<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
K2 INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
K2 INC.
A
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 7, 1998
TO THE SHAREHOLDERS OF K2 INC.:
You are cordially invited to attend our Annual Meeting to be held at the
Company's main office, 4900 South Eastern Avenue, Los Angeles, California on
Thursday, May 7, 1998 at 10:00 a.m. (local time).
The ANNUAL MEETING will be held for the following purposes:
1. To elect three directors to serve for a term of three years.
2. To ratify the selection of Ernst & Young LLP as independent auditors
for 1998.
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only shareholders of record at the close of business on March 31, 1998 are
entitled to notice of the meeting and to vote at it or any adjournments thereof.
If it is convenient for you to do so, we hope you will attend the meeting.
If you cannot, and wish your stock to be voted, we urge you to fill out the
enclosed proxy card and return it to us in the envelope provided. No additional
postage is required.
/s/ Richard Rodstein
RICHARD M. RODSTEIN
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
LOS ANGELES, CALIFORNIA
APRIL 3, 1998
- --------------------------------------------------------------------------------
PLEASE DATE AND SIGN THE ACCOMPANYING PROXY CARD AND
MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
<PAGE>
K2 INC.
A
4900 SOUTH EASTERN AVENUE
LOS ANGELES, CALIFORNIA 90040
--
PROXY STATEMENT
---------------
The enclosed proxy is solicited by the Board of Directors of K2 Inc. (the
"Company"). It may be revoked at any time before it is exercised by delivering a
written notice to the Secretary of the Company stating that the proxy is
revoked, by executing a subsequent proxy and presenting it to the Secretary of
the Company or by attending the annual meeting and voting in person. Only
shareholders of record at the close of business on March 31, 1998 will be
entitled to notice of and to vote at the annual meeting. As of that date, the
Company had outstanding 16,538,321 shares of Common Stock, each share entitled
to one vote. It is anticipated that the mailing to shareholders of this Proxy
Statement and the enclosed proxy will commence on or about April 3, 1998.
Proxies will be solicited by mail, telephone or telegram and may be
personally solicited by directors, officers and other employees of the Company
and by Morrow & Co., 909 Third Avenue, New York, New York, which has been
engaged for a fee of $6,500 plus expenses for this purpose. The cost of
soliciting proxies will be borne by the Company.
Both abstentions and broker non-votes are counted for purposes of
determining the presence or absence at the annual meeting of a quorum for the
transaction of business, but shares represented by broker non-votes on a matter
submitted to shareholders are not considered present and entitled to vote on
that matter. Directors will be elected by plurality vote of the shares present
and entitled to vote. The ratification of the selection of independent auditors
will require the affirmative vote of a majority of the shares present and
entitled to vote. Consequently, broker non-votes will have no effect, but
abstentions will have the effect of a vote against such ratification.
<PAGE>
ELECTION OF DIRECTORS
Under the Certificate of Incorporation of the Company, the Board of
Directors is divided into three classes, each having a three-year term, with the
term of office of one of the classes expiring each year. Proxies solicited
herewith will be voted for election to the Board of Directors of the nominees
named below (unless authority to vote for one or more such nominees is
withheld), to serve until the 2001 annual meeting of shareholders and until
their successors are elected and qualified. While the Board of Directors has no
reason to believe that any of those named will not be available as a candidate,
should such a situation arise the proxy may be voted for the election of other
nominees as directors in the discretion of the persons acting pursuant to the
proxy. Directors will be elected by plurality vote.
Certain information concerning the nominees and each director whose term of
office will continue after the 1998 annual meeting is set forth below:
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
FOR TERM OF OFFICE EXPIRING IN 2001
SUSAN E. ENGEL Director since 1996
Ms. Engel, 50, has been Chairwoman of the Board, President and Chief
Executive Officer of Department 56, Inc., a marketer of collectibles and
specialty giftware, since September 1997. Ms. Engel was its president and chief
executive officer from November 1996 to August 1997, and from September 1994 to
November 1996 she was its president and chief operating officer. From October
1991 through September 1993, Ms. Engel was president and chief executive officer
of Champion Products, Inc., a marketer and manufacturer of authentic athletic
apparel and a division of Sara Lee Corporation. Prior to Champion, Ms. Engel was
a management consulting vice president and eastern retail practice leader for
Booz, Allen and Hamilton, a general consulting firm. Ms. Engel is a member of
the board of directors of The Penn Traffic Company, a northeast supermarket
chain, and Piper Jaffray Inc., a retail stock broker.
