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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Quarterly Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

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.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act)

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of April 30, 2003

PART - 1 FINANCIAL INFORMATION

ITEM 1     FINANCIAL STATEMENTS

CONDENSED STATEMENTS OF CONSOLIDATED INCOME (Unaudited)
(Thousands, except per share figures)

See notes to consolidated condensed financial statements.

1

CONSOLIDATED CONDENSED BALANCE SHEETS
(Thousands, except number of shares)

See notes to consolidated condensed financial statements.

2

STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS (Unaudited)
(Thousands)

See notes to consolidated condensed financial statements.

3

K2 INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2003

NOTE 1 - Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles 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 generally accepted accounting principles 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-month period ended March 31, 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 generally accepted accounting principles for complete financial statements.  The balance sheet at March 31, 2003 includes the balance sheet of Rawlings Sporting Goods Company, Inc. (“Rawlings”) which K2 acquired on March 26, 2003 but the December 31, 2002 balance sheet does not include the Rawlings balance sheet.  As a result, certain balance sheet accounts such as accounts receivable, inventories, intangible assets, accounts payable, accrued liabilities, long-term debt and shareholder’s equity 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 - - Summary of Significant Accounting Policies

Accounts Receivable and Allowances
Accounts receivable are net of allowances for doubtful accounts of $13,289,000 at March 31, 2003 and $7,838,000 at December 31, 2002. 

Inventories
The components of inventories consisted of the following:

4

K2 INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
March 31, 2003

NOTE 2 - 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,” an amendment of FASB Statement No. 123, which provides guidance for transition to the fair-value-based method of accounting for stock-based employee compensation and the required financial statement disclosure. The adoption of SFAS No. 148 expanded the disclosure in K2’s interim financial statements, and is not expected to impact K2’s annual disclosure of stock-based compensation.  For further disclosure requirements, see Note 8 to Notes to Consolidated Condensed Financial Statements.

Note 3 - Acquisitions

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 8.7 million shares of K2’s common stock were issued to the Rawlings shareholders, and the preliminary purchase price of the transaction valued at approximately $71.6 million plus merger costs estimated to be approximately $4.4 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.  In connection with the acquisition, K2 paid off Rawlings’ long-term and seasonal working capital debt of approximately $64 million. 

5

K2 INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
March 31, 2003

Note 3-Acquisitions (Continued)

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