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‘05 Our Year In Sports K2 INC. :: 2005 ANNUAL REPORT STARTING THE YEAR OFF RIGHT TED LIGETY GRABS GOLD FOR USA AND VÖLKL HIGHLIGHTS INSIDE TOP OF OUR GAME! K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 we grew earnings from $32 to $39 million, a 22% increase on sales of $1.3 billion. Over the past 24 months our adjusted diluted earnings per share have grown from $0.51 to $0.78, a 53% increase. As a result of complicated and sometimes hard to understand accounting rules, we wrote off a little over $250 million of non-cash charges, including goodwill and other intangibles. The write off had little to do with our operations and more to do with the continuing changes in how these intangibles are accounted for. What is clear is that we managed through a difficult environment in paintball and had our best adjusted operating earnings year since 2002. Looking forward, all of our brands including paintball are positioned for an even stronger year in 2006. We continue to focus on innovation at every division and will introduce hundreds of new products that will add to the enjoyment of sport. From new batting helmets to new cross country ski boots, K2 and all of our people around the world understand life on the leading edge of sport, and we like it out there. And our 13 gold, 19 silver and 12 bronze Winter Olympic medals show how happy the world’s top athletes are to be on that edge with us. In a challenging and competitive business environment, we To our shareholders: continue to compete for every fishing pole, life jacket and snow The cover of our annual report celebrates just one of the 44 shoe sale and are confident that we will grow again this year medals our brands won in this year’s Winter Olympics. From in both sales and earnings. K2 to Völkl, Marker, and Madshus, and from skis, to snowboards, boots, bindings and speed skates, we had a fantastic Thanks for your continued investment in our enterprise 20th Winter Olympics, and we’re very proud of our athlete’s and know that the 14,000 K2 folks around the globe come accomplishments. Our associates work hard year in and year to work every day building a stronger and ever more out to develop, manufacture and distribute the very best in successful company. athletic equipment, and the pay-off comes during the Olympics, the World Series, the X-games and the World Cups, not to Warmest regards, mention the sand lots and practice facilities around the world where professional, amateur and recreational athletes strive to improve and have fun. Richard J. Heckmann As you read this annual report, we hope you are moved to Chairman and Chief Executive Officer get outside, strap on one of our many great products, and go enjoy yourself. Operationally we had a terrific year in all of our categories J. Wayne Merck except for paintball. On an adjusted basis as we have reported, President and Chief Operating Officer 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 TABLE OF CONTENTS LETTER TO OUR SHAREHOLDERS / FINANCIAL HIGHLIGHTS 01 COMPANY OVERVIEW K2 Snowboarder Gretchen Bleiler 02 poses with her Silver Medal that she won, WINTER in the Women’s SPORTS Halfpipe, during the Torino 2006 Winter 03 Olympic Games. TEAM SPORTS WORLD CLASS BRANDS 07 The 2006 Winter Olympic Games in Torino marked another tremendous victory for K2 Inc. and many of our world class brands! MARINE / OUTDOOR SPORTS K2 is extremely proud of the team of Olympians its supports, including athletes representing 14 countries that won 44 medals in Torino. These athletes relied on K2’s 11 medal-winning performance products in alpine skiing, speed skating, nordic skiing and snowboarding. From Ted Ligety and Gretchen Bleiler to Michael Greis and Ole FISHING Einar Bjoerndalen, K2 designed products enabled these athletes to reach the world’s pinnacle of athletic achievement. 13 TECHNICAL Company Overview APPAREL / FOOTWEAR K2 is a leading designer, manufacturer and distributor of premier branded sports equipment, technical apparel and footwear and other recreational products. K2’s 15 diverse portfolio of owned brands offers innovative products that are utilized primarily in team and individual sports, enabling participation in activities such REPORT OF INDEPENDENT as baseball, softball, alpine skiing, snowboarding, fishing, water and outdoor AUDITORS sports, skateboarding and paintball. 