WILFORD D. GODBOLD, JR.
Mr. Godbold, 59, has served as President and Chief Executive Officer of ZERO
Corporation, which provides packaging and climate control products to the
telecommunications, instrumentation and data processing markets, since 1984, and
for the two prior years he served as chief operating officer of ZERO
Corporation. From 1966 through 1982 he was an attorney with the law firm of
Gibson, Dunn & Crutcher LLP in Los Angeles, serving as a Partner from 1973. Mr.
Godbold serves as a member of the board of directors of Pacific Enterprises,
parent of Southern California Gas Company, a public utility, and Santa Fe
Pacific Pipeline Partners, one of the largest refined petroleum product
pipelines in the United States.
RICHARD M. RODSTEIN Director since 1995
Mr. Rodstein, 43, has been President and Chief Executive Officer of the
Company since 1996. Mr. Rodstein was president and chief operating officer of
the Company from 1990 to 1995 and has held various executive positions with the
Company since joining it in 1983. Prior to 1983, Mr. Rodstein was a certified
public accountant with Ernst & Young LLP, an international auditing and
consulting firm.
2
<PAGE>
DIRECTORS CONTINUING IN OFFICE
FOR TERM OF OFFICE EXPIRING IN 2000
BERNARD I. FORESTER Director since 1966
Mr. Forester, 70, is Chairman of the Board of the Company. From January 1,
1973 through December 31, 1995, Mr. Forester served as Chief Executive Officer
of the Company. Mr. Forester additionally served as its president from 1967
through 1975 and 1979 through 1989. Prior to 1966, Mr. Forester was chief
financial officer and a director of Republic Corporation and prior to that was a
certified public accountant with Price Waterhouse LLP, an international auditing
and consulting firm.
RICHARD J. HECKMANN Director since 1997
Mr. Heckmann, 54, has served as Chairman of the Board, President and Chief
Executive Officer of United States Filter Corporation, a worldwide provider of
water and wastewater treatment systems and services, since 1990. Mr. Heckmann
was a director and the owner of Smith Goggles until its sale in 1996. Prior to
joining U.S. Filter, Mr. Heckmann was a senior vice president at
Prudential-Bache Securities, served as associate administrator for finance and
investment of the Small Business Administration in Washington, D.C. and was the
founder and chairman of the board of Tower Scientific Corporation. Mr. Heckmann
is a member of the board of directors of USA Waste Sciences, Inc., a
non-hazardous solid waste management company, and United Rentals, Inc., a
national equipment rental organization.
STEWART M. KASEN Director since 1997
Mr. Kasen, 58, has served as Chairman of the Board of Factory Card Outlet
Corp. since 1997. In April 1996, he retired as chairman, president and chief
executive officer of Best Products., Inc., a catalog showroom chain of retail
stores and nationwide mail order services. He was also its president and chief
executive officer from 1991 to 1996 and its president and chief operating
officer from 1989 to 1991. In September 1996, Best Products Co., Inc., filed for
bankruptcy under the federal bankruptcy laws. Prior to joining Best Products,
Co., Inc., Mr. Kasen served in various capacities in two divisions of Carter
Hawley Hale Stores over a 24-year period, including president and chief
executive officer of Emporium, from 1987 to 1989, and Thalhimers, from 1984 to
1987. Mr. Kasen is a member of the board of directors of Markel Corporation, a
specialty insurance underwriter, O'Sullivan Industries Holdings, Inc., a
manufacturer of ready-to-assemble furniture, The Bibb Co., a manufacturer of
home textiles, and The Elder-Beerman Stores Corp., a regional department store
chain.
DIRECTORS CONTINUING IN OFFICE
FOR TERM OF OFFICE EXPIRING IN 1999
JERRY E. GOLDRESS Director since 1996
Mr. Goldress, 67, has served as Chairman of the Board and Chief Executive
Officer of Grisanti, Galef and Goldress, Inc., a corporate turnaround management
firm, since 1981. As a corporate turnaround manager, Mr. Goldress provides
assistance to businesses in financial difficulty and, as such, has frequently
been appointed a director and an executive officer of such businesses. In this
capacity, Mr. Goldress has served as president or chief executive officer of
numerous manufacturing, distribution and retail organizations. He is a member of
the board of directors of Applied Magnetics Corporation, a manufacturer of
magnetic heads for computers, and Artisoft, Inc., a manufacturer of computer
software.
