K2 Inc. was reaping the benefits of their marketing initiatives in the SnowSports industry in the company’s third quarter, as sales increased 98.5% to $333.5 million year-on-year and net income jumped almost 300%. KTO shares jumped 6.5% for the week to close at $15.87 on Friday after the company revealed they also posted 11.5% organic growth for the period. Roughly $200 million of total sales were attributed to the Winter Sports categories.

Dick Heckman, K2 chairman & CEO, and CFO, Dudley Mendenhall, both said the remainder of the season was totally dependent on snow fall, but next year’s sales are even more so. Mendenhall said that because of this uncertainty with the weather, he is maintaining full-year guidance despite the fact that Q3 EPS beat estimates by a penny.

The Action Sports division, which includes the K2 Sports group of ski, snowboard, in-line skate, and bicycle brands, as well as the paintball and snowshoe businesses, delivered double-digit gains in skis and snowboards and benefited from the and paintball snowshoe acquisitions, and the recent addition of the Volkl and Marker businesses. Operating profit jumped 241% to $23.2 million versus $6.8 million in Q3 last year.

Heckman boasted that a third of all skis sold in the U.S. are from K2 Inc. now and that the company had doubled their pole business to more than 65,000 pairs. In snowboard, the CEO said Ride “is on fire”, indicating that one of out every four pairs of SB bindings sold last year were from Ride. He said the In-line Skate business remained “crappy”, but they were working on new initiatives to drive some business in the category again.

Most notably, he pointed to a new category of Nordic Skates that are used in conjunction with the K2 pole. He said it was popular in Europe, but hoped to bring it to the U.S. as an aerobic exercise product. He sad they saw a “little bit of uptick” in the Skate business at the end of the summer.

The Marine and Outdoor division, which includes Shakespeare and Stearns, saw its sales increases driven by growth in Pflueger reels, marine antennas and waders and the addition of All-Star rods and ATV accessory product lines in Q3.

The Team Sports group, which includes Rawlings, Worth, and K2 Licensing & Promotions, had seen most of its growth come from the acquisition of Worth in Q3 last year and Fotoball in January 2004.

The new Apparel/Footwear division, which plays host to the Marmot, Ex Officio, and Earth Products brands such as Adio and Hawk, posted a 37.0% increase in technical skate footwear and apparel, but got its biggest boost from the acquisitions of Ex Officio and Marmot this year.

Operating profit for the group jumped nearly seven-fold to $6.1 million from just $800,000 in the third quarter last year.

K2’s merchandising initiative seems to be firing on all cylinders. Heckman said that K2 now has “61 people in the field covering 37 markets that opened 16,290 cases and put 52,029 pieces of product on shelves, and built 9,203 displays.” He also said that while it is hard to put an exact number on the impact of this initiative, he feels it was a major contributor to the company’s organic growth in the quarter. He cited anecdotal evidence that they get between a 12% to 21% store “pop” when they are covered by a merchandiser.

It appears Heckman will continue with his acquisition strategy, but he is seeing some increased competition for brands in the industry, mainly from private equity investors. Heckman said that all of the deals K2 has lost have been to PE firms paying premiums for a brand, a practice he said he didn’t understand since there are usually no synergies involved in those deals.

Heckman also said that while private equity may be giving K2 competition, the company is not feeling any pressure from private label. “Retailers are great at a lot of things, but innovation of products is not one of them,” he said.

Heckman went on to say that having the ability to give retailers private label manufacturing and provide innovative branded items “is a great partnership.” Heckman also believes that continued innovation will help is his quest to consolidate the sporting goods industry.

For Q4, K2 sees diluted EPS at around 18 cents per share on sales of roughly $325 million. For 2005, they see a “pretty evenly balanced revenue mix” for the first time, with Winter Sports making up 24% to 25% of the business. KTO sees mid- to high-single-digit organic growth in 2005. Sales should slightly stronger in the first half, with stronger EPS in Q1 and Q3.