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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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Form 10-K

ANNUAL REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

|For the Year Ended December 31, 2001 |  | Commission File No. 1-4290
|------------------------------------ |  | --------------------------

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K2 INC.(Exact name of registrant as specified in its charter)

Delaware

95-2077125(State of Incorporation)

(I.R.S. Employer Identification No.)4900 South Eastern Avenue
Los Angeles, California

90040(Address of principal executive offices)

(Zip Code)


Registrant's telephone number, including area code(323) 724-2800

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange
on which registeredCommon Stock, par value $1

New York Stock ExchangePacific ExchangeSeries A Preferred Stock Purchase Rights

New York Stock ExchangePacific Exchange


Securities registered pursuant to Section 12(g) of the Act: None

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Indicate by an "X" whether the registrant 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, and has been subject to such filing requirements for the past 90 days. Yes /x/

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X

The
aggregate market value of the voting stock of the registrants held by nonaffiliates was approximately $116,603,994 as of March 8, 2002.

Indicate
the number of shares outstanding of each of the issuer's classes of common stock as of March 22, 2002.

Common
Stock, par value
$1                                      17,939,076 Shares

Documents Incorporated by Reference

Portions of the proxy statement for the Annual Meeting of Shareholders to be held May 3, 2001 are incorporated by reference in Part III.

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FORM 10-K ANNUAL REPORT

PART I

ITEM 1. BUSINESS:

General

K2 Inc. ("K2") is a premier, branded consumer products company with a primary focus on sporting goods and other recreational products as well as certain
niche industrial products. The Company offers a diverse portfolio of products used primarily in individual sports activities such as alpine skiing, snowboarding, in-line skating, mountain
and BMX biking, fishing and watersport activities. K2's sporting goods include several name brand lines such asK2and Olinalpine skis,K2, Ride, Liquid, 5150andMorrowsnowboards, boots and bindings,K2in-line skates, K2bikes, ShakespeareandPfluegerfishing rods and reels,Stearnspersonal flotation devices, rainwear, and outdoor products andK2backpacks. K2's other recreational products include Hiltoncorporate casual apparel,Planet Earthskateboards and apparel and AdioandHawkshoes. K2's industrial products consist primarily of Shakespearemonofilament line used in weed trimmers, in paper mills and industrial applications, and Shakespearefiberglass and composite marine antennas,
and composite utility and decorative light poles. Founded in 1946, K2 has grown to approximately
$600 million in annual sales through a combination of internal growth and strategic acquisitions. For segment and geographic information, see Note 14 to Notes to Consolidated Financial
Statements. Registered and other trademarks and tradenames of Company products are italicized in this Form 10-K.

In
recent years, K2 has aggressively expanded into several new sporting goods markets in the United States, Europe and Japan, including in-line skates, snowboards, footwear
and fishing tackle reels and kits and combos. Management believes these newer products have benefited from the brand strength, reputation, distribution, and the market share positions of other K2
products, several of which are now among the top brands in their respective markets. For example, management believesK2has the #1 market position in
worldwide performance in-line skates, and the #2 market position in worldwide snowboard products. Management also believesStearnshas the
#1 U.S. market position in personal flotation devices and thatShakespeareleads the U.S. market in fishing rods, and kits and combo sales, while the Ugly Stikis the top selling line of moderately priced fishing rods.

In
1998, K2 adopted a plan to sell its Simplex building products division ("Division"). As a result, K2 reclassified the Division as a discontinued operation in 1998 and similarly
reclassified prior years' operations (see Note 3 to Notes to Consolidated Financial Statements for further discussion). On June 30, 2000, K2 completed the sale of the assets and
business. Consequently, the discussion which follows focuses on the continuing operations of K2.

K2's
common stock was first offered to the public in 1959 and is currently traded on the New York and Pacific Stock Exchanges (symbol: KTO).

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Sporting Goods Products

Net sales for sporting goods products were $445.2 million in 2001, $509.6 million in 2000 and 480.6 million in 1999. The following table
lists K2's principal sporting good products and the brand names under which they are sold.

Product

Brand NameAlpine skis

K2, OlinSnowboards and accessories

K2, Ride, 5150, Liquid, MorrowIn-line skates

K2Fishing rods, reels and fishing kits

Shakespeare, Ugly Stik, PfluegerActive water sports outdoor products

StearnsMountain and BMX bikes

K2Backpacks

K2, Dana Design


Alpine Skis.K2 sells its alpine skis under the namesK2and Olinin the 3 major ski markets of the worldthe United States, Europe and Japan. While participation rates for alpine skiing have been
relatively flat during the past several years, K2 believes that industry retail sales have declined in the domestic market during the same period. In particular, K2 believes poor weather conditions in
certain markets, the high cost of skiing, the opportunity to participate in alternative activities such as snowboarding, and the increased use of rental or demo skis further contributed to a decline
in retail sales.K2skis, however, have benefited in recent years from their increasing popularity among retail purchasers, resulting from recent
innovations including performance enhancingMODtechnology, attractive graphics and creative marketing. K2's new Axisski line has been well received by
dealers and customers, especially in the United States market.

K2andOlinskis are manufactured by K2 primarily in its facility in China, after moving
its remaining domestic ski production to K2's China facility in late 2001. The skis and accessories, such as helmets, are sold to specialty retail shops and sporting goods chains in the U.S. by
independent sales representatives and in Europe and Japan through independent and Company-owned distributors.K2and Olinalpine skis are marketed to
skiers ranging from beginners to top racers using youthful and fun advertising. Within each brand, K2 offers various
styles of skis to meet the performance, usage and terrain requirements of the consumer. From a pricing perspective, K2 positions the brands in the mid-level and premium price points,
reflecting the quality of the product and the continual incorporation of technological innovations. To assist in its marketing efforts, K2 sponsors amateur and professional skiers.

Snowboards.K2 sells snowboards, boots, bindings and snowboard outerwear under the K2,Ride, Morrow, 5150andLiquidbrands. K2 also sells
strapless snowboard bindings and compatible snowboard boots under theK2 Clickerbrand. Back country accessories, including backpacks for carrying
snowboards and other gear when hiking into the back country are being marketed under theK2Brand. The snowboard market, which has been highly
fragmented, has been consolidating in favor of the larger, better
established brands. K2 manufactures most of its own snowboards in its manufacturing facility in China. K2 believes its manufacturing capability and ability to innovate provide a competitive advantage.
Like its alpine skis,K2snowboards are of high quality, have innovative features and attractive graphics and are creatively marketed.

K2's
innovations in its snowboarding line include theClicker, an advanced step-in binding system for snowboards, the RideM2 construction featuring the edge
contact system which results in a better turning board, and the Fatbob board, an extra-wide
snowboard for people with large feet. TheClickerwas among the first commercially available step-in binding systems for snowboards.

K2's
snowboard brands are sold to specialty retail shops and sporting goods chains in the U.S. by independent sales representatives and in Europe and Japan through independent and
Company-owned

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distributors. LikeK2skis,K2, RideandMorrowsnowboard products are marketed using youthful and fun advertising, and K2 sponsors professional and amateur snowboarders.

In-Line Skates.K2 introduced itsK2soft boot
in-line skates in 1994. The in-line skate market in the U.S. grew dramatically as K2's sales of this product went from $10 to $117 million in four years. The worldwide
market, however, has declined in recent years with the sharpest decline occurring in 2001.

K2's
in-line skates target the enthusiast and are priced at the mid to upper end of the industry's price points.K2skates are
attractive and of high quality and have innovative features such as a soft mesh and leather upper designed for improved comfort, with a rigid plastic cuff for support. K2's skates incorporate several
innovations, including K2's newSlip-Fittechnology, a soft boot skate with no laces. The patented product line is designed for performance
as well as superior comfort and support. K2 also sells women's-specific skates and adjustable-size, softboot skates for children.

K2in-line skates are manufactured to Company specifications and primarily assembled by a vendor in China. They are sold to
specialty retail shops and sporting goods chains in the U.S. by independent sales representatives and in Europe and Japan through independent and Company-owned distributors. During 2001, sales of
in-line skates in Europe amounted to approximately 58% of total in-line skate sales.

Fishing Rods, Reels and Fishing Kits and Combos.K2 sells fishing rods, reels and fishing line throughout the world. K2
believes Shakespeare'sUgly Stikmodels have been the best selling fishing rods in the U.S. over the past 20 years. The success of these fishing
rods has allowed K2 to establish a strong position with retailers and mass merchandisers, thereby increasing sales of new rods, reels and kits and combos and allowing K2 to introduce new products such
as expansion of itsPfluegerproduct line and tackle boxes.Shakespearerods and reels are manufactured
principally in China.Shakespeareproducts are sold directly by K2 and through independent sales representatives to mass merchandisers and
sporting goods retailers in the United States and in Europe and Australia through independent and company-owned distributors.

Active Water Sports Products.K2 sellsStearnsflotation vests, jackets and
suits ("personal flotation devices"), cold water immersion products, wet suits, waders, outdoor products, rainwear and inflatable and towable water products in the United States and in certain foreign
countries. In the United States, occupants of boats are required by law either to wear or have available personal flotation devices meeting Coast Guard standards. Stearnspersonal flotation devices are
manufactured to such standards and are subject to rigorous testing for certification by Underwriters
Laboratories. Stearns manufactures most of its personal flotation devices in the U.S. and sources its other products from Asia.Stearnsproducts are
sold principally through an in-house marketing staff and independent sales representatives to mass merchandisers, specialty shops and chain stores and to the off-shore oil
industry, commercial fishermen and other commercial users through independent sales representatives.

Mountain and BMX Bikes.K2 designs and distributes high quality full-suspension mountain bikes, front suspension
mountain bikes, road bikes and BMX bikes and accessories under theK2name in the United States and internationally. Performance and comfort are
provided by mountain bikes which have shock absorbing elements for either front and rear wheels or front wheels only, thereby improving climbing ability and decreasing rider fatigue and
off-road vibration. K2 entered the high-end, full-suspension mountain bike business in 1993 through its acquisition of Girvin and in late 1998, introduced several
new products to reposition its product line at more popular price points.

The
bikes are manufactured and assembled to K2's specifications by vendors and are marketed by an in-house marketing staff and are sold by independent sales representatives
to independent bicycle dealers and other K2 retailers in the U.S. and through distributors internationally.

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Backpacks.Dana Design, which was acquired by K2 in 1995, manufactures and distributes high-end backpacks in the
U.S.Dana Designproducts are known for their comfort, high quality and innovative features, such as custom fitting. The line also includes a series of
"activity specific" packs marketed by K2 ski, bike and snowboard.Dana DesignandK2backpacks are
primarily manufactured to K2's specifications by vendors internationally for sale by independent sales representatives to specialty retailers primarily in the United States.

Other Recreational Products

Net sales for other recreational products were $39.8 million in 2001, $42.2 million in 2000 and $42.8 million in 1999. The following table
lists K2's principal other recreational products and brand names under which they are sold.

Product

Brand NameImprinted Corporate Casuals

HiltonSkateboard apparel

Planet EarthSnowboard apparel

Planet EarthSkateboard shoes

Adio and Hawk


Corporate Casuals.K2 manufactures and distributes jackets, shirts and other active wear under the HiltonandUSAbrand names. The products are sold in the United States to either corporate buyers or
advertising specialty distributors, embroiderers and screen printers who in turn sell imprinted items, including garments, principally to corporate buyers. HiltonandUSAapparel, which are sourced from offshore vendors, are sold through catalogs, by a direct
sales force and by independent sales representatives.

Skateboard and snowboard apparel and skateboard shoes.Skateboard and snowboard apparel and skateboard shoes are sold in the
U.S., Canada, Europe and Japan. Suppliers, primarily located in Asia, manufacture these products to K2's specifications. The products are sold by independent sales representatives to retailers in the
domestic market and through Company-owned and independent distributors in Europe and Asia. K2's skateboard shoes are designed with significant assistance from a group of well-known
professional skateboarders. With favorable demographic trends, skateboarding has been enjoying a significant resurgence in popularity, principally among pre-teen and early teen boys.
Skateboard shoes are marketed under theAdioandHawkbrand names, and models are named after the
specific skateboarder who aided in the design. TheHawkbrand of shoes has been designed and introduced in cooperation with Tony Hawk, the best known
professional skateboarder in the world.

Industrial Products

Net sales of industrial products were $110.5 million in 2001, $119.0 million in 2000 and $122.6 million in 1999. The following table lists
K2's principal industrial products and the brand names under which they are sold.

Product

Brand NameMonofilament Line

ShakespeareComposite Utility and Decorative Light Poles

ShakespeareFiberglass Marine Radio Antennas

Shakespeare


Monofilament Line.Nylon and polyester monofilament line is domestically manufactured and sold by K2 in a variety of
diameters, tensile strengths and softness. Monofilament is used in various applications including the manufacture of woven mats for use by paper producers in the United States, Europe and South
America and for use as line in weed trimmers in the United States and is sold directly to paperweavers and distributors of cutting line and to others through independent sales

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representatives. Monofilament sold in Europe for woven mats is manufactured primarily in K2's U.K. facility. Shakespeare monofilament also manufactures various products for industrial applications.

Composite Utility and Decorative Light Poles.K2 produces and directly sells composite utility and decorative light poles
under theShakespearename in the United States, principally to public and private utilities and developers for specialty and unique applications.

Marine Radio Antennas.K2 manufactures fiberglass radio antennas in the United States for marine, citizen band and military
application under theShakespearename. The products are sold primarily in the United States. K2 also distributes marine radios and other marine
electronics under theShakespearename which are manufactured in Asia to K2's specifications. The antennas, radios and other marine electronics are sold
by an in-house sales department and independent sales representatives to specialty marine dealers.

Competition

K2's competition varies among its business lines. The sporting goods markets and recreational products markets are generally highly competitive, with competition
centering on product innovation, performance and styling, price, marketing and delivery. Competition in these products (other than snowboards and active wear) consists of a relatively small number of
large producers, some of whom have greater financial and other resources than K2. A relatively large number of companies compete in
snowboards and active wear. While K2 believes its well-recognized brand names, established distribution networks and reputation for developing and introducing innovative products have been
key factors in the successful introduction of its sporting goods products, there are no significant technological or capital barriers to entry into the markets for many sporting goods and recreational
products. These markets face competition from other leisure activities, and sales of leisure products are affected by changes in consumer tastes, which are difficult to predict.

K2
believes its industrial products segment competes based on product quality, service and delivery, however, K2's industrial products are, in most instances, subject to price
competition, ranging from moderate in marine antennas and monofilament line to intense for commodity-type products. Composite utility and light poles compete with products made of other
materials, such as wood and aluminum. Certain industrial competitors have greater financial and other resources than K2.

Manufacturing, Foreign Sourcing and Raw Materials

K2 believes that for the products within its core categories, it is of strategic importance to develop the capability to source and manufacture
high-quality, low cost products. As a result, K2 currently manufactures products in the People's Republic of China, including most of its fishing rods and reels, snowboards, skis, shells
for flotation devices and marine antennas. Additionally, K2 currently purchases in-line skates from a vendor in China. Certain other products are sourced from various vendors in Asia,
Latin America and Europe. The remaining products are manufactured by K2 in its United States factories and in England.

K2
has not experienced any substantial difficulty in obtaining raw materials, parts or finished goods inventory for its sporting goods and other recreational products businesses,
although the cost of certain raw materials has fluctuated. Certain components and finished products, however, are manufactured or assembled abroad and therefore could be subject to interruption as a
result of local unrest, currency exchange fluctuations, increased tariffs, trade difficulties and other factors. K2's sporting goods products are manufactured in the People's Republic of China which
trades with the United States under Normal Trade Relations ("NTR") status. Timely supply from its factories and suppliers in China is dependent on uninterrupted trade with China. Should there be an
interruption in trade with China, it could have a significant adverse impact on sales and earnings. Additionally, the gross margins on K2's products

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manufactured or sourced in the U.S. or in Asia and distributed in Europe will depend on the relative exchange rates between the U.S. dollar and the Euro.

K2
has not experienced any substantial difficulty in obtaining raw materials for its industrial products segment, although the cost of certain raw materials has fluctuated throughout the
year.