3
<PAGE>
JOHN H. OFFERMANS Director since 1987
Mr. Offermans, 69, is a real estate investment consultant engaged in private
practice. From 1973 through 1993, Mr. Offermans was an active commercial real
estate broker. Prior to that, from 1970 to 1973 Mr. Offermans was president and
chief executive officer of Fabri-Tek Educational Systems, Inc., an educational
computer manufacturer, and from 1968 to 1970, he was international marketing
vice president of Electronic Associates, Inc., a manufacturer of computer
systems for the aerospace and other high technology industries.
JOHN B. SIMON Director since 1986
Mr. Simon, 73, has served as the Managing Partner of SMC Properties, a real
estate developer of industrial properties, since 1983. From 1949 through 1977,
Mr. Simon was the founder and president of Sunglo Glass Company, a western
regional distributor of automotive glass products.
Under the By-Laws of the Company, nominations for the election of directors
may be made by the Board or by any stockholder entitled to vote in the election
of directors, provided that no stockholder may nominate a person for election as
a director unless written notice of such nomination is presented to the Company
at least 90 days prior to the date of the applicable meeting. No such notice has
been given with respect to the election of directors. As a result, no other
nominees for election as director will be considered at the annual meeting
except nominations made by the Board in the event one of the nominees named
herein should unexpectedly be unavailable.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held five meetings in 1997. Each director attended at
least 75% of the total number of meetings of the Board of Directors and
Committees on which he or she served.
The Board of Directors currently has four standing committees: Audit
Committee, Compensation Committee, Executive Committee and Nominating Committee.
The Audit Committee of the Board of Directors, currently consisting of Ms.
Engel, Mr. Hunter (Chairman), and Mr. Offermans, held two meetings in 1997. The
functions of the Committee include recommending to the Board the engagement or
discharge of independent auditors, directing investigations into matters
relating to audit functions, reviewing the plan and results of audit with the
auditors, reviewing the Company's internal accounting controls and approving
services to be performed by the auditors and related fees.
The Compensation Committee of the Board of Directors, currently consisting
of Mr. Goldress, Mr. Hunter and Mr. Simon (Chairman), held three meetings in
1997. The Committee considers and authorizes remuneration arrangements for
senior management, including the granting of options under the Company's stock
option plan.
The Executive Committee of the Board of Directors, currently consisting of
Mr. Forester, Mr. Rodstein (Chairman) and Mr. Offermans, held two meetings in
1997, but took actions from time to time by written consent. The Committee is
authorized to act on behalf of the Board on all corporate actions for which
applicable law does not require participation of the full Board.
The Nominating Committee of the Board of Directors, consisting of Mr.
Forester (Chairman), Mr. Goldress and Mr. Simon, held one meeting in 1997, in
addition to informal meetings of Committee
4
<PAGE>
members with potential nominees for director from time to time. The Committee
recruits and interviews qualified candidates to serve as directors and reports
on its findings to the full Board.
STOCK PRICE PERFORMANCE GRAPH
The graph below compares cumulative total return to shareholders, assuming
quarterly reinvestment of dividends, of the Company, the Russell 2000 Index and
a peer group of companies. The peer group is comprised of Brunswick Corporation,
Cannondale Corporation, First Team Sports, Inc., GT Bicycles, Inc., Marker
International, Morrow Snowboards, Inc., Rawlings Sporting Goods Company, Inc.
and The North Face, Inc. The graph assumes investment of $100 on December 31,
1992 in the Company's Common Stock, the Russell 2000 Index and common stock of
the peer group (except for Cannondale, which became a public company in 1994; GT
Bicycles which became a public company in 1995; Marker, which became a public
company in 1994; Morrow, which became a public company in 1995; Rawlings, which
became a public company in 1994; and The North Face, which became a public
company in 1996).
