 million in the prior year, an increase of 9.9%. Adjusted net income for the fourth quarter of 2006 was $13.4 million, or 25 cents adjusted diluted earnings per share, compared to Adjusted net income of $14.7 million, or 28 cents in the fourth quarter of 2005.

Net sales for fiscal year 2006 were a record $1.4 billion or 6.2% higher than fiscal year 2005. Adjusted net income for fiscal year 2006 was $44.8 million, or 87 cents Adjusted diluted earnings per share, compared to Adjusted net income of $39.0 million, or 78 cents for fiscal year 2005, an increase of 14.8% in Adjusted net income.

Wayne Merck, President and Chief Executive Officer, said, “Our 2006 performance validates the strength of our diversified brand portfolio, with Adjusted diluted earnings per share growth of 11.5% and sales growth of 6.2%, driven by Action and Team Sports. The strong profit growth in Action and Team is a reflection of a significant level of new product development efforts ranging from premium alpine skis and integrated binding systems, to high performance baseball and softball bats, gloves and accessories. Our Apparel and Footwear segment for 2006 generated solid top line growth in the Marmot® and Ex Officio® brands, but profitability was impacted by higher start-up expenses in our new distribution center, by higher investment to expand our Marmot® brand, coupled with flat domestic sales for our skateboard shoes and apparel business.

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

K2's net sales for the fourth quarter of 2006 were $388.6 million versus $353.5 million in the fourth quarter of 2005, and the increase was mainly due to growth in winter product sales within the Action Sports segment. The acquisition of Sevylor Inc., a leading manufacturer of watersports and outdoor products, closed on December 11, 2006, and there was no material impact on sales in the fourth quarter since the business is seasonally slow in that period. K2's gross profit as a percentage of net sales increased to 36.2% in the fourth quarter of 2006 compared to 35.9%, in the fourth quarter of 2005.

On February 20, 2007, the United States Circuit Court of Appeals for the Eighth Circuit issued its decision with respect to litigation concerning a dispute under a license agreement, which was in place prior to an acquisition made in 2003. As a result of the decision, K2 recorded $3.6 million in legal claims expense in excess of reserves as part of general and administrative expense in the fourth quarter of 2006.

Selling, general and administrative expenses as a percentage of net sales on an Adjusted basis increased to 29.3% in the fourth quarter of 2006 compared to 27.7% in the fourth quarter of 2005, due primarily to $3.6 million in legal expense and higher advertising and marketing expense in the Apparel and Footwear segment. These expenses were offset by a $1.7 million gain from the termination of a deferred compensation arrangement with a former executive. For the fiscal year 2006, the $3.6 million in legal expense was offset by the $1.7 million deferred compensation arrangement gain and a $1.5 million gain on the sale of a facility in the second quarter of 2006. K2's operating profit, as a percentage of net sales on an Adjusted basis for the fourth quarter of 2006 decreased to 6.8% compared to 8.2% in the comparable 2005 period, due to higher selling, general, and administrative expenses.

The Action Sports segment has historically included skis, snowboards, bindings, snowshoes, in-line skates and paintball products. During 2005, the paintball business declined significantly. In order to improve efficiency, K2 reorganized the paintball business to operate more in line with how the components of the Team Sports segment operates, with increased emphasis on the mass merchant and large sporting goods retailer distribution. Upon completion of the reorganization in the first quarter 2006, K2 adjusted its segment reporting to include paintball products in the Team Sports segment. The results of K2's China manufacturing operations are consolidated under the Marine and Outdoor segment. Historically, K2 has eliminated the intersegment sales from the China manufacturing operations, but has not allocated its operating profit from those intersegment sales to the other segments. In the fourth quarter of 2006, K2 implemented new financial reporting systems in its China manufacturing operations that now allow it to allocate profitability by segment. Historical numbers presented below have been restated to reflect the change in segment reporting.

Net sales of winter products and in-line skates totaled $178.2 million in the fourth quarter of 2006, an increase of 22.6% from the 2005 fourth quarter, due primarily to increased sales of K2® and Volkl® alpine skis and Marker® bindings. Operating profit for the fourth quarter of 2006 was $27.9 million, a 15.5% increase compared to the operating profit in the fourth quarter 2005 of $24.1 million excluding non-cash intangible charges of $108.1 million. The increase in operating profit for the fourth quarter was primarily due to strong sales growth and lower selling, general and administrative expenses as a percentage of net sales.

In its seasonally slowest quarter, Shakespeare® fishing tackle and monofilament and Stearns® marine and outdoor products generated net sales of $74.9 million in the fourth quarter of 2006, an increase of 6.5% from the comparable quarter in 2005. The fourth quarter sales increase was due to increased sales of fishing kits and combos, Ugly Stik® rods and immersion suits offset by declines in military antennas, cutting line, Hodgman® waders and drywear. The decline in operating income for the fourth quarter from $4.8 million in 2005 to $3.2 million in 2006 was due to lower gross margins as a percentage of net sales due to product mix, and higher selling, general and administrative expenses as a percentage of net sales.

Rawlings, Worth, K2 Licensed Products and JT Sports (formerly known as Brass Eagle) had net sales of $89.9 million in the 2006 fourth quarter, up 3.3% from the 2005 period. The operating loss was $0.6 million in the 2006 fourth quarter, an improvement from the loss of $2.8 million in the 2005 period excluding non-cash intangible charges and restructuring charges of $149.1 million, primarily due to higher gross margins as a percentage of net sales, and lower selling, general and administrative expenses as a percentage of net sales.

Apparel and Footwear had net sales of $45.6 million in the fourth quarter of 2006, a decrease of 10.4% from the 2005 period due to reduced sales of Marmot® winter outerwear products as a consequence of lower re-orders due to warm winter conditions, and due to declines in sales of skateboard shoes and apparel. The operating profit for the fourth quarter of 2006 was $1.1 million compared to an operating profit of $5.4 million in the fourth quarter of 2005 due to lower gross margins as a percentage of net sales and higher selling, general and administrative expenses as a percentage of net sales.

The segment information presented below is for the three months ended
December 31:

                                          (in millions)
                          Net Sales to
                           Unaffiliated  Intersegment    Operating
                            Customers        Sales      Profit (Loss)
                         --------------- ------------- ---------------
                          2006    2005   2006   2005   2006    2005
                         ------- ------- ------ ------ ------ --------
Action Sports (a)        $178.2  $145.4   $2.9   $2.0  $27.9   $(84.0)
Marine and Outdoor         74.9    70.2   35.4   32.5    3.2      4.8
Team Sports (b)            89.9    87.0      -      -   (0.6)  (151.9)
Apparel and Footwear       45.6    50.9    1.4    0.8    1.1      5.4
                         ------- ------- ------ ------ ------ --------

  Total segment data     $388.6  $353.5  $39.7  $35.3   31.6   (225.7)
                         ======= ======= ====== ======

Corporate expenses, net                                 (5.6)    (3.2)
Interest expense                                        (8.7)    (8.3)
                                                       ------ --------

Income (loss) before
 provision for income
 taxes                                                 $17.3  $(237.2)
                                                       ====== ========