Seasonality and Cyclicality; Backlog

Sales of K2's sporting goods are generally highly seasonal and in many instances are dependent on weather conditions. K2's industrial products are mildly
seasonal. This seasonality causes K2's financial results to vary from quarter to quarter, and K2's sales and earnings are usually lower in the first and fourth quarters. In addition, the nature of
K2's ski, snowboard, bike, in-line skate, fishing and water sports products businesses requires that in anticipation of the selling season for these products, it make relatively large
investments in inventory. The primary selling season, in the case of skis and snowboards runs from August through December, in the case of bikes runs from October through April, in the case of
in-line skates runs primarily from October through May and in the case of fishing tackle and water sports products runs primarily from January through June. Relatively large investments in
receivables consequently exist during and after such seasons. The rapid delivery requirements of K2's customers for its sporting goods products and other recreational products also result in
investment in significant amounts of inventory. K2 believes another factor in its level of inventory investment is the shift by certain of its sporting goods customers from substantial purchases of
pre-season inventories to deferral of deliveries until the products' retail seasons and ordering based on rates of sale.

Sales
of sporting goods and other recreational products depend to a large extent on general economic conditions including the amount of discretionary income available for leisure
activities, consumer confidence and favorable weather conditions. Sales of K2's industrial products are dependent to varying degrees upon economic conditions in the container and paper industries, and
are subject to threat from vertical integration and consolidation among its customers.

As
a result of the nature of many of K2's businesses, backlog is generally not significant, except for the in-line skate business. The backlog of in-line skate
sales as of February 28, 2002 and 2001 was approximately $21.2 million and $44.7 million, respectively. The backlog may be subject to cancellation or other adjustments and is not
necessarily indicative of future sales.

Customers

K2 believes that its customer relationships are excellent, and no one customer of K2 accounted for 10% or more of its consolidated annual net sales or 5% of its
operating income in 2001 or 2000.

Research and Development

Consistent with K2's business strategy of continuing to develop innovative brand name products and improving the quality, cost and delivery of products, K2
maintains decentralized research and development departments at several of its manufacturing centers, which are engaged in product development and the search for new applications and manufacturing
processes. Expenditures for research and development activities totaled approximately $12.2 million in 2001, $13.3 million in 2000
and $12.1 million in 1999 and were expensed as a part of general and administrative expenses in the year incurred.

Environmental Factors

K2 is one of several named potentially responsible parties ("PRP") in three Environmental Protection Agency matters involving discharge of hazardous materials at
old waste sites in South Carolina and Michigan. Although environmental laws technically impose joint and several liability upon

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each PRP at each site, the extent of K2's required financial contribution to the cleanup of these sites is expected to be limited based upon the number and financial strength of the other named PRPs
and the volume and types of waste involved which might be attributable to K2.

Environmental
and related remediation costs are difficult to quantify for a number of reasons including the number of parties involved, the difficulty in determining the extent of the
contamination, the length of time remediation may require, the complexity of environmental regulation and the continuing advancement of remediation technology. K2's environmental engineers,
consultants and legal counsel have developed estimates based upon cost analyses and other available information for this particular site. K2 accrues for these costs when it is probable a liability has
been incurred and the amount can be reasonably estimated. At December 31, 2001 and 2000, K2 had recorded an estimated liability of approximately $745,000 and $762,000, respectively, for such
liability and made no provision for expected insurance recovery.

Employees

K2 had approximately 2,000 and 2,900 employees at December 31, 2001 and 2000, respectively. K2 believes its relations with employees generally have been
good.

Patents and Intellectual Property Rights

While product innovation is a highly important factor in K2's sporting goods and other recreational products segments and many of K2's innovations have been
patented, K2 does not believe the loss of any one patent would have a material effect on it, however, the loss of the in-line skate patent could result in increased competition and reduced
sales and margins. Certain of its brand names, such asK2,Olin,Ride,
Morrow,Shakespeare,Ugly Stik, Pflueger,StearnsandDana Designare believed by K2 to
be well-recognized by consumers and therefore important in the sales of these products. Registered and other trademarks and tradenames of Company products are italicized in this
Form 10-K.

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ITEM 2. PROPERTIES

The table below provides information with respect to the principal production and distribution facilities utilized by K2 for continuing operations as of
December 31, 2001.

|                            |                |  |                             | Owned Facilities |   | Leased Facilities
|--------------------------- | -------------- |  | --------------------------- | ---------------- | - | -----------------
|
|Sporting Goods              |                |  |                             |                  |   |                  
|                            | Minnesota      |  | Distribution and production |                  | 1 |                  
|                            | South Carolina |  | Distribution and production |                  | 1 |                  
|                            | Washington     |  | Distribution and production |                  | 1 |                  
|                            | Foreign        |  | Distribution and production |                  | 1 |                  
|                            |                |  |                             |                  |   |                  
|                            |                |  |                             | 4                |   | 550,000          
|                            |                |  |                             |                  |   |                  
|Other Recreational Products |                |  |                             |                  |   |                  
|                            | Alabama        |  | Distribution                |                  | 2 |                  
|                            | California     |  | Distribution                |                  |   |                  
|                            | Illinois       |  | Distribution                |                  |   |                  
|                            |                |  |                             |                  |   |                  
|                            |                |  |                             | 2                |   | 160,000          
|                            |                |  |                             |                  |   |                  
|Industrial Products         |                |  |                             |                  |   |                  
|                            | Florida        |  | Production                  |                  |   |                  
|                            | South Carolina |  | Distribution and production |                  | 2 |                  
|                            | Foreign        |  | Distribution and production |                  | 1 |                  
|                            |                |  |                             |                  |   |                  
|                            |                |  |                             | 3                |   | 545,000          
|                            |                |  |                             |                  |   |                  

The
corporate headquarters of K2 is located in 6,000 square feet of leased office space in Los Angeles, California. The terms of K2's leases range from one to ten years, and many are
renewable for additional periods. The termination of any lease expiring during 2002 would not have a material adverse effect on K2's operations.

K2
believes, in general, its plants and equipment are adequately maintained, in good operating condition and are adequate for K2's present needs. K2 regularly upgrades and modernizes its
facilities and equipment and expands its facilities to meet production and distribution requirements.

ITEM 3. LEGAL PROCEEDINGS

Certain of K2's products are used in relatively high risk recreational settings and from time to time K2 is named as a defendant in lawsuits asserting product
liability claims relating to its sporting goods products. To date none of these lawsuits has had a material effect on K2, and K2 does not expect any lawsuit now pending to have such an effect. K2
maintains product liability, general liability and excess liability insurance coverages. No assurances can be given such insurance will continue to be available at an acceptable cost to K2 or such
coverage will be sufficient to cover one or more large claims, or that the insurers will not successfully disclaim coverage as to a pending or future claim.

K2
is one of several named potentially responsible parties ("PRP") in three Environmental Protection Agency matters involving discharge of hazardous materials at old waste sites in South
Carolina and Michigan. Although environmental laws technically impose joint and several liability upon each PRP at each site, the extent of K2's required financial contribution to the cleanup of these
sites is expected to be limited based upon the number and financial strength of the other named PRPs and the volume and types of waste involved which might be attributable to K2.

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Environmental
and related remediation costs are difficult to quantify for a number of reasons including the number of parties involved, the difficulty in determining the extent of the
contamination, the length of time remediation may require, the complexity of environmental regulation and the continuing advancement of remediation technology. K2 accrues for liabilities of this
nature when it is probable a liability has been incurred and the amount can be reasonably estimated. At December 31, 2001 and 2000, K2 had recorded an estimated liability of approximately
$745,000 and $762,000, respectively, for environmental liabilities and made no provision for expected insurance recovery.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

EXECUTIVE OFFICERS OF K2

|Name                 |  | Position                                                           |  | Age
|-------------------- |  | ------------------------------------------------------------------ |  | ---
|Richard M. Rodstein  |  | President and Chief Executive Officer                              |  | 47 
|John J. Rangel       |  | Senior Vice PresidentFinance                                      |  | 48 
|J. Wayne Merck       |  | Executive Vice PresidentOperations                                |  | 42 
|David G. Cook        |  | Vice President; President of Stearns                               |  | 64 
|Timothy C. Cronin    |  | Vice President; President of Hilton Corporate Casuals              |  | 51 
|David H. Herzberg    |  | Vice President; President of Shakespeare Industrial Products Group |  | 59 
|James A. Vandergrift |  | Vice President                                                     |  | 51 
|David Y. Satoda      |  | Vice President                                                     |  | 36 
|Diana C. Crawford    |  | Secretary                                                          |  | 34 

Mr. Rodstein
has been President of K2 since 1990 and Chief Executive Officer for more than the past five years.

Mr. Rangel,
a CPA, has been Senior Vice President-Finance of K2 for more than the past five years.

Mr. Merck
has been Executive Vice PresidentOperations of K2 since July 2000. Mr. Merck was Vice President of K2 from January 1, 1996 to
July 2000 and president of Shakespeare Composites & Electronics since June 1996. Mr. Merck was president of K2's former Anthony Pools business from February 1994 to
June 1996.

Mr. Cook
has been a Vice President of K2 and president of Stearns for more than the past five years.

Mr. Cronin
has been a Vice President of K2 since January 1, 1996 and president of Hilton Corporate Casuals since November 1996. Mr. Cronin was Executive Vice
President of Hilton Corporate Casuals from October 1992 to October 1996.

Mr. Herzberg
has been president of Shakespeare Industrial Products Group since July 2000 in addition to being a vice president of K2 for more than the past five years.
Prior to his election to president of Shakespeare Industrial Products Group, Mr. Herzberg was the president of Shakespeare Monofilament for more than the previous five years.

Mr. Vandergrift
has been a Vice President of K2 since January 1, 1996 and Vice President of Product Development of K-2 Corporation for more than the past five
years.

Mr. Satoda
has been a Vice President of K2 Inc. since May 2001, and Director of Taxes since August 2000. Prior to joining K2, Mr. Satoda was a Senior
Manager with Ernst & Young LLP for more than five years previous to that.

Ms. Crawford
has been Secretary of K2 since December 2000 and K2 Corporate Controller since July 1999. Prior to joining K2, Ms. Crawford was Controller of
Kent H. Landsberg Company from January 1996 to June 1999, and an Audit Manager with Ernst & Young LLP for more than a year prior.

Officers
of K2 are elected for one year by the directors at their first meeting after the annual meeting of shareholders and hold office until their successors are elected and qualified.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER



Principal Markets

K2's Common Stock is listed on the New York Stock Exchange and the Pacific Stock Exchange under the symbol "KTO." At March 8, 2002 there were 2,007 holders
of record of Common Stock of K2.

Common Stock Prices and Dividends

The following table sets forth, for the quarters indicated, the reported high, low and closing sales prices of K2's Common Stock, as reported by the New York
Stock Exchange during K2's two most recent fiscal years, and the cash dividends per share declared by K2 during those years:

Stock PricesCash Dividends
Per ShareHigh

Low

Close2001Fourth

8.74

5.31

7.21

Third

11.99

5.40

5.98

Second

11.43

7.80

11.43

First

9.75

7.75

8.75

2000Fourth

9.75

7.38

8.00

Third

11.38

8.38

8.94

Second

8.81

7.00

8.31

First

8.00

6.75

7.94




Dividends

K2 has paid no cash dividends since May, 1999. K2 is subject to credit agreements which limit its ability to pay cash dividends. As of December 31, 2001,
no retained earnings were free to pay dividends. See Note 6 of Notes to Consolidated Financial Statements for further description of K2's credit facilities.

Transfer Agent, Registrar and Dividend Disbursing Agent for Common Stock

Computershare
Trust Co., Inc.
12039 West Alameda Parkway Suite Z-2
Lakewood, Colorado 80228

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ITEM 6. SELECTED FINANCIAL DATA

FINANCIAL HIGHLIGHTS

|                       |                                                                                     | Year Ended December 31(a) |  
|---------------------- | ----------------------------------------------------------------------------------- | ------------------------- | -
|
|
|Income Statement Data: |                                                                                     |                           |  
|                       | Net sales                                                                           |                           | $
|                       | Cost of products sold (f)                                                           |                           |  
|                       |                                                                                     |                           |  
|                       | Gross profit                                                                        |                           |  
|                       | Selling expenses                                                                    |                           |  
|                       | General and administrative expenses (f)                                             |                           |  
|                       | Research and development expenses                                                   |                           |  
|                       |                                                                                     |                           |  
|                       | Operating income                                                                    |                           |  
|                       | Interest expense                                                                    |                           |  
|                       | Other income, net                                                                   |                           |  
|                       |                                                                                     |                           |  
|                       | Income (loss) from continuing operations before provision (credit) for income taxes |                           |  
|                       | Provision (credit) for income taxes                                                 |                           |  
|                       |                                                                                     |                           |  
|                       | Income (loss) from continuing operations                                            |                           |  
|                       | Discontinued operations, net of taxes (g)                                           |                           |  
|                       |                                                                                     |                           |  
|                       | Net Income (loss)                                                                   |                           | $
|                       |                                                                                     |                           |  
|                       | Basic earnings per share:                                                           |                           |  
|                       |                                                                                     | Continuing operations     |  
|                       |                                                                                     | Discontinued operations   |  
|                       |                                                                                     |                           |  
|                       |                                                                                     | Net income (loss)         |  
|                       |                                                                                     |                           |  
|                       | Diluted earnings per share:                                                         |                           |  
|                       |                                                                                     | Continuing operations     |  
|                       |                                                                                     | Discontinued operations   |  
|                       |                                                                                     |                           |  
|                       |                                                                                     | Net income (loss)         |  
|                       |                                                                                     |                           |  
|                       | Dividends:                                                                          |                           |  
|                       |                                                                                     | Cashper share            |  
|                       | Basic shares                                                                        |                           |  
|                       | Diluted shares                                                                      |                           |  
|Balance Sheet Data:    |                                                                                     |                           |  
|                       | Total current assets                                                                |                           | $
|                       | Total assets                                                                        |                           |  
|                       | Total current liabilities                                                           |                           |  
|                       | Long-term debt                                                                      |                           |  
|                       | Shareholders' equity                                                                |                           |  

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

K2 is a leading designer, manufacturer and marketer of brand name sporting goods and other recreational products, and is also a manufacturer and supplier of
selected industrial products. The sporting goods segment represents $445.2 million, or 74.8%, of K2's 2001 consolidated net sales, and other recreational products represent
$39.8 million, or 6.7% in 2001 net sales. Industrial products had sales of $110.5 million, or 18.5% of net sales in 2001.

During
1999, K2 began to reduce the cost structure of its ski and snowboard operations by restructuring and downsizing its Seattle manufacturing operation in favor of lower cost
manufacturing and sourcing opportunities. During 2001, in ongoing cost reduction moves, K2 completed the move of its remaining ski production to China, closing the Washington ski manufacturing
facility during the 2001 third quarter. In addition, three other smaller manufacturing facilities which serviced the Stearns and Hilton operations were shut down in Minnesota and Alabama, with most of
the production also moving overseas. In addition to the factory closures, K2 experienced a substantial industry-wide slowdown of sales of small-wheeled products in 2001, necessitating a
downsizing of K2's small-wheeled products operation. Consequently, the factory closures and downsizing activities have resulted in 2001 charges to cost of products sold and general and administrative
expenses for restructuring and downsizing costs of $15.6 million and $2.4 million, respectively. Approximately $5.0 million of the total amount was a charge to earnings that
resulted in or will result in a cash payment. These costs are associated with the reduction of personnel, the write down of facilities and equipment, and the reduction in the net carrying value of
small-wheeled products inventory.

In
1998, K2 adopted a plan to dispose of its Simplex building products division. As a result, K2 reclassified Simplex as a discontinued operation in 1998 and similarly reclassified prior
years' operations. On June 30, 2000, K2 completed the sale of the assets and business of Simplex to Ludlow Building Products, a subsidiary of Tyco International Ltd. (see Note 3
of Notes to Consolidated Financial Statements). The discussion that follows focuses on the continuing operations of K2.

Certain
amounts included in prior years' net sales and selling expense have been reclassified to conform to the current year presentation (see Note 1 to Notes to Consolidated
Financial Statements for details). The following discussion reflects the effects of such changes.