COMPARATIVE 5-YEAR TOTAL RETURNS
K2 INC., RUSSELL 2000, PEER GROUP
PERFORMANCE RESULTS THROUGH DECEMBER 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Comparative 5-year Total Returns
<S> <C> <C> <C>
K2 Inc., Russell 2000, Peer Group
Performance results through December 31,
1997
KTO Russell 2000 Peer Group
1992 $100.0 $100.0 $100.0
1993 134.7 118.9 0.0
1994 145.3 116.8 0.0
1995 213.8 150.0 0.0
1996 259.9 174.8 0.0
1997 221.1 213.7 0.0
</TABLE>
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning annual, long-term and
other compensation of the Company's President and Chief Executive Officer and
the four most highly compensated executive officers of the Company (together,
the "named executive officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS OF
NAME AND ---------------------- STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
- ------------------------------------------------ --------- ---------- ---------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Richard M. Rodstein ............................ 1997 $ 280,000 $ 223,300 35,000 12,500(a)
President and Chief Executive Officer 1996 260,000 420,000 35,000 12,600(a)
1995 260,000 415,600 -- 12,000(a)
John J. Rangel ................................. 1997 $ 195,000 $ 132,900 20,000 9,500(a)
Senior Vice President--Finance 1996 175,000 250,000 20,000 8,400(a)
1995 175,000 244,200 15,000 6,900(a)
David H. Herzberg .............................. 1997 $ 160,000 $ 160,000 8,000 10,100(a)
Vice President & President of Shakespeare 1996 150,000 150,000 8,000 10,300(a)
Monofilament 1995 150,000 140,000 8,000 12,300(a)
J. Wayne Merck ................................. 1997 $ 155,000 $ 125,000 8,000 3,300(a)
Vice President & President of Shakespeare 1996 (c) (c) (c) (c)
Composites & Electronics 1995 (c) (c) (c) (c)
David G. Cook .................................. 1997 $ 155,000 $ 100,000 8,000 5,100(b)
Vice President & President of Stearns 1996 145,000 145,000 8,000 6,800(b)
1995 145,000 145,000 8,000 7,800(b)
</TABLE>
- ------------------------
(a) Dollar value of allocations to the accounts of the named individuals in the
Company's Employee Stock Ownership Plan: Mr. Rodstein ($7,700 in 1997,
$8,400 in 1996 and $12,000 in 1995), Mr. Rangel ($4,800 in 1997, $5,600 in
1996 and $6,900 in 1995), Mr. Herzberg ($8,000 in 1997, $9,000 in 1996 and
$12,300 in 1995), and Mr. Merck ($2,300 in 1997); and Company's matching
contribution to the accounts of the named individuals in the Company's
401(k) Retirement Savings Plan, which was adopted in 1996: Mr. Rodstein
($4,800 in 1997 and $4,200 in 1996), Mr. Rangel ($4,700 in 1997 and $2,800
in 1996), Mr. Herzberg ($2,100 in 1997 and $1,300 in 1996) and Mr. Merck
($1,000 in 1997 and $800 in 1996).
(b) Dollar value of allocation to Mr. Cook's account in the Company's Employee
Stock Ownership Plan ($3,400 in 1997, $3,700 in 1996 and $4,800 in 1995) and
the Company's matching contribution to the Stearns 401(k) Payroll Savings
and Profit Sharing Plan ($1,700 in 1997, $3,000 in 1996 and $3,000 in 1995).
(c) Mr. Merck became a Vice President of the Company on January 1, 1997.
6
<PAGE>
The following table summarizes the number of shares and the terms and
conditions of stock options granted to the named executive officers in 1997.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK PRICE
OPTIONS APPRECIATION FOR OPTION
GRANTED EXERCISE TERM (D)
OPTIONS EMPLOYEES PRICE PER EXPIRATION ------------------------
NAME GRANTED (A) DURING 1997 SHARE (B) DATE (C) 5% 10%
- --------------------------------------- ----------- ----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
R. M. Rodstein......................... 35,000 15.38% $ 23.500 12/18/07 $ 518,175 $ 1,307,775
J. J. Rangel........................... 20,000 8.79% $ 23.500 12/18/07 $ 296,100 $ 747,300
D. H. Herzberg......................... 8,000 3.71% $ 23.500 12/18/07 $ 118,440 $ 298,920
J.W. Merck............................. 8,000 3.71% $ 23.500 12/18/07 $ 118,440 $ 298,920
D. G. Cook............................. 8,000 3.71% $ 23.500 12/18/07 $ 118,440 $ 298,920
</TABLE>
- ------------------------
(a) All options granted to the named individuals in 1997 are exercisable as to
20% after one year from date of grant, an additional 30% after two years and
an additional 50% after three years. The option agreements in connection
with the options granted to the named individuals contain a provision under
which the optionee may borrow money from the Company in connection with the
exercise of the options. Each currently outstanding loan bears interest,
payable quarterly, at a fixed rate equal to the Applicable Federal Rate, as
published by the Internal Revenue Service, for the period during which the
loan was made.
