K2 Inc. cut their earnings guidance last week due to considerable weakness in the paintball market. The company has been seeing weakness in this segment for most of the year, but was anticipating a turn-around in the back half. The company now expects diluted EPS in the range of 66 cents to 68 cents for fiscal year 2005, versus the previous forecast of 77 cents to 81 cents. For the third quarter of 2005, K2 forecasts diluted EPS of approximately 32 cents, and for the fourth quarter diluted EPS in the range of 23 cents to 25 cents.

Dick Heckmann, chairman and CEO of K2, said the majority of paintball products are sold through the mass distribution channels, a channel whose consumers have been particularly hard hit by rising energy costs. He said they are restructuring the costs in the paintball business, which should result in a return to profitability in 2006 if paintball sales stabilize at current levels.

K2’s operating income from paintball was roughly $8.5 million, or about 10 cents per share, in H2 last year, but management now expects little if any contribution from this segment in the back half this year.

Heckman said K2’s other core businesses including winter products, apparel and footwear, team sports, and marine and outdoor, would “continue to perform in accordance with our plan.”