Review of Operations: Comparison of 2001 to 2000

Net sales from continuing operations declined to $595.5 million from $670.8 million in the prior year. The net loss for 2001 was
$7.7 million, or $.43 per diluted share, as compared to net income of $16.6 million, or $.92 per diluted share, in the prior year. The net loss for 2001 included $11.7 million, or
$.65 per diluted share, in after-tax charges for restructuring and downsizing.

Net sales.In the sporting goods segment, net sales for 2001 totaled $445.2 million as compared with
$509.6 million in 2000. The overall decline in sales was attributable to a decline in scooter sales, primarily in the European market, and a reduction in worldwide in-line skate
sales. The scooter market experienced explosive growth in 2000, however, orders for scooters abruptly stopped early in the 2001 first quarter. Orders for in-line skates began to decline in
the 2001 second quarter in response to higher than expected retail inventory levels. Orders for in-line skates remained soft throughout the remainder of the year, however, the rate of
decline diminished by the 2001 fourth quarter as retail inventory levels improved. Partially offsetting these declines were increases in sales of K2 skis, Stearns outdoor water products, and domestic
sales of Shakespeare Fishing Tackle products. Sales of K2 skis improved in 2001 despite historically low reorder sales caused by the economy and poor snow conditions, reflecting gains in market shares
in the North American market fueled by the success of the ski line that featuredMODtechnology. Fishing tackle sales improved, led by the growth of
reels, kits and combos and accessories reflecting new product introductions and increased market share. Sales of

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Stearns products improved due to higher sales of drywear, industrial and cordage products. Partially offsetting these increases was a modest decline in snowboard sales due to the sluggish economy and
poor snow conditions.

In
the other recreational products segment, net sales for 2001 were $39.8 million as compared with $42.2 million in the prior year. The growth in skateboard shoes,
particularly the Adio and Hawk brands, partially offset the recession-related decline of sales in the corporate casuals business.

In
the industrial products group, net sales declined to $110.5 million from $119.0 million in 2000. The sales decline reflected a soft demand for paperweaving
monofilaments, composite light poles and marine antennas.

Gross profit.Gross profit for the year was $166.1 million, or 27.9% of net sales in 2001, as compared with
$208.5 million, or 31.1% of net sales in 2000. Gross profit for 2001 included charges for restructuring and downsizing of $15.6 million (a discussion regarding an additional
$2.4 million which was charged against general and administrative expenses is included below). During the 2001 third quarter, K2 closed the Washington ski manufacturing facility and moved more
production to China. K2 also shut down three other smaller manufacturing facilities in Minnesota and Alabama which serviced the Stearns and Hilton operations, with most of the production also moving
overseas. In addition to the factory closures, K2 experienced an industry-wide slowdown in sales of small-wheeled products, necessitating a downsizing of K2's small-wheeled products
operation. The downsizing of the small-
wheeled products business, the shutdown of the domestic manufacturing facilities and additional cost reduction measures resulted in charges to cost of products sold of $15.6 million primarily
related to severance, the write down of facilities and equipment, and the reduction in the net carrying value of small-wheeled products inventory. As a result, the decline in gross profit dollars and
margins for 2001 was attributable to the restructuring and downsizing charges discussed above, higher sales of reduced margin products, including close-out sales of in-line
skates in Europe, and an unfavorable mix of products sold. This decline was partially offset by reduced product costs obtained from selling products manufactured in China.

Costs and expenses.Selling expenses decreased 3.4% to $109.6 million, or 18.4% of net sales as compared with
$113.5 million, or 16.9% of net sales, in 2000. The increase as a percentage of sales reflects the decline in sales volume for 2001, without a corresponding decrease in expenses. Expenses did
not decline at a corresponding rate due to the initiation of certain sales and marketing programs early in 2001before there was indication of a market contraction in small-wheeled products.

General
and administrative expenses for 2001 were $43.0 million, or 7.2% of net sales, compared with $43.0 million, or 6.4% of net sales, in 2000. Expenses for 2001
included downsizing charges of $2.4 million, primarily for severance and the write down of facilities associated with the downsizing of the small-wheeled products operation. The increase in
expenses as a percentage of sales was attributable to the downsizing charges discussed above, partially offset by cost reduction measures initiated during 2001. Research and development expenses
declined 8.3% to $12.2 million from $13.3 million in 2000.

Operating income.Operating income was $1.3 million, or 0.2% of net sales, as compared to operating income of
$38.8 million, or 5.8% of net sales, in 2000. The decrease in earnings for the period was attributable to the $18.0 million of restructuring and downsizing charges discussed above, and
to a decline in small-wheeled products sales and earnings, partially offset by improved operating results for skis, snowboards, bikes, fishing tackle and Stearns outdoor products, and decreased
selling, general and administrative expenses.

Interest expense.Interest expense declined $1.2 million to $13.6 million in 2001. Lower average borrowings
resulted in interest savings of $1.9 million, which was offset by $0.7 million of additional interest as the result of higher average interest rates. The average interest rate increase
was due to

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lesser receivables sold under the accounts receivable purchase facility in 2001, which has lower average interest rates than K2's other long-term liquidity facilities and an increase in
borrowing costs beginning in the fourth quarter.

Other income.Other income, which includes royalties, interest income and other miscellaneous income, increased to
$.4 million from $.2 million in 2000.

Income taxes.The income tax rate for 2001 decreased due to the tax benefit recognized in 2001 from the recording of
carrybacks and benefits from carryforward of tax losses in the United States and Germany.

Segment information.Total segment operating profit (before interest, corporate expenses and income taxes) declined to to
$5.5 million from $42.3 million in 2000. In the sporting goods segment, operating loss was $0.2 million as compared with an operating profit of $32.3 million in 2000. The
current year decline was attributable to $16.3 million of restructuring and downsizing costs, discussed above, and an overall decline in sales and margins of small wheeled products as compared
to the prior year.

In
the other recreational products segment, an operating loss of $5.9 million was reported in 2001 as compared with an operating loss of $2.7 million in 2000. The increase
in the loss was attributable to $1.5 million of restructuring costs associated with plant closures in 2001, and the decline in corporate apparel sales due to continued sluggish market
conditions. This decline was partially offset by improved sales volume of skateboard shoes and apparel.

In
the industrial products segment, operating profit declined to $11.6 million from $12.7 million in 2000. The decline was due to reduced sales volume of monofilament line
used in the paper industry, marine antennas and composite light poles.

Review of Operations: Comparison of 2000 to 1999

Net sales from continuing operations increased to $670.8 million from $646.0 million in the prior year. Income from continuing operations for 2000
was $16.7 million, or $.93 per diluted share in 2000 as compared to $8.5 million, or $.50 per diluted share, in the prior year. Net income improved to $16.6 million, or $.92 per
diluted share, from $9.8 million, or $.58 per diluted share, in the prior year.

Net sales.In the sporting goods segment, net sales increased 6.0% to $509.6 million from $480.6 million in
1999. The increase was attributable to strong demand during the year for most of the products in the segment. Snowboard products, Kickboard scooters, fishing tackle and Stearns marine products
registered double-digit growth. The increase in shipments of snowboard products reflected strong demand for K2 and Ride products and from the full year benefit of the 1999 Ride acquisition. Sales of
the innovative K2 Kickboard scooter increased mainly due to strong demand in the European market. Fishing tackle sales improved, led by growth of new packaged rods and reels and other new products
such as a line of fishing reels. New product introductions at Stearns fueled sales increases primarily in children's flotation devices and outdoor water products. Offsetting these increases were
declines in sales of skis, in-line skates and bikes. The decline in skis sales, despite an increase in U.S. shipments, was due to a decline in international ski shipments for the year
reflecting the higher price of dollar denominated US-produced skis. In-line skate sales declined due to softness in the European market, and due to lower translated European
sales resulting from the weakness of the Euro compared to the prior year. Bike sales declined due to the repositioning of the bike business.

In
the other recreational products segment, net sales declined to $42.2 million from $42.8 million in the prior year. Sales of skateboard shoes and apparel for the year
increased substantially over the prior year, however, declines in sales to the advertising specialty market more than offset K2's strength in the skateboard business.

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In
the industrial products group, net sales declined 2.9%, to $119.0 million from $122.6 million in 1999. The sales decline reflected a slowdown and consolidation in the
paperweaving industry. Partially offsetting this decline were improved sales of composite light poles.

Gross profit.Gross profit for the year increased to $208.5 million, or 31.1% of net sales in 2000, from
$184.0 million, or 28.5% of net sales in 1999. For the year ended 1999, gross profit was net of a $10.5 million charge. In the fourth quarter of 1999, K2 announced a strategic initiative
to significantly reduce the cost structure of its ski and snowboard operations by restructuring and downsizing the Seattle manufacturing operation to take advantage of lower cost manufacturing and
sourcing opportunities in Asia, Europe and the United States. This resulted in a charge to cost of products sold for restructuring costs of $6.5 million and related downsizing costs of
$4.0 million. Excluding the impact of the charge in 1999, gross profit as a percentage of sales for 1999 was 30.1%. The improvement in gross profit percentage in the current year reflects the
benefits from K2's global cost reduction initiatives partially offset by the product cost impact of weak European currencies and declining margins in the manufacture of monofilaments.

Costs and expenses.Selling expenses increased 6.4% to $113.5 million, or 16.9% of net sales as compared with
$106.7 million, or 16.5% of net sales in 1999. The increase was attributable to increased sales volume in the sporting goods segment along with increased selling expenses related to a full year
of Ride Snowboard operations, an acquisition made in the 1999 fourth quarter.

General
and administrative expenses increased 6.7% to $43.0 million, or 6.4% of net sales, compared with $40.3 million, or 6.2% of net sales in 1999. The increase was
attributable to increased expenses related to a full year of Ride Snowboard operations, an acquisition made in the 1999 fourth quarter. In addition, declining sales in the industrial products group
resulted in an increase as a percentage of sales for certain fixed expenses. Research and development expenses increased to $13.3 million from $12.1 million in 1999.

Operating income.Operating income from continuing operations improved 56% to $38.8 million, or 5.8% of net sales,
from $24.8 million, or 3.8% of net sales, in 1999. Excluding 1999 restructuring and downsizing costs totaling $10.5 million, operating income from continuing operations for the year
ended December 31, 1999 was $35.3 million, or 5.5% of sales. The improvement is attributable to increased sales volume and an improvement in gross margins over the prior year.

Interest expense.Interest expense increased $2.1 million to $14.8 million in 2000. Lower average borrowings
resulted in interest savings of $1.9 million, which was offset by $4.0 million of additional interest as the result of higher average interest rates. The interest rate increase was due
to an increase in the LIBOR variable rate as compared to the prior year and the refinancing of variable debt into higher cost long-term fixed debt at the end of 1999.

Other income.Other income, which includes royalties, interest income and other miscellaneous income, decreased to
$.2 million from $.4 million in 1999.

Income taxes.The income tax rate for 2000 decreased due to the impact of net operating loss benefits on foreign earnings.

Segment information.Total segment operating profit or loss (before interest, corporate expenses and income taxes) improved
to $42.3 million from $30.6 million in 1999. In the sporting goods segment, operating profit increased to $32.3 million from $15.0 million in 1999. Excluding the
$10.5 million charge for restructuring and downsizing costs in 1999, segment operating profit was $25.5 million. The improvement in 2000 was attributable to the increases in sales volume
and improved margins over the prior year.

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In
the other recreational products segment, an operating loss of $2.7 million was reported in 2000 as compared with an operating loss of $1.9 million in 1999. The increase
in the loss was attributable to the decline in corporate apparel sales due to continued sluggish market conditions. This decline was partially offset by improved sales volume of skateboard shoes and
apparel.

In
the industrial products segment, operating profit declined to $12.7 million from $17.5 million in 1999. The decline was due to reduced sales volume of monofilament line
used in the paper industry and from declining gross margins.

Liquidity and Sources of Capital

Principally as the result of the factory closures and downsizing costs incurred in 2001 and the prolonged slowdown which occurred in the small-wheeled products
segment, K2 was unable to comply with financial covenants contained in its principal bank credit facility and two long-term notes. In addition, K2's asset securitization facility expired
by its terms on November 15, 2001. K2 engaged in extended
negotiations with its lenders concerning appropriate amendments to these credit facilities and sought a replacement asset securitization facility, while operating under a series of
short-term waivers and extensions. Pursuant to these short-term arrangements, K2 incurred increased interest and other financing charges aggregating approximately $400,000
during the fourth quarter of 2001, and its borrowing capacity was severely constrained. Amendments to the credit facilities and notes were finally completed in March 2002, and a new asset
securitization facility was entered into in the same month. Pursuant to the amendments borrowing costs and other fees will increase by up to $1.6 million based upon increases to interest rates
and other borrowing related fees and K2 has granted security interests in substantially all of its assets to secure the outstanding indebtedness. K2 believes that the credit availability under the
amended credit facilities and funding under the new asset securitization facility, together with cash flow from operations, will be sufficient for K2's business needs during 2002. The grant of
security to K2's lenders, however, could adversely affect K2's ability to arrange debt financing from other sources if such additional financing should become necessary.

K2's
continuing operations provided $15.6 million of cash flow down from the $50.8 million provided in 2000. During 2001, K2 sold $21.3 million fewer receivables
under its accounts receivable purchase facility as compared with the prior year. Excluding the impact of the sale of receivables, cash provided by operating activities for 2001 increased to
$36.9 million, from $27.7 million in 2000. The increase in cash provided from operations was attributable to decreases in accounts receivable and inventory, partially offset by the
reduction in operating income.

Net
cash used in investing activities from continuing operations was $15.9 million, as compared to $13.7 million in 2000. Partially offsetting the decrease in cash used in
2001 was the purchase of the assets of an industrial business for $4.6 million in cash. Net capital expenditures in 2001 were $1.4 million lower than in 2000. No material commitments for
capital expenditures existed at year end.

Cash
provided by financing activities was $8.5 million as contrasted with cash used of $68.6 million in 2000. The cash provided by financing activities as compared to cash
used in the prior year was due to the overall decrease in cash provided from operations in 2001, resulting in net borrowings in 2001 compared to net repayments in 2000.

K2's
principal long-term borrowing facility, as amended (see discussion above), is a $75 million Credit Line ("Credit Line"), secured by certain of the assets of K2,
which becomes due on December 31, 2003. Additionally, as of March 2002, K2 has a new five year, $75 million accounts receivable purchase facility ("Purchase Facility"). At
December 31, 2001, $26.5 million was outstanding under the Credit Line and $51.8 million of accounts receivable had been sold under the old Purchase Facility. Under the amended
Credit Line, K2 is subject to an agreement which, among other things, currently prohibits amounts available for payment of cash dividends and stock repurchases by K2 until certain financial covenants
are met. K2 also had $13.4 million of 8.89% secured senior notes due

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through 2004, payable in three remaining equal principal payments, and $50.0 million of 9.01% secured notes due through 2009, payable in seven equal principal payments commencing in 2003. At
December 31, 2001, K2 had $18.8 million outstanding under foreign lines of credit.

The
following summarizes the outstanding borrowings and long-term contractual obligations of K2 at December 31, 2001 and the effects such obligations are expected to
have on liquidity and cash flow in future periods.

|Contractual Obligations            |  | Total |         | Less than
1 year |   | 1-3 years |  | 4-5 years |        | After
5 years
|---------------------------------- |  | ----- | ------- | ---------------- | - | --------- |  | --------- | ------ | -------------
|
|Long-term debt                     |  | $     | 103,714 |                  | $ | 5,886     |  | $         | 50,527 |              
|Operating leases                   |  |       | 11,559  |                  |   | 4,246     |  |           | 3,684  |              
|                                   |  |       |         |                  |   |           |  |           |        |              
|Total contractual cash obligations |  | $     | 115,273 |                  | $ | 10,132    |  | $         | 54,211 |              
|                                   |  |       |         |                  |   |           |  |           |        |              

For
further information regarding K2's borrowings, see Note 6 to Notes to Consolidated Financial Statements.