(b) The exercise price is the closing price of the Company's common stock on
December 18, 1997, the date of grant.
(c) All options granted to the named individuals in 1997 expire on the tenth
anniversary of the date of grant, subject to earlier expiration in the event
of the officer's termination of employment with the Company.
(d) In order for the named individuals to realize these potential values, the
closing price of the Company's common stock on December 18, 2007 would have
to be $38.31 and $60.87 per share, respectively.
7
<PAGE>
The following table summarizes exercises of stock options in 1997 which were
previously granted to the President and Chief Executive Officer and the other
named executive officers, as well as the number of all unexercised options held
by them at the end of 1997, and their value at that date if they were in-the-
money.
AGGREGATED STOCK OPTION EXERCISES IN 1997 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS AT
12/31/97
---------------------------------------------
NUMBER OF UNEXERCISED
SHARES OPTIONS AT 12/31/97 EXERCISABLE UNEXERCISABLE
ACQUIRED ON VALUE -------------------------- --------------------- ----------------------
NAME EXERCISE (A) REALIZED EXERCISABLE UNEXERCISABLE SHARES TOTAL $ SHARES TOTAL $
- -------------------- ------------- --------- ----------- ------------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. M. Rodstein...... 105,420 63,000 98,420 $ 696,500
J. J. Rangel........ 48,075 43,500 36,575 $ 250,800
D. H. Herzberg...... 20,108 18,400 14,508 $ 93,400
J. W. Merck......... 10,000 $ 74,400 1,000 12,000
D. G. Cook.......... 19,454 18,400 13,854 $ 80,500
</TABLE>
- ------------------------
(a) Optionees, in the discretion of the Compensation Committee, may be granted
the right to borrow money from the Company in connection with the exercise
of options under both the 1994 Incentive Stock Option Plan and the 1988
Incentive Stock Option Plan. At December 31, 1997, the aggregate loans
outstanding to executive officers in connection with the exercise of stock
options, including the exercises shown above, and the weighted average
Applicable Federal Rate at which they bear interest were: Mr. Merck
($43,800, 5.97%).
PENSION PLANS
The Company maintains several defined benefit pension plans for the benefit
of eligible K2 Inc., Shakespeare and Stearns employees. The plans are
tax-qualified, Company-funded plans subject to the provisions of ERISA.
Contributions to the plans, which are made solely by the Company, are
actuarially determined. Benefits under the plans are based on years of service
and remuneration.
The table below illustrates approximate annual benefits under the Pension
Plan of K2 Inc. (the "K2 Plan"), based on the indicated assumptions. For 1997,
the Internal Revenue Code (the "Code") limits the K2 Plan's covered compensation
to $160,000.
<TABLE>
<CAPTION>
APPROXIMATE ANNUAL PENSION UPON RETIREMENT AT AGE 65
(A) YEARS OF SERVICE
-----------------------------------------------------
COVERED COMPENSATION 15 20 25 30 35
- --------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$125,000............................... $ 18,750 $ 25,000 $ 31,250 $ 37,500 $ 43,750
$150,000............................... 22,500 30,000 27,500 45,000 52,500
$175,000............................... 24,000 32,000 40,000 48,000 56,000
</TABLE>
- ------------------------
(a) An individual retiring at age 65 earns his maximum pension (as a percentage
of covered compensation) at 35 years of service.
The K2 Plan defines remuneration on which annual benefits are based as the
average of the participant's highest five consecutive years' earnings. Earnings
include salary, wages, overtime pay,
8
<PAGE>
commissions, bonuses, and similar forms of incentive compensation actually paid
during the year not exceeding certain amounts for sales personnel and subject to
the $160,000 Code Limit in 1997 for all personnel.
Compensation for 1997 that would be included in the calculation of covered
compensation and credited years of service at December 31, 1997 is shown below
for the individuals named in the Summary Compensation Table who are participants
in the plan.