18 SELECTED FINANCIAL DATA 19 MANAGEMENT’S DISCUSSION & ANALYSIS / CONSOLIDATED STATEMENTS / NOTES TO CONSOLIDATED STATEMENTS 20 CORPORATE INFO The Annual Report contains forward-looking statements that involve risks and uncertainties, as well as assumptions that may never materialize or prove correct. K2’s actual results may differ / BOARD OF materially from those expressed or implied by such forward-looking statements and do not reflect the potential impact of any future divestitures, mergers, acquisitions or other business combinations. All statements other than statements of historical fact are statements that could be deemed forward-looking statements including and projections of net sales, gross margin, DIRECTORS expenses, earnings or losses from operations, synergies or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statement concerning developments, performance or industry rankings relating to products; any statements regarding future economic conditions or performance; any statements of expectation or belief; any statements of assumptions underlying any of the foregoing. The risks, uncertainties and assumptions referred to herein include K2’s ability to successfully execute its acquisition plans and growth strategy, integration of acquired businesses, weather conditions, consumer spending, continued success of manufacturing in the People’s Republic of China, global IBC economic conditions, product demand, financial market performance and other risks that are described from time to time in K2’s Securities and Exchange Commission reports, including K2’s Annual Report on Form 10-K, that are available through the EDGAR system without charge at the SEC’s website, www.sec.gov. K2 cautions that the foregoing list of important factors is not exclusive, and K2 assumes no obligation and does not intend to update these forward-looking statements. WINTER SPORTS K2 K2 K2 K2 K2 K2 K2 K2 K2 K2 MARKER :: VÖLKL MARKER VÖLKL IN THE FAST LANE largest market for skis in the world - the second generation of the award winning company has moved to second place in women’s and equipment collection ATTIVA, the past year. the company is taking the lead. Positive developments in the 2005 business year and a strong strategic A model example of the synergy between MARKER VÖLKL’s participation in racing position for the future Marker and Völkl is the cooperative activities has born fruit in this year’s development of the iPT MOTION ski Olympics. The VÖLKL RACETIGER has proven VÖLKL and MARKER were again among the binding system and the current RACETIGER itself a real winner at the Winter Olympics winners in the heavily contested ski market generation of skis. A combination that in Torino: the 21-year-old boy from the in 2005. Both classic brands were able to has had enormous resonance with the US, Ted Ligety, secured the gold medal strengthen and increase their competitive consumer. in a furious run on his RACETIGER skis in positions with the sale of 460,000 pairs the Combined Competition. This victory of skis and over 1 million pairs of MARKER In 2006, MARKER VÖLKL is putting an means that the youngster now belongs bindings. As the manufacturer of bindings, emphasis on the market for high-grade ski to the exclusive circle of VÖLKL Olympic OEM bindings and binding systems, models with racing technology as well as champions such as Hanni Wenzel, Katja MARKER is second in the international the areas of all mountain and new-school Seizinger and Hilde Gerg. The 24-year- market. VÖLKL is currently the fourth largest skiing this coming season. With the old Swiss skier, Martina Schild, was also ski producer in the world. In the USA – the successful in Torino: she won silver in a sensational women’s downhill race. Further medallists for VÖLKL at this year’s Olympics are: Austrian Nicole Hosp, who won silver in the women’s slalom; Tanja Poutiainen from Finland - she also received a silver medal in the women’s giant slalom; and Alexandra Meissnitzer (AUT) who came in third in the women’s Super-G. Such successes always have an effect on the new generation of products at MARKER VÖLKL: the technical know-how gained in racing goes straight into the development and design of new skis and bindings. u WINTER SPORTS :: MARKER : VÖLKL :: PAGE 03 WINTER SPORTS MADSHUS 7 7 7 7 7 7 7 7 7 7 2006 Marks Madshus 100th Anniversary, Making It the World’s Oldest Ski Company. In 1906, Martin Madshus started manufacturing skis in a barn located in Vardal, Norway. A fire there in 1936, forced the company to relocate to its present location in Lillehammer, Norway. In its many years of ski manufacturing and competitive Olympic and World Cup wins, Madshus has become the second largest Nordic ski manufacturer in the world. For 2006, Madshus will introduce a completely new boot, ski, and binding system. Photo by: Arnd Hemmerbach Madshus mixed together a group of skiers and engineers from Norway, 35 Olympic medals with its new ski Bjørndalen, Halvard Hanevold, K2 Skate engineers from the USA, technology and 15 Olympic medals Magnus Moan, Germany’s Kathi and fined tuned the program with a on its new boots just introduced a Wilhelm and Georg Hettich, Canadian and an Italian to develop few months ago.

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