Environmental Matters

K2 is one of several named potentially responsible parties ("PRP") in three Environmental Protection Agency matters involving discharge of hazardous materials at
old waste sites in South Carolina and Michigan. Although environmental laws technically impose joint and several liability upon each PRP at each site, the extent of K2's required financial
contribution to the cleanup of these sites is expected to be limited based upon the number and financial strength of the other named PRPs and the volume and types of waste involved which might be
attributable to K2.

Environmental
and related remediation costs are difficult to quantify for a number of reasons including the number of parties involved, the difficulty in determining the extent of the
contamination, the length of time remediation may require, the complexity of environmental regulation and the continuing advancement of remediation technology. K2 accrues for liabilities of this
nature when it is probable a liability has been incurred and the amount can be reasonably estimated. At December 31, 2001 and 2000, K2 had recorded an estimated liability of approximately
$745,000 and $762,000, respectively, for environmental liabilities and made no provision for expected insurance recovery.

The
ultimate outcome of this matter cannot be predicted with certainty, however, and taking into consideration reserves provided, management does not believe this matter will have a
material adverse effect on K2's financial statements.

Newly Adopted Accounting Standards

During 2001, K2 adopted the new requirements of "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities", for sales of
receivables that occurred during 2001. The impact of the adoption on the financial statements was immaterial.

In
July 2001, the FASB issued "Business Combinations," and "Goodwill and Other Intangible Assets." The Business Combination changes requires the purchase method of accounting for
business combinations initiated after June 30, 2001, and eliminates the pooling-of interests method. The changes to goodwill are effective for fiscal years beginning after
December 15, 2001, requiring that goodwill and indefinite-lived intangible assets no longer be amortized to earnings, but instead reviewed annually for impairment. In addition, the standard
includes provisions, upon adoption, for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and the testing for impairment of existing goodwill and other intangibles. For existing goodwill and other

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intangibles, K2 will adopt this pronouncement on January 1, 2002. K2 is currently assessing the impact adoption will have on the consolidated financial statements. Amortization expense arising
from goodwill
and other intangible assets that will no longer be amortized under the provisions of the new rules was approximately $2.6 million and $2.4 million in 2001 and 2000, respectively.

In
August 2001, the FASB issued "Accounting for the Impairment or Disposal of Long-Lived Assets," which is effective for fiscal years beginning after
December 15, 2001. K2 is currently assessing the impact, if any on its consolidated financial position, results of operations and cash flows.

In
2000 and 2001, the FASB Emerging Issues Task Force issued several changes to GAAP for the accounting for incentives to customers principally effective for year beginning after
December 15, 2001. The impact of the adoption of these changes on K2's financial statements is expected to be immaterial.

Critical Accounting Policies

K2's discussion and analysis of its financial condition and results of operations are based upon K2's consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires K2 to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.

K2
believes the following critical accounting policies affect its more significant estimates and judgments used in the preparation of its consolidated financial statements.

Revenue Recognition

K2 recognizes revenue from product sales upon shipments to its customers. Under this guidance revenue is recognized when persuasive evidence of an arrangement
exists, the price to the customer if fixed or determinable, and collectibility is reasonably assured. In addition, reserves are established for future product returns based upon historical return
rates. These reserves are recorded as a reduction of revenue. If the historical data used to calculate these reserves does not reflect future return rates, these estimates could be revised.

Warranty

K2 records the cost of product warranties at the time revenue is recognized. K2's warranty obligation is affected by product failure rates, material usage and
service delivery costs incurred in correcting a
product failure. Should actual product failure rates, material usage or service delivery costs differ from estimates, revisions to the estimated warranty liability would be required.

Allowance for Doubtful Accounts

K2 evaluates the collectibility of accounts receivable based on a combination of factors. In circumstances where there is knowledge of a specific customer's
inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the net recognized receivable to the amount that is reasonably believed to be collected. For
all other customers, reserves are established based on historical bad debts, customer payment patterns and current economic conditions. The establishment of these reserves requires the use of judgment
and assumptions regarding the potential for losses on receivable balances. If the financial condition of K2's customers were to deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required.

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Inventories

Inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method, including material,
labor and factory overhead. K2 records adjustments to its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market
value based upon assumptions about future demand and market conditions. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from actual requirements if
future economic conditions, customer inventory levels or competitive conditions differ from expectations.

Income Taxes

Income taxes are recorded using the liability method. K2 estimates actual current tax exposure together with temporary differences that result from differing
treatment of items for tax and accounting purposes. These temporary differences result in deferred tax assets and liabilities. K2 then assesses the likelihood that deferred tax assets will be
recovered from future taxable income and to the extent that recovery is unlikely, a valuation allowance must be established. A significant portion of K2's deferred tax assets relate to net operating
loss carryforwards for both domestic and foreign purposes. The realization of these assets is based upon estimates of future taxable income. In those jurisdictions where the realization of these
carryforwards is not likely, a valuation allowance has been established. At December 31, 2001, the balance of the valuation allowance was $8.6 million. If actual results are less
favorable than those projected by management, additional income tax expense may be required.

Pensions

As described in Note 9 of Notes to Consolidated Financial Statements, K2 sponsors several trusteed noncontributory defined benefit pension plans covering
most of its domestic employees. Pension costs and liabilities are actuarially calculated. These calculations are based on assumptions related to the discount rate, projected compensation increases and
expected return on assets. A variance in the discount rate, expected return on plan assets and rate of compensation increase could have a significant impact on the pension costs recorded.

Receivable Sales

During 2001, 2000 and 1999, K2 sold trade receivables under a domestic accounts receivable securitization facility, in which K2 retained servicing
responsibilities. The purchasers of the receivables had no recourse to K2's other assets for failure of customers to pay when due. The costs incurred by K2 associated with sales under the facility for
the years ended December 31, 2001, 2000 and 1999 totaled $2,816,000, $3,995,000 and $2,849,000, respectively. The expenses are included in interest expense. For further discussion see
Note 6 to Notes to Consolidated Financial Statements.

Foreign Currency Translation

The functional currency for most foreign operations is the local currency. The financial statements of foreign subsidiaries have been translated into United
States dollars. Asset and liability accounts have been translated using the exchange rate in effect at the balance sheet date. Revenue and expense accounts have been translated using the average
exchange rate for the year. The gains and losses associated with the translation of the financial statements resulting from the changes in exchange rates from year to year have been reported in the
other comprehensive income or loss account in shareholders' equity. To the extent assets and liabilities of the foreign operations are realized or the foreign operations pay back intercompany debt,
amounts previously reported in other comprehensive income or loss account would be included in net income or loss in the period in which the transaction

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occurs. Transaction gains or losses, other than intercompany debt deemed to be of a long-term nature, are included in net income or loss in the period in which they occur.

Euro Conversion

On January 1, 1999, 11 of the 15 member countries of the European Union established fixed conversion rates between their existing currencies (legacy
currencies) and one new common currencythe Euro. The transition period for the introduction of the Euro extends through 2002. Beginning in January 2002, new
Euro-denominated bills and coins have been issued. K2 has evaluated, and will continue to evaluate, the effects on its operations of the conversion to the Euro. The costs to prepare for
this conversion, including the costs to adapt information systems, have not been and are not expected to be material to K2's results of operations, financial position or cash flows. K2 does not
currently expect the introduction and use of the Euro to have a material effect on its foreign exchange and hedging activities. While K2 does not expect the Euro conversion to have a material effect
on its operations, some uncertainty exists as to the effect that the conversion to the Euro will have on the markets for K2's products. Accordingly, the effect on K2's operations cannot be predicted
with certainty.

Impact of Inflation and Changing Prices

The inflation rate, as measured by the Consumer Price Index, has been relatively low in the last few years, and therefore, pricing decisions by K2 have largely
been influenced by competitive market conditions. Depreciation expense is based on the historical cost to K2 of its fixed assets, and therefore, is considerably less than it would be if it were based
on current replacement cost. While buildings, machinery and equipment acquired in prior years will ultimately have to be replaced at significantly higher prices, it is expected this will be a gradual
process over many years.

Statement Regarding Forward Looking Disclosure

This Annual Report on Form 10-K contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These represent K2's beliefs concerning future events, including, but not limited to, the following: statements
regarding market trends of products sold by K2, foreign exchange fluctuations, debt reduction, inventory levels at retail, product acceptance and demand, growth efforts, cost reduction efforts, margin
enhancement efforts, product development efforts, success of new product introductions, and overall market trends. All such forward looking statements involve substantial risks and uncertainties.

Actual
results could differ materially by reason of a number of factors, many of which are outside of K2's control. Among such factors are the following:



21

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

K2's earnings and cash flow are subject to fluctuations due to changes in foreign currency exchange rates. K2 manages its exposures to changes in foreign currency
exchange rates on certain firm purchase commitments and anticipated, but not yet committed purchases, by entering into some foreign currency forward contracts. K2's risk management objective is to
reduce its exposure to the effects of changes in exchange rates on the cost of products sold over quarterly time horizons. Foreign currency exchange rate movements also affect K2's competitive
position, as exchange rate changes may affect business practices and/or pricing strategies of non-U.S. based competitors and may affect the

22

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profitability and pricing strategies of K2 as well. K2's foreign currency risk policies entail entering into foreign currency derivative instruments only to manage risk of currency fluctuations over
a given period of time, not for speculative investments.

Considering
both the anticipated cash flows from firm purchase commitments and anticipated purchases for the next quarter and the foreign currency derivative instruments in place at year
end, a hypothetical 10% weakening of the U.S. dollar relative to other currencies would not materially adversely affect expected first quarter 2002 earnings or cash flows. This analysis is dependent
on actual
purchases during the next quarter occurring within 90% of budgeted forecasts. The effect of the hypothetical change in exchange rates ignores the effect this movement may have on other variables
including competitive risk. If it were possible to quantify this competitive impact, the results could well be different than the sensitivity effects shown above. In addition, it is unlikely
currencies would uniformly strengthen or weaken relative to the U.S. dollar. In reality, some currencies may weaken while others may strengthen.

23

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

K2 INC.        STATEMENTS OF CONSOLIDATED OPERATIONS

|                                      |                                                                            | Year ended December 31 |        
|------------------------------------- | -------------------------------------------------------------------------- | ---------------------- | -------
|
|
|Net sales                             |                                                                            | $                      | 595,466
|Cost of products sold                 |                                                                            |                        | 429,338
|                                      |                                                                            |                        |        
|                                      | Gross profit                                                               |                        |        
|Selling expenses                      |                                                                            |                        | 109,635
|General and administrative expenses   |                                                                            |                        | 43,028 
|Research and development expenses     |                                                                            |                        | 12,184 
|                                      |                                                                            |                        |        
|                                      | Operating income                                                           |                        |        
|Interest expense                      |                                                                            |                        | 13,631 
|Other income, net                     |                                                                            |                        | (375   
|                                      |                                                                            |                        |        
|                                      | Income (loss) from continuing operations before provision for income taxes |                        |        
|Provision (credit) for income taxes   |                                                                            |                        | (4,271 
|                                      |                                                                            |                        |        
|                                      | Income (loss) from continuing operations                                   |                        |        
|Discontinued operations, net of taxes |                                                                            |                        |       
|                                      |                                                                            |                        |        
|Net income (loss)                     |                                                                            | $                      | (7,704 
|                                      |                                                                            |                        |        
|Basic earnings per share:             |                                                                            |                        |        
|                                      | Continuing operations                                                      |                        | $      
|                                      | Discontinued operations                                                    |                        |        
|                                      |                                                                            |                        |        
|                                      | Net income (loss)                                                          |                        | $      
|                                      |                                                                            |                        |        
|Diluted earnings per share:           |                                                                            |                        |        
|                                      | Continuing operations                                                      |                        | $      
|                                      | Discontinued operations                                                    |                        |        
|                                      |                                                                            |                        |        
|                                      | Net income (loss)                                                          |                        | $      
|                                      |                                                                            |                        |        
|Basic shares outstanding              |                                                                            |                        | 17,940 
|Diluted shares outstanding            |                                                                            |                        | 17,940 

See
notes to consolidated financial statements

24

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K2 INC.        CONSOLIDATED BALANCE SHEETS

|                                        |                                                                                                                   | December 31                                |        
|--------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | -------
|
|
|Assets                                  |                                                                                                                   |                                            |        
|Current Assets                          |                                                                                                                   |                                            |        
|                                        | Cash and cash equivalents                                                                                         |                                            | $      
|                                        | Accounts receivable, net                                                                                          |                                            |        
|                                        | Inventories, net                                                                                                  |                                            |        
|                                        | Deferred taxes and income taxes receivable                                                                        |                                            |        
|                                        | Prepaid expenses and other current assets                                                                         |                                            |        
|                                        |                                                                                                                   |                                            |        
|                                        |                                                                                                                   | Total current assets                       |        
|Property, Plant and Equipment           |                                                                                                                   |                                            |        
|                                        | Land and land improvements                                                                                        |                                            |        
|                                        | Buildings and leasehold improvements                                                                              |                                            |        
|                                        | Machinery and equipment                                                                                           |                                            |        
|                                        | Construction in progress                                                                                          |                                            |        
|                                        |                                                                                                                   |                                            |        
|                                        |                                                                                                                   |                                            | 170,175
|                                        | Less allowance for depreciation and amortization                                                                  |                                            |        
|                                        |                                                                                                                   |                                            |        
|                                        |                                                                                                                   |                                            | 68,404 
|Other Assets                            |                                                                                                                   |                                            |        
|                                        | Intangibles, principally goodwill, net                                                                            |                                            |        
|                                        | Other                                                                                                             |                                            |        
|                                        |                                                                                                                   |                                            |        
|                                        |                                                                                                                   | Total Assets                               |        
|                                        |                                                                                                                   |                                            |        
|Liabilities and Shareholders' Equity    |                                                                                                                   |                                            |        
|Current Liabilities                     |                                                                                                                   |                                            |        
|                                        | Bank loans                                                                                                        |                                            | $      
|                                        | Accounts payable                                                                                                  |                                            |        
|                                        | Accrued payroll and related                                                                                       |                                            |        
|                                        | Other accruals                                                                                                    |                                            |        
|                                        | Current portion of long-term debt                                                                                 |                                            |        
|                                        |                                                                                                                   |                                            |        
|                                        |                                                                                                                   | Total current liabilities                  |        
|Long-term Debt                          |                                                                                                                   |                                            | 97,828 
|Deferred taxes and income taxes payable |                                                                                                                   |                                            | 7,588  
|Commitments and Contingencies           |                                                                                                                   |                                            |        
|Shareholders' Equity                    |                                                                                                                   |                                            |        
|                                        | Preferred Stock, $1 par value, authorized 12,500,000 shares, none issued                                          |                                            |        
|                                        | Common Stock, $1 par value, authorized 40,000,000 shares, issued shares18,676,146 in 2001 and 18,673,646 in 2000 |                                            |        
|                                        | Additional paid-in capital                                                                                        |                                            |        
|                                        | Retained earnings                                                                                                 |                                            |        
|                                        | Employee Stock Ownership Plan and stock option loans                                                              |                                            |        
|                                        | Treasury shares at cost, 747,234 in 2001 and 738,676 in 2000                                                      |                                            |        
|                                        | Accumulated other comprehensive loss                                                                              |                                            |        
|                                        |                                                                                                                   |                                            |        
|                                        |                                                                                                                   | Total Shareholders' Equity                 |        
|                                        |                                                                                                                   |                                            |        
|                                        |                                                                                                                   | Total Liabilities and Shareholders' Equity |        
|                                        |                                                                                                                   |                                            |        