<TABLE>
<CAPTION>
COVERED YEARS OF
NAME COMPENSATION SERVICE
- --------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Richard M. Rodstein.................................................. $ 160,000 14
John J. Rangel....................................................... 160,000 13
</TABLE>
The Salaried Employees' Pension Plan of Shakespeare Company (the
"Shakespeare Plan") defines remuneration upon which annual benefits are based as
the average of the employee's highest five consecutive years' earnings. Earnings
include the employee's regular basic monthly earnings excluding commissions,
bonuses, maintenance, overtime and other extra compensation, not exceeding
certain amounts for field sales personnel and subject to the $160,000 Code Limit
in 1997 for all personnel.
The table below illustrates approximate annual benefits under the
Shakespeare pension plan based on the indicated assumptions.
<TABLE>
<CAPTION>
APPROXIMATE ANNUAL PENSION UPON
RETIREMENT AT AGE 65 (A)
------------------------------------------
YEARS OF SERVICE
------------------------------------------
COVERED COMPENSATION 15 20 25 45
- -------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
$125,000.......................................... $ 26,300 $ 43,800 $ 61,300 $ 75,000
$150,000.......................................... 31,500 52,500 73,500 90,000
$175,000.......................................... 33,600 56,500 78,400 96,000
</TABLE>
- ------------------------
(a) An individual retiring at age 65 earns his maximum pension (as a percentage
of covered compensation) after approximately 43 years of service.
Compensation for 1997 that would be included in the calculation of covered
compensation and credited years of service at December 31, 1997 is shown below
for the individuals named in the Summary Compensation Table who are participants
in the Shakespeare Plan.
<TABLE>
<CAPTION>
COVERED YEARS OF
NAME COMPENSATION SERVICE
- --------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
David H. Herzberg.................................................... $ 160,000 18
J.Wayne Merck........................................................ $ 160,000 7
</TABLE>
The Stearns Manufacturing Company Salaried, Administrative and Clerical
Employees' Pension Plan (the "Stearns Plan") defines remuneration on which
annual benefits are based as the average of the participant's highest 60 months'
compensation. Compensation includes salary, wages, overtime pay, bonuses, and
commissions, subject to the $160,000 Code limit for 1997. The 1997 covered
compensation of Mr. Cook, the only individual named in the Summary Compensation
Table who participates in the Stearns Plan, was $160,000, and he had 18 years of
service as of December 31, 1997.
9
<PAGE>
The table below illustrates approximate annual benefits under the Stearns
Plan based on the indicated assumptions.
<TABLE>
<CAPTION>
APPROXIMATE ANNUAL PENSION UPON
RETIREMENT AT AGE 65 (A)
------------------------------------------
YEARS OF SERVICE
------------------------------------------
COVERED COMPENSATION 15 20 25 30
- -------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
$125,000.......................................... $ 26,100 $ 34,800 $ 43,500 $ 52,250
$150,000.......................................... 33,000 44,000 55,000 66,000
$175,000.......................................... 35,800 47,700 59,600 71,500
</TABLE>
- ------------------------
(a) An individual retiring at age 65 earns his maximum pension (as a percentage
of covered compensation) at 30 years of service.
DIRECTORS' COMPENSATION
In 1997 directors who were not salaried officers of the Company were paid
$1,500 per calendar quarter for their services as directors, $1,000 per calendar
quarter for each committee position held by them and $1,000 per meeting day for
each meeting of the Board of Directors and of any committee which they attended.
They were also reimbursed for out-of-pocket expenses. Directors may elect to
defer the receipt of fees. Interest on deferred fees is accrued quarterly based
on the average interest rate earned by the Company in the preceding quarter on
its short-term commercial paper. Under the Company's Directors' Medical Expense
Reimbursement Plan, non-employee directors are reimbursed at the rate of 185%
for up to $10,000 of medical and dental expenses not covered under other health
insurance plans. For 1997 an aggregate of $129,900 was paid under such plan.
Under the 1994 Incentive Stock Option Plan, Eligible Directors receive an
initial grant of 1,000 Nonqualified Stock Options (NQOs) on the first Grant Date
after their election and annual grants thereafter of 500 NQOs. All grants to
Eligible Directors are at fair market value on date of grant and are exercisable
as to 20% after one year from date of grant, an additional 30% after two years
and an additional 50% after three years, all exercisable amounts being
cumulative. In 1997 initial grants of 1,000 NQOs each were made to Susan E.