See
notes to consolidated financial statements

25

---



K2 INC.        STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY

|                                                                             |                                                                              | Common
Stock |        | Additional
paid-in
capital |   | Retained
earnings |        | Employee Stock
Ownership Plan
and stock
option loans |        | Treasury
shares,
at cost |    | Accumulated
other
comprehensive
loss |     | Total |       
|---------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | ------------ | ------ | -------------------------- | - | ----------------- | ------ | ---------------------------------------------------- | ------ | ------------------------ | -- | ------------------------------------ | --- | ----- | ------
|
|Balance at December 31, 1998                                                 |                                                                              | $            | 17,191 |                            | $ | 132,488           |        | $                                                    | 67,227 |                          | ($ | 1,981                                | )   | ($    | 8,106 
|                                                                             | Net income for the year 1999                                                 |              |        |                            |   |                   |        |                                                      |        | 9,843                    |    |                                      |     |       |       
|                                                                             | Translation adjustments                                                      |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      |     |       |       
|                                                                             |                                                                              |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      |     |       |       
|                                                                             | Comprehensive income                                                         |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      |     |       |       
|                                                                             | Issuance of shares from acquisition of Ride, Inc.                            |              |        | 1,482                      |   |                   | 10,838 |                                                      |        |                          |    |                                      |     |       |       
|                                                                             | Repurchase of shares                                                         |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      |     |       |       
|                                                                             | Cash dividends, $.11 per share                                               |              |        |                            |   |                   |        |                                                      |        | (1,822                   | )  |                                      |     |       |       
|                                                                             | Stock option loan(s)                                                         |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      | (4  | )     |       
|                                                                             | Employee Stock Ownership Plan, amortization, loan and partial loan repayment |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      | 10  |       |       
|                                                                             |                                                                              |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      |     |       |       
|Balance at December 31, 1999                                                 |                                                                              |              | 18,673 |                            |   | 143,326           |        |                                                      | 75,248 |                          |    | (1,975                               | )   |       | (8,992
|                                                                             | Net income for the year 2000                                                 |              |        |                            |   |                   |        |                                                      |        | 16,579                   |    |                                      |     |       |       
|                                                                             | Translation adjustments                                                      |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      |     |       |       
|                                                                             | Change in fair value of derivatives                                          |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      |     |       |       
|                                                                             |                                                                              |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      |     |       |       
|                                                                             | Comprehensive income                                                         |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      |     |       |       
|                                                                             | Repurchase of shares                                                         |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      |     |       |       
|                                                                             | Exercise of stock options                                                    |              |        | 1                          |   |                   | 5      |                                                      |        |                          |    |                                      |     |       |       
|                                                                             | Stock option loan repayments                                                 |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      | 60  |       |       
|                                                                             | Employee Stock Ownership Plan, amortization, loan and partial loan repayment |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      | 270 |       |       
|                                                                             |                                                                              |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      |     |       |       
|Balance at December 31, 2000                                                 |                                                                              |              | 18,674 |                            |   | 143,331           |        |                                                      | 91,827 |                          |    | (1,645                               | )   |       | (9,045
|                                                                             | Net loss for the year 2001                                                   |              |        |                            |   |                   |        |                                                      |        | (7,704                   | )  |                                      |     |       |       
|                                                                             | Translation adjustments                                                      |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      |     |       |       
|                                                                             | Change in fair value of derivatives                                          |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      |     |       |       
|                                                                             |                                                                              |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      |     |       |       
|                                                                             | Comprehensive loss                                                           |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      |     |       |       
|                                                                             | Repurchase of shares                                                         |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      |     |       |       
|                                                                             | Exercise of stock options                                                    |              |        | 2                          |   |                   | 15     |                                                      |        |                          |    |                                      |     |       |       
|                                                                             | Stock option loan repayments                                                 |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      | 54  |       |       
|Employee Stock Ownership Plan, amortization, loan and partial loan repayment |                                                                              |              |        |                            |   |                   |        |                                                      |        |                          |    | 9                                    |     |       |       
|                                                                             |                                                                              |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      |     |       |       
|Balance at December 31, 2001                                                 |                                                                              | $            | 18,676 |                            | $ | 143,346           |        | $                                                    | 84,123 |                          | ($ | 1,582                                | )   | ($    | 9,107 
|                                                                             |                                                                              |              |        |                            |   |                   |        |                                                      |        |                          |    |                                      |     |       |       

See notes to consolidated financial statements

26

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K2 INC.        STATEMENTS OF CONSOLIDATED CASH FLOWS

|                                                                                |                                                                                                                      | Year ended December 31                        |                                           
|------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | --------------------------------------------- | ------------------------------------------
|
|
|Operating Activities                                                            |                                                                                                                      |                                               |                                           
|                                                                                | Income (loss) from continuing operations                                                                             |                                               | $                                         
|                                                                                | Adjustments to reconcile income from continuing operations to net cash provided by operating activities:             |                                               |                                           
|                                                                                |                                                                                                                      | Depreciation of property, plant and equipment |                                           
|                                                                                |                                                                                                                      | Amortization of intangibles                   |                                           
|                                                                                |                                                                                                                      | Deferred taxes and income taxes receivable    |                                           
|                                                                                |                                                                                                                      | Changes in operating assets and liabilities:  |                                           
|                                                                                |                                                                                                                      |                                               | Accounts receivable                       
|                                                                                |                                                                                                                      |                                               | Increase (decrease) in sale of receivables
|                                                                                |                                                                                                                      |                                               | Inventories                               
|                                                                                |                                                                                                                      |                                               | Prepaid expenses and other current assets 
|                                                                                |                                                                                                                      |                                               | Accounts payable                          
|                                                                                |                                                                                                                      |                                               | Payrolls and other accruals               
|                                                                                |                                                                                                                      |                                               |                                           
|                                                                                | Net cash provided by continuing operations                                                                           |                                               |                                           
|Investing Activities                                                            |                                                                                                                      |                                               |                                           
|                                                                                | Property, plant and equipment expenditures                                                                           |                                               |                                           
|                                                                                | Disposals of property, plant and equipment                                                                           |                                               |                                           
|                                                                                | Purchases of businesses, net of cash acquired                                                                        |                                               |                                           
|                                                                                | Other items, net                                                                                                     |                                               |                                           
|                                                                                |                                                                                                                      |                                               |                                           
|                                                                                | Net cash used in investing activities                                                                                |                                               |                                           
|Financing Activities                                                            |                                                                                                                      |                                               |                                           
|                                                                                | Borrowings under long-term debt                                                                                      |                                               |                                           
|                                                                                | Payments of long-term debt                                                                                           |                                               |                                           
|                                                                                | Net increase (decrease) in short-term bank loans                                                                     |                                               |                                           
|                                                                                | Exercise of stock options                                                                                            |                                               |                                           
|                                                                                | Dividends paid                                                                                                       |                                               |                                           
|                                                                                | Net repayments by ESOP                                                                                               |                                               |                                           
|                                                                                |                                                                                                                      |                                               |                                           
|                                                                                | Net cash (used in) provided by financing activities                                                                  |                                               |                                           
|                                                                                |                                                                                                                      |                                               |                                           
|Net increase (decrease) in cash and cash equivalents from continuing operations |                                                                                                                      |                                               | 8,242                                     
|Discontinued Operations                                                         |                                                                                                                      |                                               |                                           
|                                                                                | Income (loss) from discontinued operations                                                                           |                                               |                                           
|                                                                                | Net proceeds received from sale of discontinued operation                                                            |                                               |                                           
|                                                                                | Adjustments to reconcile income (loss) from discontinued operations to net cash provided by discontinued operations: |                                               |                                           
|                                                                                |                                                                                                                      | Depreciation and amortization                 |                                           
|                                                                                |                                                                                                                      | Capital expenditures                          |                                           
|                                                                                |                                                                                                                      | Other items, net                              |                                           
|                                                                                |                                                                                                                      |                                               |                                           
|Cash provided by discontinued operations                                        |                                                                                                                      |                                               |                                          
|                                                                                |                                                                                                                      |                                               |                                           
|Net increase (decrease) in cash and cash equivalents                            |                                                                                                                      |                                               | 8,242                                     
|Cash and cash equivalents at beginning of year                                  |                                                                                                                      |                                               | 3,174                                     
|                                                                                |                                                                                                                      |                                               |                                           
|Cash and cash equivalents at end of year                                        |                                                                                                                      | $                                             | 11,416                                    
|                                                                                |                                                                                                                      |                                               |                                           

See
notes to consolidated financial statements

27

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K2 INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        DECEMBER 31, 2001

Note 1Summary of Significant Accounting Policies

Organization

K2 is a leading designer, manufacturer and marketer of brand name sporting goods, which represent $445.2 million, or 74.8%, of K2's 2001 consolidated net
sales, and other recreational products, which represent $39.8 million in 2001 net sales. K2 is also a manufacturer and supplier of selected industrial products, which had sales of
$110.5 million in 2000.

Principles of Consolidation

The consolidated financial statements include the accounts of K2 and its subsidiaries. Intercompany accounts and transactions have been eliminated in
consolidation.

Fiscal Periods

K2 maintains its books using a 52/53 week year ending on the last Sunday of December. For purposes of the consolidated financial statements, the year end is
stated as of December 31. The years ended December 31, 2001 and 1999 consisted of 52 weeks, and the year ended December 31, 2000 consisted of 53 weeks.

Revenue Recognition

K2 recognizes revenue from product sales upon shipment to its customers. Under this guidance revenue is recognized when persuasive evidence of an arrangement
exists, the price to the customer if fixed or determinable, and collectibility is reasonably assured.

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions affecting the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements. Actual amounts could differ from those estimates.

Foreign Currency Translation

The functional currency for most foreign operations is the local currency. The financial statements of foreign subsidiaries have been translated into United
States dollars. Asset and liability accounts have been translated using the exchange rate in effect at the balance sheet date. Revenue and expense accounts have been translated using the average
exchange rate for the year. The gains and losses associated with the translation of the financial statements resulting from the changes in exchange rates from year to year have been reported in the
other comprehensive income or loss account in shareholders' equity. To the extent assets and liabilities of the foreign operations are realized or the foreign operations pay back intercompany debt,
amounts previously reported in other comprehensive income or loss account would be included in net income or loss in the period in which the transaction occurs. Transaction gains or losses, other than
intercompany debt deemed to be of a long-term nature, are included in net income or loss in the period in which they occur.

28

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Cash Equivalents

Short-term investments (including any debt securities) that are part of K2's cash management portfolio are classified as cash equivalents carried at
amortized cost. These investments are liquid, are of limited credit risk and have original maturities of three months or less when purchased. The carrying amount of cash equivalents approximates
market.

Accounts Receivable and Allowances

Accounts receivable are the result of K2's worldwide sales activities. Although K2's credit risk is spread across a large number of customers within a wide
geographic area, periodic concentrations within a specific industry occur due to the seasonality of its businesses. At December 31, 2001 and 2000, K2's receivables from sporting goods retailers
who sell skis, skates, snowboards and bikes, before giving consideration to receivables sold during the year, amounted to 59% and 66%, respectively of total receivables. K2 generally does not require
collateral and performs periodic credit evaluations to manage its credit risk.

K2
evaluates the collectibility of accounts receivable based on a combination of factors. In circumstances where there is knowledge of a specific customer's inability to meet its
financial obligations, a specific reserve is recorded against amounts due to reduce the net recognized receivable to the amount that is reasonably believed to be collected. For all other customers,
reserves are established based on historical bad debts, customer payment patterns and current economic conditions. The establishment of these reserves requires the use of judgment and assumptions
regarding the potential for losses on receivable balances. Accounts receivable are net of allowances for doubtful accounts of $5,316,000 and $6,969,000 at December 31, 2001 and 2000,
respectively.

Inventories

Inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method, including material,
labor and factory overhead. K2 records adjustments to its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market
value based upon assumptions about future demand and market conditions.

Long-Lived Assets

Long-lived assets, include, among others, goodwill, intangible assets and property, plant and equipment and are reviewed periodically to determine if
the carrying values are impaired. K2 considers the future cash flows of the acquired companies in assessing the recoverability of these assets. If indicators of
impairment are present, or if long-lived assets are expected to be disposed of, impairment losses are recorded. Any impairment is charged to expense in the period in which the impairment
is incurred.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Depreciation is provided on the straight-line method based upon the estimated useful lives of the
assets ranging from 3 to 20 years. In the third

29

---

quarter of 2001 and the fourth quarter of 1999, K2 wrote down certain equipment and facilities no longer in use in connection with the closing of certain domestic manufacturing locations.

Intangibles

Goodwill arising from acquisitions is amortized on a straight-line basis over a period ranging from 15 to 40 years. Other intangibles are
amortized on a straight-line basis over 3 to 15 years. Accumulated amortization of intangibles as of December 31, 2001 and 2000 amounted to $12,494,000 and $10,418,000,
respectively. Goodwill will no longer be amortized to earnings effective with K2's adoption of the statement on January 1, 2002. Goodwill amortization expense for the years ended
December 31, 2001, 2000 and 1999 amounted to $2.6 million, $2.4 million and $2.0 million, respectively. Beginning in 2002, K2 will yearly review goodwill for impairment,
annually.

Warranty

K2 records the cost of product warranties at the time revenue is recognized. K2's warranty obligation is affected by product failure rates, material usage and
service delivery costs incurred in correcting a product failure.

Income Taxes

Income taxes are recorded using the liability method. K2 estimates actual current tax exposure together with temporary differences that result from differing
treatment of items for tax and accounting purposes. These temporary differences result in deferred tax assets and liabilities. K2 then assesses the likelihood that deferred tax assets will be
recovered from future taxable income and to the extent that recovery is unlikely, a valuation allowance must be established. A significant portion of K2's deferred tax assets relate to net operating
loss carryforwards for both domestic and foreign purposes. The
realization of these assets is based upon estimates of future taxable income. In those jurisdictions where the realization of these carryforwards is not likely, a valuation allowance has been
established.

Pensions

As described in Note 9, K2 sponsors several trusteed noncontributory defined benefit pension plans covering most of its domestic employees. Pension costs
and liabilities are actuarially calculated. These calculations are based on assumptions related to the discount rate, projected compensation increases and expected return on assets.

Receivable Sales

During 2001, 2000 and 1999, K2 sold trade receivables under a domestic accounts receivable securitization facility, in which K2 retained servicing
responsibilities. The purchasers of the receivables had no recourse to K2's other assets for failure of customers to pay when due. The costs incurred by K2 associated with sales under the facility for
the years ended December 31, 2001, 2000 and 1999 totaled $2,816,000, $3,995,000 and $2,849,000, respectively. The expenses are included in interest expense. For further discussion see
Note 6.

30

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Stock-Based Compensation and Other Equity Instruments

K2 and its subsidiaries account for employee and directors' stock option grants using the intrinsic method. Generally, the exercise price of K2's employee stock
options equals or exceeds the market price of the underlying stock on the date of grant and no compensation expense is recognized. If the option price is less than the fair value, K2 records
compensation expense over the vesting period of the option. K2 disclosed the pro forma effects of using the fair value method for its option plans in the accompanying financial statements.

Shipping and Handling Costs

K2 reports freight billed to customers ("freight recovery") as a component of net sales and related freight costs are reflected primarily in selling expenses.

Advertising Costs

Advertising costs are expensed as incurred. Advertising costs for the years ended December 31, 2001, 2000 and 1999 amounted to $23,765,000, $25,209,000 and
$23,680,000, respectively.

Research and Development

Research and development costs are charged to expense as incurred.

Other Income

Other income includes interest income, royalties and other miscellaneous income.

Earnings Per Share

Basic earnings per share ("EPS") are determined by dividing net income by the weighted average number of shares outstanding during the period. Diluted EPS
reflects the potential dilutive effects of stock options, using the treasury stock method. The dilutive effects of stock options included in the dilutive EPS calculation at December 31, 2000
and 1999 were 91,000 and 3,000, respectively. During 2001, 2000 and 1999, the computation of diluted EPS did not include the options to purchase 1,890,000, 966,000 and 1,064,000 shares of common
stock, respectively, because their inclusion would have been antidilutive.

Newly Adopted Accounting Standards

During 2001, K2 adopted the new requirements of "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities", for sales of
receivables that occurred during 2001. The impact of the adoption on the financial statements was immaterial.

In
July 2001, the FASB issued "Business Combinations," and "Goodwill and Other Intangible Assets." The Business Combination changes requires the purchase method of accounting for
business combinations initiated after June 30, 2001, and eliminates the pooling-of interests method. The changes
to goodwill are effective for fiscal years beginning after December 15, 2001, requiring that goodwill and indefinite-lived intangible assets no longer be amortized to earnings, but instead
reviewed annually for

31

---

impairment. In addition, the standard includes provisions, upon adoption, for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing
recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the testing for impairment of existing goodwill and other intangibles. For existing goodwill and
other intangibles, K2 will adopt this pronouncement on January 1, 2002. K2 is currently assessing the impact adoption will have on the consolidated financial statements. Amortization expense
arising from goodwill and other intangible assets that will no longer be amortized under the provisions of the new rules was approximately $2.6 million and $2.4 million in 2001 and 2000,
respectively.

In
August 2001, the FASB issued "Accounting for the Impairment or Disposal of Long-Lived Assets," which is effective for fiscal years beginning after
December 15, 2001. K2 is currently assessing the impact, if any on its consolidated financial position, results of operations and cash flows.

In
2000 and 2001, the FASB Emerging Issues Task Force issued several changes to GAAP for the accounting for incentives to customers principally effective for year beginning after
December 15, 2001. The impact of the adoption of these changes on K2's financial statements is expected to be immaterial.

In
September 2001, the FASB Emerging Issues Task Force, or EITF, issued EITF Issue No. 01-09, "Accounting for Consideration Given by Vendor to a Customer or a
Reseller of the Vendor's Products," which is a codification of EITF Issues No. 00-25, "Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's
Products," No. 00-14, "Accounting for Certain Sales Incentives," and No. 00-22, Accounting for "Points' and Certain Other Time-or Volume-Based Sales
Incentive Offers and Offers for Free Products or Services to be Delivered in the Future." EITF 00-25, as codified by EITF 01-09, established the treatment in the statement of
operations of vendor consideration to resellers of a vendor's products. EITF 00-25 and 01-09 are effective for fiscal quarters beginning after December 15, 2001. The
impact of the adoption of this issue on K2's financial statements is expected to be immaterial.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

Note 2Charges Against Earnings

In ongoing cost reduction moves initiated in 1999, K2 completed the move of its remaining ski production to China in 2001, closing the Washington ski
manufacturing facility during the 2001 third quarter. In addition, three other smaller manufacturing facilities were shut down in Minnesota and Alabama which serviced the Stearns and Hilton
operations, with most of the production also moving overseas.

In
addition to the factory closures, K2 experienced a substantial industry-wide slowdown of sales of small-wheeled products in 2001, including primarily scooters and
in-line skates, necessitating a downsizing of K2's small-wheeled products operation. The factory closures, coupled with the downsizing activities, have resulted in the reduction of
approximately 600 positions worldwide. In conjunction with the closures and downsizing activities, K2 recorded a pre-tax charge in the 2001 third quarter of $18.0 million, primarily
related to severance, the write down of facilities and equipment, and the reduction in the net carrying value of small-wheeled products inventory. Approximately $5.0 million of

32

---

the total amount was a charge to earnings that resulted in or will result in a cash payment. Approximately $15.6 million of the charge was included in cost of sales and approximately
$2.4 million was included in general and administrative expenses.

The
following table summarizes the activity in 2001:

|                          |                     | Facilities &
Equipment |       | Inventory |   | Severance
and Related |       | Subtotal |       | Other
Downsizing |   | Total 
|------------------------- | ------------------- | ---------------------- | ----- | --------- | - | --------------------- | ----- | -------- | ----- | ---------------- | - | ------
|
|2001 Charges              |                     | $                      | 3,179 |           | $ | 9,266                 |       | $        | 4,389 |                  | $ | 16,834
|Utilized:                 |                     |                        |       |           |   |                       |       |          |       |                  |   |       
|                          | Cash                |                        |       |           |   |                       |       |          |       | 3,104            |   |       
|                          | Non-cash write down |                        |       |           |   |                       | 9,266 |          |       |                  |   |       
|                          | Non-cash disposal   |                        |       | 3,179     |   |                       |       |          |       |                  |   |       
|                          |                     |                        |       |           |   |                       |       |          |       |                  |   |       
|                          |                     |                        | 3,179 |           |   | 9,266                 |       |          | 3,104 |                  |   | 15,549
|Balance December 31, 2001 |                     | $                      |      |           | $ |                      |       | $        | 1,285 |                  | $ | 1,285 
|                          |                     |                        |       |           |   |                       |       |          |       |                  |   |       

Of
the remaining cash charges not utilized in 2001, K2 anticipates such amounts will be settled by the end of the 2002 first quarter, resulting in a cash outlay of $1.4 million.

In
the fourth quarter of 1999, a pre-tax charge of $10.5 million was charged to cost of products sold to cover restructuring costs of $6.5 million and
downsizing costs of $4.0 million. K2's strategic initiative was adopted in 1999 to reduce the cost structure of its ski and snowboard operations by taking advantage of lower cost manufacturing
and sourcing opportunities. In accordance with the initiative, K2's Seattle manufacturing facility was downsized and approximately half of its ski and all of its snowboard manufacturing were moved to
either K2's China or California production facilities or to third party sourcing operations worldwide. The charges reflected expenses associated with the write-off of related equipment and
inventory, the reduction of approximately 200 production personnel and the utilization of approximately 200 temporary workers. Approximately $5.3 million of the total amount was a cash charge
to earnings.

33

---

The
following table summarizes the activity in 1999 and 2000:

|                          |                     | Equipment |       | Inventory |   | Severance
and Related |       | Subtotal |     | Downsizing |   | Total
|------------------------- | ------------------- | --------- | ----- | --------- | - | --------------------- | ----- | -------- | --- | ---------- | - | -----
|
|1999 Charges              |                     | $         | 3,355 |           | $ | 2,229                 |       | $        | 923 |            | $ | 6,507
|Utilized:                 |                     |           |       |           |   |                       |       |          |     |            |   |      
|                          | Cash                |           |       |           |   |                       | 500   |          |     | 130        |   |      
|                          | Non-cash write-down |           |       |           |   |                       | 1,132 |          |     |            |   |      
|                          | Non-cash disposal   |           |       | 3,355     |   |                       |       |          |     |            |   |      
|                          |                     |           |       |           |   |                       |       |          |     |            |   |      
|                          |                     |           | 3,355 |           |   | 1,632                 |       |          | 130 |            |   | 5,117
|Balance December 31, 1999 |                     |           |      |           |   | 597                   |       |          | 793 |            |   | 1,390
|Utilized:                 |                     |           |       |           |   |                       |       |          |     |            |   |      
|                          | Cash                |           |       |          |   |                       | 597   |          |     | 793        |   |      
|                          |                     |           |       |           |   |                       |       |          |     |            |   |      
|                          |                     |           |      |           |   | 597                   |       |          | 793 |            |   | 1,390
|Balance December 31, 2000 |                     | $         |      |           | $ |                      |       | $        |    |            | $ |     
|                          |                     |           |       |           |   |                       |       |          |     |            |   |      

Note 3Discontinued Operations

On September 10, 1998, K2 adopted a plan to dispose of its Simplex building products division as part of K2's strategic focus on the core sporting goods
and other recreational businesses. Accordingly, Simplex is shown in the accompanying consolidated financial statements as discontinued operations.

On
June 30, 2000, K2 completed the sale of the assets and business of Simplex. Consideration included $24.4 million in cash and the assumption of certain liabilities by the
buyer. The loss on disposal of Simplex was $1,157,000, net of a tax benefit of $623,000, and included costs of disposal and reserves related to the retention of certain liabilities by K2.

Income
from discontinued operations is net of taxes of $560,000 for the year ended December 31, 2000. Net sales of $32,739,000 for the year ended December 31, 2000 were
excluded from consolidated net sales in the accompanying consolidated statements of income.

Note 4Acquisitions

In 2001, K2 acquired certain assets of a resistat business from BASF. The net cash purchase price was approximately $4.5 million and was accounted for
using the purchase method of accounting.

On
October 7, 1999, K2 completed the acquisition of Ride, Inc. ("Ride"), a designer and manufacturer of snowboard equipment, apparel and accessories, in a stock for stock
merger transaction. Under the terms of the merger, each share of Ride common and preferred stock was converted into 1/10 share of common stock of K2. Based on the number of preferred
and common shares outstanding of Ride as of
the acquisition date, approximately 1,482,000 shares of K2's common stock were issued to the Ride shareholders and the purchase price was valued at $12.3 million. This transaction was accounted
for using the purchase method of accounting; accordingly, the purchased assets and liabilities

34

---

have been recorded at their estimated fair values at the date of the acquisition. The purchase price allocation resulted in an excess of cost over net assets acquired of approximately
$21.7 million, to be amortized on a straight-line basis over 30 years. The results of operations of Ride have been included in the consolidated financial statements since the
date of acquisition.

In
1999, K2 acquired certain assets relating to the Morrow snowboard business, including the Morrow trademark, from Morrow Snowboards, Inc. The net cash purchase price was
approximately $3.0 million and the acquisition was accounted for using the purchase method of accounting.

The
following summarized unaudited pro forma results of operations of K2 assume the acquisition of Ride had occurred as of the beginning of each period presented. This pro forma
information does not purport to be indicative of what would have occurred had the acquisition been made as of those dates, or of results which may occur in the future:

Pro Forma Information (Unaudited)(Thousands, except per share amounts)

Year ended
December 31,
1999Net sales

$
675,797Loss from continuing operations


(11,440
)Loss per common share


(.63
)


Note 5Inventories

Inventories consisted of the following at December 31:

2001

2000(Thousands)Finished goods

$
135,623

$
137,733Work in process


11,788


13,164Raw materials


22,558


25,731Total inventories

$
169,969

$
176,628


Note 6Borrowings and Other Financial Instruments

As of December 31, 2001, K2 was not in compliance with certain financial covenants under its $75 million revolving line of credit and two
long-term notes payable. In addition K2's asset securitization facility had expired by its terms on November 15, 2001. K2 operated under a series of short-term waivers
and extensions until completion of amendments to the credit facilities and notes in March 2002. Additionally, a new asset securitization was entered into in the same month. Pursuant to the
amendments, K2 has granted security interests in substantially all of its assets, except for certain domestic trade accounts receivables which are secured by the accounts receivable arrangement as
discussed below. As the result of the amendments, there have been modifications of certain financial covenants and interest costs have increased. The new asset securitization will not qualify for
off-balance

35

---

sheet treatment, and as a result, beginning in the first quarter, the assets and liabilities for the receivables securtized by the facility will be recorded on the K2's balance sheet. The discussion
below relates to the revised credit arrangements.

At
December 31, 2001, K2 had $18.8 million outstanding under foreign lines of credit. Two of the foreign subsidiaries' lines of credit totaling $13.8 million have
been converted to long-term facilities and the remaining lines are short-term. The short-term lines generally have no termination date but are reviewed annually for
renewal and are denominated in the subsidiaries' local currencies. At December 31, 2001, interest rates on the foreign lines of credit ranged from 1.7% to 11.4%. The weighted average interest
rates on the foreign lines of credit as of December 31, 2001 and 2000 were 3.6% and 5.6%, respectively.

The
principal components of long-term debt at December 31 were:

2001*

2000(Thousands)Notes payable due in seven equal annual principal installments through 2009 with semi-annual interest payable at 9.01%

$
50,000

$
50,000Notes payable due in six equal annual principal installments through 2004 semi-annual interest payable at 8.89%


13,336


17,780$75 million five-year secured bank revolving credit line due December 31, 2003, interest payments due at LIBOR plus 1.00% to 3.25% and a commitment fee of 0.225% to 0.50% on the unused portion of the line through December
31, 2003


26,500


6,500Foreign lines of credit


13,818


Other


60


150103,714


74,430Less-amounts due within one year


5,886


4,594$
97,828

$
69,836




The
principal amount of long-term debts contractually maturing in each of the five years following 2001 are:

(Thousands)2002

$
5,8862003


50,5272004


11,5872005


7,1432006


7,143Thereafter


21,428$
103,714


36

---

Interest
paid on short- and long-term debt for the years ended December 31, 2001, 2000 and 1999 was $13.6 million, $14.8 million and
$12.7 million, respectively.

Under
a five year domestic accounts receivable arrangement, referred to above, K2 can sell with limited recourse, undivided participation interests in designated pools of accounts
receivable in an amount not to exceed $75 million. The originators of the receivables sell the receivables through a subsidiary of K2 to a conduit who issues paper in the commercial market. As
of December 31, 2001 and 2000, accounts receivable of $51.8 and $73.1 million, respectively, were sold under the expiring program. The costs incurred by K2 associated with sales under
the facility for the years ended December 31, 2001, 2000 and 1999 totaled $2,816,000, $3,995,000 and $2,849,000, respectively. The expenses are included in interest expense.

The
credit facilities currently prohibit the payment of cash dividends and stock repurchases by K2 until certain financial covenants are met. The interest rate on the $75 million
credit line at December 31, 2001 was 4.7%.

K2
had $38.4 million of letters of credit outstanding as of December 31, 2001.

The
carrying amounts for the short-term lines of credit and the long-term bank revolving credit line approximate their fair value since floating interest rates
are charged, which approximate market rates. The fair value of the $50.0 million 9.01% notes payable, based on quoted market interest rates, is $50.2 million as compared to a carrying
amount of $50.0 million. The fair value of the $13.3 million 8.89% notes payable, based on quoted market interest rates, is $13.2 million as compared to a carrying amount of
$13.3 million.

K2,
including its foreign subsidiaries, enters forward exchange contracts to hedge certain firm and anticipated purchase commitments, which are denominated in U.S. or foreign currencies.
The purpose of the foreign currency hedging activities is to reduce K2's risk of fluctuating exchange rates. K2's forward contracts are accounted for as hedges because the derivative instruments are
designated and effective as hedges and reduce K2's exposure to identified risks. The ineffective portion of derivative transactions was not material to the results of operations for the year ended
December 31, 2001. At December 31, 2001, K2 had foreign exchange contracts with maturities of within one year to exchange various foreign currencies to dollars in the aggregate amount of
$16.5 million. At December 31, 2001, the fair value of these contracts was $636,000, which was reflected net of taxes as an increase to other comprehensive income. The fair value of
these contracts will be recognized in cost of sales when the related inventory is sold. Counterparties on foreign exchange contracts expose K2 to credit losses in the event of
non-performance, but K2 does not anticipate non-performance.

37

---

Note 7-Income Taxes

Pretax income (loss) from continuing operations for the years ended December 31 was taxed under the following jurisdictions:

2001

2000

1999(Thousands)Domestic

$
(5,926
)
$
13,598

$
6,365Foreign


(6,049
)

10,602


6,151$
(11,975
)
$
24,200

$
12,516


Components
of the income tax provision (benefit) applicable to continuing operations for the three years ended December 31 are:

2001

2000

1999Current

Deferred

Current

Deferred

Current

Deferred(Thousands)Federal

$
(1,115
)
$
(1,592
)
$
2,265

$
2,324

$
9,147

$
(7,317
)State


(280
)

(24
)

524


105


705


(25
)Foreign


1,112


(2,372
)

1,900


384


2,050


(555
)$
(283
)
$
(3,988
)
$
4,689

$
2,813

$
11,902

$
(7,897
)


The
principal elements accounting for the difference between the statutory federal income tax rate and the effective tax rate for the three years ended December 31 are:

2001

2000

1999(Percent)Statutory federal income tax rate

(35.0
)
35.0

35.0State income tax effect, net of federal benefit

1.0

1.7

3.5Valuation allowance and foreign earnings

(7.8
)
(5.9
)
(5.5
)Other

6.1

0.2

(1.0
)(35.7
)
31.0

32.0


No
provision for United States income taxes has been made on undistributed earnings of foreign subsidiaries, since these earnings are considered to be permanently reinvested. At
December 31, 2001, foreign subsidiaries had unused operating loss carryforwards of approximately $21.0 million which begins to expire in 2009, or carries forward indefinitely. Since the
use of these operating loss carryforwards is limited to future taxable earnings of the related foreign subsidiaries, a valuation allowance has been recognized to offset the portion of the deferred tax
assets arising from such carryforwards not likely to be usable in the near future. Approximately $2.6 million of foreign net deferred tax assets are not provided for with a valuation allowance
and the realization of this asset is dependent upon achieving sufficient future taxable income in the foreign jurisdiction.

38

---

Deferred
tax assets and liabilities are comprised of the following at December 31:

2001

2000(Thousands)Deferred tax liabilities:Depreciation and amortization of property, plant and equipment

$
6,101

$
5,239Trademark amortization


450


377Other


1,217


1,979Deferred tax liabilities


7,768


7,595Deferred tax assets:Insurance accruals


1,026


1,994Tax effect of foreign loss carryforwards


7,704


852Tax effect of domestic loss carryforwards


3,995


4,230Bad debt reserve


1,018


1,780Inventory reserve


924


1,912Restructure and contingency reserves


4,761


1,740Pension accrual


2,405


2,101Other


3,372


2,21325,205


16,822Valuation allowance


8,599


4,377Current deferred tax assets


16,606


12,445Deferred tax assets, net

$
8,838

$
4,850


At
the acquisition date, Ride had $30.2 million of federal net operating loss carryovers. The ability of K2 to utilize these losses to reduce future tax due is subject to an
annual Internal Revenue Code §382 limitation. Accordingly, K2 currently estimates the amount realizable would be a maximum of $13.1 million over the twenty year carryforward period.
For financial reporting purposes, the realization of these carryovers reduces goodwill recorded from the acquisition of Ride. During 2000, K2 recorded a reduction of goodwill of $1.1 million
for the estimated amount of Ride's operating loss carryover likely to be utilized in the near future.

No
income taxes were paid for the year ended December 31, 2001. Income taxes paid, net of refunds, in the years ended December 31, 2000 and 1999 were $9.4 million
and $9.0 million, respectively.

39

---



Note 8Commitments and Contingencies

Future minimum payments under noncancelable operating leases as of December 31, 2001 are as follows:

(Thousands)2002

$
4,2462003


3,6842004


2,7462005


3932006


124Thereafter


366$
11,559


Leases
are primarily for rentals of facilities, and about two-thirds of these contain rights to extend the terms from one to ten years.

Net
rental expense, including those rents payable under noncancelable leases and month-to-month tenancies, amounted to $6,901,000, $6,691,000 and $4,797,000 for
the years ended December 31, 2001, 2000 and 1999, respectively.

K2
has not experienced any substantial difficulty in obtaining raw materials, parts or finished goods inventory for its sporting goods and other recreational products businesses. Certain
components and finished products, however, are manufactured or assembled abroad and therefore could be subject to interruption as a result of local unrest, currency exchange fluctuations, increased
tariffs, trade difficulties and other factors. A single supplier manufactures major portions of K2's in-line skates.    K2 believes alternate sources for these products could
be found.

K2
is subject to various legal actions and proceedings in the normal course of business. While the ultimate outcome of these matters cannot be predicted with certainty, management does
not believe these matters will have a material adverse effect on K2's financial statements.

K2
is one of several named potentially responsible parties ("PRP") in three Environmental Protection Agency matters involving discharge of hazardous materials at old waste sites in South
Carolina and Michigan. Although environmental laws technically impose joint and several liability upon each PRP at each site, the extent of K2's required financial contribution to the cleanup of these
sites is expected to be limited based upon the number and financial strength of the other named PRPs and the volume and types of waste involved which might be attributable to K2.

Environmental
and related remediation costs are difficult to quantify for a number of reasons including the number of parties involved, the difficulty in determining the extent of the
contamination, the length of time remediation may require, the complexity of environmental regulation and the continuing advancement of remediation technology. K2 accrues for liabilities of this
nature when it is probable a liability has been incurred and the amount can be reasonably estimated. At December 31, 2001 and 2000, K2 had recorded an estimated liability of approximately
$745,000 and $762,000, respectively, for environmental liabilities and made no provision for expected insurance recovery.

40

---

The
ultimate outcome of these matters cannot be predicted with certainty, however, management does not believe these matters will have a material adverse effect on K2's financial
statements.

Note 9Pension Plans and Other Benefit Plans

K2 sponsors several trusteed noncontributory defined benefit pension plans covering most of its employees. Benefits are generally based on years of service and
the employee's highest compensation for five consecutive years during the years of credited service. Contributions are intended to provide for benefits attributable to service to date and service
expected to be provided in the future. K2 funds these plans in accordance with the Employee Retirement Income Security Act of 1974.

K2
also sponsors defined contribution pension plans covering most of its domestic employees. Contributions by K2 for the defined contribution plans are determined as a percent of the
amounts contributed by the respective employees. During 2001, 2000 and 1999, K2 expensed contributions of $745,000, $816,000 and $940,000, respectively, related to these plans.

The
following table sets forth the defined benefit plans' funded status and amounts recognized in K2's consolidated balance sheets at December 31:

Pension Plan2001

2000(Thousands)Change in Benefit ObligationBenefit obligation at beginning of year

$
52,532

$
50,179Service cost


1,595


1,670Interest cost


3,991


4,010Actuarial loss


456


1,231Other gains and forfeitures





(1,194
)Benefits paid


(2,415
)

(3,364
)Benefit obligation at end of year

$
56,159

$
52,532Change in Plan AssetsFair value of plan assets at beginning of year

$
52,821

$
57,377Actual return on fair value of plan assets


(339
)

(1,193
)Benefits paid


(2,415
)

(3,363
)Fair value of plan assets at end of year


50,067


52,821Funded status of the plan


(6,092
)

289Unrecognized prior service cost


568


642Unrecognized net transition asset





(51
)Unrecognized actuarial (gain) loss


1,799


(3,657
)Accrued benefit cost

$
(3,725
)
$
(2,777
)Weighted Average AssumptionsDiscount rate


7.25
%

7.75
%Expected return on plan assets


9.00
%

9.00
%Rate of compensation increase


4.00
%

5.00
%


41

---

The other gains and forfeitures reflects a change in future benefit obligations in part due to the sale of the discontinued operation during the
year 2000.

Net
pension cost consisted of the following for the year ended December 31:

Pension Plan2001

2000

1999(Thousands)Net Periodic CostService cost

$
1,595

$
1,670

$
2,061Interest cost


3,991


4,010


3,838Expected return on plan assets


(4,659
)

(5,840
)

(4,473
)Amortization of prior service cost


73


88


106Amortization of transition asset


(51
)

(285
)

(276
)Amortization of loss (gain)


(1
)

(241
)

0Net periodic cost

$
948

$
(598
)
$
1,256


Note 10Other Comprehensive Loss

The components of other comprehensive loss are as follows:

Currency Translation Adjustments

Derivative Financial Instruments

Total(Thousands)Balance at December 31, 1999

$
(7,760
)
$


$
(7,760
)Currency translation adjustment


(8,606
)




(8,606
)Change in fair value of derivatives, net of $212 taxes





472


472Balance at December 31, 2000


(16,366
)

472


(15,894
)Currency translation adjustment


(4,872
)




(4,872
)Reclassification adjustment for amounts recognized in cost of sales





(472
)

(472
)Change in fair value of derivatives, net of $197 taxes





439


439Balance at December 31, 2001

$
(21,238
)
$
439

$
(20,799
)


The
earnings associated with K2's investment in its foreign subsidiaries are considered to be permanently invested and no provision for U.S. federal and state income taxes on those
earnings or translation adjustments has been provided.

42

---

Note 11Quarterly Operating Data (Unaudited)

|                                     |                   | Quarter |       |      |  
|------------------------------------ | ----------------- | ------- | ----- | ---- | -
|
|
|2001                                 |                   |         |       |      |  
|Net sales from continuing operations |                   | $       | 173.2 |      | $
|Gross profit                         |                   |         | 50.7  |      |  
|Net income (loss)                    |                   | $       | 3.2   |      | $
|                                     |                   |         |       |      |  
|Basic earnings per share             |                   |         |       |      |  
|                                     | Net income (loss) |         | $     | 0.18 |  
|                                     |                   |         |       |      |  
|Diluted earnings per share           |                   |         |       |      |  
|                                     | Net income (loss) |         | $     | 0.17 |  
|                                     |                   |         |       |      |  
|Cash dividend per sharenone         |                   |         |       |      |  
|Stock prices:                        |                   |         |       |      |  
|                                     | High              |         | $     | 9.75 |  
|                                     | Low               |         | $     | 7.75 |  

---

43

---

|                                      |                         | Quarter |      
|------------------------------------- | ----------------------- | ------- | -----
|
|
|2000                                  |                         |         |      
|Net sales from continuing operations  |                         | $       | 185.0
|Gross profit                          |                         |         | 54.1 
|Income from continuing operations     |                         |         | 3.3  
|Discontinued operations, net of taxes |                         |         | 0.4  
|                                      |                         |         |      
|Net income                            |                         | $       | 3.7  
|                                      |                         |         |      
|Basic earnings per share              |                         |         |      
|                                      | Continuing operations   |         | $    
|                                      | Discontinued operations |         |      
|                                      |                         |         |      
|                                      | Net income              |         | $    
|                                      |                         |         |      
|Diluted earnings per share            |                         |         |      
|                                      | Continuing operations   |         | $    
|                                      | Discontinued operations |         |      
|                                      |                         |         |      
|                                      | Net income              |         | $    
|                                      |                         |         |      
|Cash dividend per sharenone          |                         |         |      
|Stock prices:                         |                         |         |      
|                                      | High                    |         | $    
|                                      | Low                     |         | $    

---

Note 12Stock Options

Under K2's 1999 and 1994 Incentive Stock Option Plans ("1999 Plan" and "1994 Plan", respectively), options may be granted to eligible directors and key employees
of K2 and its subsidiaries at not less than 100% of the market value of the shares on the dates of grant. No further options may be granted under the 1994 Plan.

The
1999 Plan permits the granting of options for terms not to exceed ten years from date of grant. The options are exercisable on such terms as may be established at the dates of grant.

K2
is authorized, at the discretion of the Compensation Committee, to provide loans to key employees in connection with the exercise of stock options under the 1999 and 1994 Plans. At
December 31, 2001 and 2000, there was a total of $38,500 and $155,000, respectively, of loans to key employees made to enable the exercise of stock options, and accrued interest outstanding.
The remaining loan at December 31, 2001 is due March 2002. The amounts of these loans are shown as a

44

---

reduction of shareholders' equity. The loans are collateralized by the underlying shares of stock issued and bear interest.

Options
granted, exercised and forfeited for the 1999 Plan and 1994 Plan were as follows:

Exercise PriceShares

Low

High

Weighted
AverageOptions outstanding at December 31, 1998

1,122,661

$
11.11

$
29.88

$
18.33Granted

229,500


7.50


10.63


7.55Forfeited

(63,050
)

10.63


29.88


18.42Options outstanding at December 31, 1999

1,289,111


7.50


29.88


16.40Granted

906,000


7.13


8.56


7.22Forfeited

(251,050
)

7.13


29.88


15.07Options outstanding at December 31, 2000

1,944,061


7.13


29.88


12.30Granted

83,000


7.75


8.76


8.32Exercised

(2,500
)

7.13


7.13


7.13Forfeited

(134,600
)

7.13


29.88


15.29Options outstanding at December 31, 2001

1,889,961


7.13


29.88


11.91


At
December 31, 2001, 2000 and 1999, stock options to purchase 1,178,511, 865,661 and 695,761 were exercisable at weighted average prices of $14.66, $17.85 and $20.21,
respectively. At December 31, 2001, 636,825 shares of common stock were reserved for issuance under the Plans.

K2
uses the intrinsic-value method of accounting for stock-based awards granted to employees. Accordingly, K2 has not recognized compensation expense for its stock-based awards to
employees. Had K2 elected to adopt the fair value approach, net income (loss) and basic and diluted earnings per share would have been $(8,768,000) $(.49) and $(.49), respectively, for the year ended
December 31, 2001, $14,905,000, $.83 and $.83, respectively, for the year ended December 31, 2000 and $8,525,000, $.51 and $.50, respectively, for the year ended December 31,
1999. The pro forma effect was calculated using Black-Scholes option valuation model, and the following assumptions were utilized.

2001

2000

1999Risk free interest rate

1.85
%
4.75
%
5.5
%Expected life

5 years

5 years

5 yearsExpected volatility

.436

.394

.388Expected dividend yield








The
pro forma amounts may not be representative of future disclosures since the estimated fair value of stock options is amortized to expense over the vesting period and additional
options may be granted in future years. Since changes in the subjective assumptions used in the Black-Scholes model can materially affect the fair value estimate, management believes the model does
not provide a reliable measure of the fair value of its options.

45

---

Options
are granted at an exercise price equal to the fair market value at the date of grant. Information regarding stock options outstanding as of December 31, 2001 is as
follows:

Options Outstanding

Options ExercisablePrice Range

Shares

Weighted Average Exercise Price

Weighted Average Remaining Contractual Life

Shares

Weighted Average Exercise Price$7.13 to $8.76

1,074,000

$
7.38

8.12 years

363,800

$
7.41$10.63 to $17.25

456,961


12.70

4.84 years

455,711


12.70$21.50 to $29.88

359,000


24.49

5.14 years

359,000


24.49


Note 13Shareholders' Equity

Preferred Stock

Shares are issuable in one or more series, and the Board of Directors has authority to fix the terms and conditions of each series. No shares were issued or
outstanding during 2001 and 2000.

Employee Stock Ownership Plan

K2 has an Employee Stock Ownership Plan ("ESOP"), which covers substantially all of its domestic non-union employees with at least one year of
service. As of December 31, 2001, the trust was indebted to K2 in the aggregate amount of $319,000 in connection with stock purchases made from 1982 through 1984 of which 67,487 shares with an
aggregate market value of $486,581 as of December 31, 2001 remained unallocated to participants. These loans are repayable over the next one to three years with interest at prime plus
1/2%, not to exceed 18%, and the unallocated shares will be released to participants proportionately as these loans are repaid. Allocated shares as of December 31, 2001 totaled
1,396,180.

Additionally,
the trust was indebted to K2 in the amount of $1,100,000 at December 31, 2001 and 2000, in connection with distributions made to terminees.

Shareholders'
equity has been reduced by the amounts of the loans and any payments made by K2 on behalf of the trust. The payments, made by K2 on behalf of the trust, which at
December 31, 2001 totaled $59,000, are being amortized to expense over the lives of the loans.

The
amount of K2's annual contribution to the ESOP is at the discretion of K2's Board of Directors. No contributions were made in 2001 or 2000. ESOP expense, including amortization of
the foregoing payments, was $301,000, $203,000 and $638,000 in 2001, 2000 and 1999, respectively.

Preferred Stock Rights

Rights are outstanding which entitle the holder of each share of Common Stock of K2 to buy one one-hundredth of a share of Series A Junior
Participating Cumulative Preferred Stock at an exercise price of $60.00 per one one-hundredth of a share, subject to adjustment. The rights are not separately tradable or exercisable until
a party either acquires, or makes a tender offer resulting in ownership of, at least 15% of K2's common shares. If a person becomes the owner of at least 15% of K2's

46

---

outstanding common shares (an "Acquiring Person"), each holder of a right other than such Acquiring Person and its affiliates is entitled, upon payment of the then-current exercise price
per right (the "Exercise Price"), to receive shares of Common Stock (or Common Stock equivalents) having a market value of twice the Exercise Price. If K2 subsequently engages in a merger, a business
combination or an asset sale with the Acquiring Person, each holder of a right other than the Acquiring Person and its affiliates is thereafter entitled, upon payment of the Exercise Price, to receive
stock of the Acquiring Person having a market value of twice the Exercise Price. At any time after any party becomes an Acquiring Person, the Board of Directors may exchange the rights (except those
held by the Acquiring Person) at an exchange ratio of one common share per right. Prior to a person becoming an Acquiring Person, the rights may be redeemed at a redemption price of one cent per
right, subject to adjustment. The rights are subject to amendment by the Board.

Note 14Segment Data

K2 classifies its business into three segments based on similar product types consisting of sporting goods products, other recreational products and selected
industrial products. The sporting goods segment consists primarily of sports equipment used to participate in individual sports activities sold primarily through sporting goods specialty dealers,
regional and national sporting goods chains and the sporting goods department of mass merchants. The equipment includes in-line skates, skis, snowboards, bikes, fishing tackle and
flotation vests. The other recreational products segment is primarily active leisure apparel sold principally into the advertising specialty market through distributors, and leisure footwear and other
apparel sold through specialty sporting goods dealers. The industrial products segment includes monofilament line sold to the paper industry, string trimmer line sold to a variety of distributors,
retailers and equipment manufacturers, fiberglass light poles sold to contractors, utility companies and municipalities and marine and CB radio antennas sold to marine dealers.

K2
evaluates performance based on operating profit or loss (before interest, corporate expenses and income taxes). The accounting policies of the reportable segments are the same as
those described in the summary of significant accounting policies in Note 1 of Notes to Consolidated Financial Statements. Intercompany profit or loss is eliminated where applicable.

47

---

The
information presented below is as of or for the year ended December 31.

|                                                             |  | Net Sales to Unaffiliated Customers |       | Intersegment Sales |   | Operating Profit (Loss) | 
|------------------------------------------------------------ |  | ----------------------------------- | ----- | ------------------ | - | ----------------------- | 
|
|
|Sporting goods                                               |  | $                                   | 445.2 |                    | $ | 509.6                   | 
|Other recreational                                           |  |                                     | 39.8  |                    |   | 42.2                    | 
|Industrial                                                   |  |                                     | 110.5 |                    |   | 119.0                   | 
|                                                             |  |                                     |       |                    |   |                         | 
|Total segment data                                           |  | $                                   | 595.5 |                    | $ | 670.8                   | 
|                                                             |  |                                     |       |                    |   |                         | 
|Corporate expenses, net                                      |  |                                     |       |                    |   |                         | 
|Interest expense                                             |  |                                     |       |                    |   |                         | 
|                                                             |  |                                     |       |                    |   |                         | 
|Income (loss) from continuing operations before income taxes |  |                                     |       |                    |   |                         | 
|                                                             |  |                                     |       |                    |   |                         | 

---

48

---

|                            |                    | Identifiable Assets |       | Depreciation and Amortization |   | Capital Expenditures
|--------------------------- | ------------------ | ------------------- | ----- | ----------------------------- | - | --------------------
|
|
|Sporting goods              |                    | $                   | 298.2 |                               | $ | 306.9               
|Other recreational          |                    |                     | 33.0  |                               |   | 32.3                
|Industrial                  |                    |                     | 63.0  |                               |   | 61.7                
|                            |                    |                     |       |                               |   |                     
|                            | Total segment data |                     |       | 394.2                         |   |                     
|Corporate                   |                    |                     | 26.8  |                               |   | 23.2                
|                            |                    |                     |       |                               |   |                     
|Total continuing operations |                    |                     | 421.0 |                               |   | 424.1               
|                            |                    |                     |       |                               |   |                     
|Discontinued operations     |                    |                     |      |                               |   |                    
|                            |                    |                     |       |                               |   |                     
|                            | Total              |                     | $     | 421.0                         |   | $                   
|                            |                    |                     |       |                               |   |                     



2001

2000

1999(Millions)Net sales by locationNorth America

$
403.2

$
438.1

$
417.7Europe


130.6


157.3


171.4Asia


61.7


75.4


56.9Total net sales

$
595.5

$
670.8

$
646.0AssetsNorth America

$
303.5

$
276.8

$
351.5Europe


75.1


99.0


94.8Asia


42.4


48.3


45.1Total assets

$
421.0

$
424.1

$
491.4Long-lived assetsNorth America

$
92.6

$
93.6

$
99.2Europe


7.4


8.4


8.3Asia


9.5


6.8


4.0Total long-lived assets

$
109.5

$
108.8

$
111.5


49

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K2 INC.        REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders:

K2 Inc.

We
have audited the accompanying consolidated balance sheets of K2 Inc. and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of K2 Inc. and subsidiaries at
December 31, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States.

| |  | logo
| |  | ----

Los
Angeles, California
February 15, 2002, except for Note 6 which is March 28, 2002

50

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Except as noted in the following paragraph the information called for by Items 10, 11, 12 and 13 have been omitted because on or before April 30, 2002,
Registrant will file with the Commission pursuant to Regulation 14A a definitive proxy statement. The information called for by these items set forth in that proxy statement is incorporated
herein by reference.

The
information called for by Item 10 with respect to executive officers of the Registrant appears following Item 4 under Part I of the Report.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

The following documents are filed as part of this report.

(a-1)    Financial
Statements (for the three years ended December 31, 2001 unless otherwise stated):

Page Reference
Form 10-KStatements of consolidated income

24Consolidated balance sheets at December 31, 2001 and 2000

25Statements of consolidated shareholders' equity

26Statements of consolidated cash flows

27Notes to consolidated financial statements

28-49Report of Ernst & Young LLP, Independent Auditors

50


(a-2)    Consolidated
financial statement schedule:

II-Valuation and qualifying accounts

S-1


All
other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes.

(a-3)    Exhibits

|(3) |  | (a)(i)  |  | Restated Certificate of Incorporation dated May 4, 1989, filed as Exhibit (3)(a) to Form 10-K for the year ended December 31, 1989 and incorporated herein by reference.                               
|--- |  | ------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  | (a)(ii) |  | Certificate of Amendment of Restated Certificate of Incorporation dated May 31, 1995, filed as Exhibit 3(a)(ii) to Form 10-K for the year ended December 31, 1995 and incorporated herein by reference.
|    |  |         |  |                                                                                                                                                                                                        

51

---

|     |  | (a)(iii)           |  | Certificate of Amendment of Restated Certificate of Incorporation, filed as Exhibit (3)(i) to Form 10-Q for the quarter ended June 30, 1996 and incorporated herein by reference.                                                                                                                                                        
|---- |  | ------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  | (b)(i)             |  | By-Laws of K2 Inc., as amended and restated, filed as Exhibit 3 to Form 10-Q for the quarter ended March 31, 1997 and incorporated herein by reference.                                                                                                                                                                                  
|     |  | (b)(ii)            |  | By-Laws of K2 Inc., as amended, filed as Exhibit 3 to Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference.                                                                                                                                                                                                
|(4)  |  | (a)                |  | Rights Agreement dated as of July 1, 1999 between K2 Inc. and Harris Trust Company of California, as Rights Agent, which includes thereto the Form of Rights Certificate to be distributed to holders of Rights after the Distribution, filed as
Item 2, Exhibit 1 to Form 8-A filed August 9, 1999 and incorporated herein by reference.
|(10) |  | Material contracts
|     |  | (a)                |  | Note Agreement Re: $40,000,000 8.39% Senior Notes due November 20, 2004 dated as of October 15, 1992, filed as Exhibit (10)(b) to Form 10-K for the year ended December 31, 1992 and incorporated herein by
reference.                                                                                                                   
|     |  |                    |  | (1)                                                                                                                                                                                                                                                                                                                                      
|     |  |                    |  | (2)                                                                                                                                                                                                                                                                                                                                      
|     |  |                    |  | (3)                                                                                                                                                                                                                                                                                                                                      
|     |  |                    |  | (4)                                                                                                                                                                                                                                                                                                                                      
|     |  | (b)                |  | Note Agreement Re: $50,000,000 8.41% Series 1999-A Senior Notes due December 1, 2009, dated as of December 1, 1999, filed as Exhibit 10(C) to Form 10-K for the year ended December 31, 1999 and incorporated herein by
reference.                                                                                                       
|     |  |                    |  | (1)                                                                                                                                                                                                                                                                                                                                      
|     |  | (c)                |  | Credit Agreement dated as of December 21, 1999 among K2 Inc., Bank of America, N.A., as Administrative Agent, Swing Line Lender and Letter of Credit Issuing Lender and the Other Financial Institutions Party Hereto, filed as Exhibit 10
(D) to Form 10-K for the year ended December 31, 1999 and incorporated herein by reference.   
|     |  |                    |  | (1)                                                                                                                                                                                                                                                                                                                                      
|     |  |                    |  |                                                                                                                                                                                                                                                                                                                                          

52

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| |  | (d) |  | Amended and Restated Transfer and Administration Agreement among Enterprise Funding Corp. as the Company, K2 Funding, Inc., as the Transferor, K2 Inc. as the Master Servicer, and Bank of America, National Association as Agent and Bank
Investor dated as of April 4, 2000, filed as Exhibit 10(a) to Form 10-Q for the quarter ended June 30, 2000 and incorporated herein by reference.                          
| |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (e) |  | Receivables Purchase and Servicing Agreement, Dated as of March 28, 2002 by and among K2 Finance Company LLC, as Seller, Redwood Receivables Corporation, as Conduit Purchaser, K2 Inc. as Master Servicer, K-2 Corporation, Shakespeare Company, LLC,
 and Stearns Inc., each as a Servicer, K2 Receivables Corporation and General Electric Capital Corporation, as Committed Purchaser and as Administrative Agent.
| |  |     |  | (1)                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | (f) |  | Receivables Sale and Contribution Agreement, Dated as of March 28, 2002, by and between K2 Inc. as Parent Guarantor, The Entities Party Hereto as Originators and K2 Finance Company LLC as Buyer.                                                                                                                                                                                                                    
| |  |     |  | (1)                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | (g) |  | Security Agreement dated as of March 28, 2002 among K2 Inc., a Delaware Corporation, and certain subsidiaries of the company and Bank of America, N.A. as Collateral Agent.                                                                                                                                                                                                                                           
| |  | (h) |  | Pledge Agreement dated as of March 28, 2002 among K2 Inc., a Delaware Corporation, and certain subsidiaries of the company and Bank of America, N.A., as Collateral Agent.                                                                                                                                                                                                                                            
| |  | (i) |  | Membership Interest Pledge Agreement dated as of March 28, 2002 among K2 Inc., a Delaware Corporation, and each subsidiary of the company in favor of Bank of America, N.A., as Collateral Agent and Other Benefited Parties.                                                                                                                                                                                         
| |  | (j) |  | Executive compensation plans and arrangements:                                                                                                                                                                                                                                                                                                                                                                        
| |  |     |  | (1)(i)                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |     |  | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |     |  | (2)(i)                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |     |  | (3)                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                       

53

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|     |  |                                 |  | (4)  |  | Anthony Industries, Inc. Non-Employee Directors' Benefit Plan effective May 1, 1992, filed as Item 6, Exhibit (a)(28) of Form 10-Q for the quarter ended March 31, 1992 and incorporated herein by reference.                                                                                     
|---- |  | ------------------------------- |  | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                 |  | (5)  |  | Anthony Industries, Inc. Corporate Officers' Medical Expense Reimbursement Plan, as amended through October 22, 1993, effective August 15, 1974, filed as Exhibit (10)(c)(5) to Form 10-K for the year ended December 31,
1993 and incorporated herein by reference.                              
|     |  |                                 |  | (6)  |  | Anthony Industries, Inc. Directors' Medical Expense Reimbursement Plan, as amended through October 22, 1993, effective January 1, 1993, filed as Exhibit (10)(c)(6) to Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference.                                       
|     |  |                                 |  | (7)  |  | K2 Inc. Executive Officers' Incentive Compensation Plan adopted August 5, 1993 as amended December 17, 1996, filed as Exhibit 10(d)(7) to Form 10-K for the year ended December 31, 1996 and incorporated herein by
reference.                                                                    
|     |  |                                 |  | (8)  |  | 1994 Incentive Stock Option Plan, filed as Exhibit A to the Proxy Statement for the Annual Meeting of Shareholders held on May 5, 1994 and incorporated herein by reference.                                                                                                                      
|     |  |                                 |  | (9)  |  | Employment agreement dated May 8, 2001 between K2 Inc. and Richard M. Rodstein, filed as Item 6, Exhibit 10.1 of Form 10-Q for the quarter ended March 31, 2001 and incorporated herein by reference.                                                                                             
|     |  |                                 |  | (10) |  | Employment agreement dated May 8, 2001 between K2 Inc. and John J. Rangel, filed as Item 6, Exhibit 10.2 of Form 10-Q for the quarter ended March 31, 2001 and incorporated herein by reference.                                                                                                  
|     |  |                                 |  | (11) |  | 1999 Incentive Stock Option Plan, filed as Exhibit A to the Proxy Statement for the Annual Meeting of Shareholders held on May 6, 1999 and incorporated herein by reference.                                                                                                                      
|     |  | (k)                             |  | (1)  |  | Asset Purchase Agreement dated February 16, 1996 among General Aquatics, Inc., KDI Sylvan Pools, Inc. as Buyer, and Anthony Industries, Inc., as Seller, filed as Item 7, Exhibit 99(A) to Form 8-K filed March 21, 1996 and
incorporated herein by reference.                                    
|     |  |                                 |  | (2)  |  | Amended and Restated Agreement and Plan of Merger dated as of July 22, 1999 among K2 Inc., Ride, Inc. and KT Acquisition, Inc. included as Appendix A to Form S-4 Registration No. 333-84791, filed August 9, 1999
and incorporated herein by reference.                                          
|     |  |                                 |  | (3)  |  | Asset Purchase Agreement dated June 8, 2000 by and between Tyco International (US) Inc., Ludlow Building Products, Inc. as Buyer, Tyco Plastics Services AG, as IP Buyer, and K2 Inc., as Seller, filed as Exhibit 10(b) for the
quarter ended June 30, 2000 and incorporated herein by reference.
|(21) |  | Subsidiaries                   
|(23) |  | Consent of Independent Auditors

(b)    Reports
on Form 8-K filed in the fourth quarter of 2001:



(c)    Refer
to (a-3) above.

(d)    Refer
to (a-2) above.

54

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SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

|                    |  | K2 INC.
|------------------- |  | -------
|Date: April 1, 2002 |  | By:    

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                         |  | Title                                                                         |  | Date         
|------------------------------------------------- |  | ----------------------------------------------------------------------------- |  | -------------
|                                                  |  |                                                                               |  |              
|/s/RICHARD M. RODSTEINRichard M. Rodstein         |  | Director, President and Chief Executive Officer (Principal Executive Officer) |  | April 1, 2002
|/s/JOHN J. RANGELJohn J. Rangel                   |  | Senior Vice PresidentFinance (Principal Finance and Accounting Officer)      |  | April 1, 2002
|/s/RICHARD J. HECKMANNRichard J. Heckmann         |  | Director, Chairman of the Board                                               |  | April 1, 2002
|/s/JERRY E. GOLDRESSJerry E. Goldress             |  | Director                                                                      |  | April 1, 2002
|/s/WILFORD D. GODBOLD, JR.Wilford D. Godbold, Jr. |  | Director                                                                      |  | April 1, 2002
|/s/ROBIN E. HERNREICHRobin E. Hernreich           |  | Director                                                                      |  | April 1, 2002
|/s/LOU HOLTZLou Holtz                             |  | Director                                                                      |  | April 1, 2002
|/s/STEWART M. KASENStewart M. Kasen               |  | Director                                                                      |  | April 1, 2002
|/s/ALFRED E. OSBORNE, JR.Alfred E. Osborne, Jr.   |  | Director                                                                      |  | April 1, 2002
|/s/DAN QUAYLEDan Quayle                           |  | Director                                                                      |  | April 1, 2002

55

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K2 INC        SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS        (Thousands)

|                             |                              |   |       | Additions |   | Deductions |       |  
|---------------------------- | ---------------------------- | - | ----- | --------- | - | ---------- | ----- | -
|
|Year ended December 31, 2001 |                              |   |       |           |   |            |       |  
|                             | Allowance for doubtful items |   | $     | 6,969     |   | $          | 1,149 |  
|                             |                              |   |       |           |   |            |       |  
|                             |                              | $ | 6,969 |           | $ | 1,149      |       | $
|                             |                              |   |       |           |   |            |       |  
|Year ended December 31, 2000 |                              |   |       |           |   |            |       |  
|                             | Allowance for doubtful items |   | $     | 6,572     |   | $          | 3,314 |  
|                             |                              |   |       |           |   |            |       |  
|                             |                              | $ | 6,572 |           | $ | 3,314      |       | $
|                             |                              |   |       |           |   |            |       |  
|Year ended December 31, 1999 |                              |   |       |           |   |            |       |  
|                             | Allowance for doubtful items |   | $     | 5,798     |   | $          | 2,594 |  
|                             |                              |   |       |           |   |            |       |  
|                             |                              | $ | 5,798 |           | $ | 2,594      |       | $
|                             |                              |   |       |           |   |            |       |  

S-1

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