Engel and Jerry G. Goldress and grants of 500 NQOs each were made to Bernard I.
Forester, Abraham L. Gray, Hugh V. Hunter, John H. Offermans and John B. Simon.
Each grant was at a grant price of $29.88 per share, the closing price on the
January 2, 1997 grant date, and each was for a ten-year term.
The Company maintains a Non-Employee Directors' Benefit Plan, payable out of
the general funds of the Company, under which a non-employee director who is
vested (at least ten years of service as a director) is entitled to receive, in
general, an annual retirement benefit during the period commencing upon the
later of age 55 and the date the director retires from the Board of Directors
(the "Commencement Date") and ending upon the earlier of the director's death or
the number of years equal to the director's years of service as a non-employee
director. Under the Plan, the annual retirement benefit is the product of (i)
the director's average annual fees (based on the three-year period immediately
preceding retirement from the Board of Directors) and (ii) the sum of .55 plus
an additional .05 for each full year of service in excess of 11 years of service
and up to 20 years. A director may make an irrevocable election so that, in lieu
of the retirement benefit described above, the director's beneficiary would
instead receive, on the director's postretirement death, the discounted value of
such benefit. In the event of a change in
10
<PAGE>
control, as defined in the Plan, a vested director would receive on retirement
an actuarially reduced lump sum payment in lieu of instalment payments. Under
the terms of a retirement agreement between Mr. Forester and the Company, Mr.
Forester has waived any right to a retirement benefit under this Plan.
Mr. Forester receives benefits under a retirement agreement with the Company
that provides that he will act as a consultant to the Company for a period
ending December 31, 1998. For his consulting services, Mr. Forester received
cash compensation in the amount of $200,000 in 1997, as well as certain other
noncash benefits provided under the agreement. In addition, Mr. Forester
receives supplemental retirement benefits of approximately $319,300 each year
during his lifetime, and his survivor will receive a monthly death benefit equal
to the retirement benefit for a period of five years after his death. The
supplemental retirement benefit and death benefit are funded through a trust
that has Wells Fargo Bank as its trustee. The retirement agreement also provides
for the continuation of a pre-existing, split-dollar life insurance policy on
Mr. Forester's life. For 1997, the dollar value to Mr. Forester of the premiums
paid by the Company on this policy was $18,800.
COMPENSATION COMMITTEE REPORT
COMPENSATION OBJECTIVES AND PRACTICES
K2's executive compensation program is designed to help the Company attract,
motivate and appropriately reward management who are responsible for K2's
short-term and long-term profitability, growth and return to shareholders.
The key elements of the program consist of base salary, annual
performance-based cash awards and long-term incentive awards. Base salaries are
initially established by evaluating the responsibilities of the position, the
experience of the individual and the salaries for comparable positions in the
marketplace based on consultant surveys. Depending on the overall financial
performance of the Company, salaries are adjusted from time to time to reflect
increased responsibilities of the executive, to keep pace with competitive
practices and to reflect the performance of individual executives. The amount of
the annual performance-based cash awards available for allocation are based on
the excess earnings after the Company first achieves a specified return on
average shareholders' equity. The available awards are then allocated utilizing
performance criteria designed to create value for the Company and its
shareholders. The individuals' performances are subjectively evaluated against
their criteria. The program has been designed to place a significant amount of
compensation at risk by first setting annual base salaries at levels generally
near the 50th percentile of the marketplace for similar positions based on the
survey data obtained. The annual incentive award is then utilized to bring total
annual cash compensation (base salary plus annual incentive award) above the
average for comparable positions at similar-sized companies when targeted
superior performance levels are achieved. Stock incentives are provided to
reward management for taking actions that will contribute to the Company's
long-term growth and success, and to link their interests to those of K2's
shareholders.
COMPENSATION FOR THE NAMED EXECUTIVE OFFICERS
BASE SALARY. After maintaining key executive base salaries constant in
1996, the Committee increased salaries of the named executive officers for 1997
by varying amounts, which averaged 8%, based on survey results. After these
adjustments, the total base salaries of the named executive officers as a group
remained near the 50th percentile, according to survey data. For 1997, Mr.
Rodstein's base salary was increased 8% to $280,000, which was below the 50th
percentile, according to survey data.
11
<PAGE>
ANNUAL CASH INCENTIVE. The executives of the Company are eligible for
participation under the Executive Officers' Incentive Compensation Plan
("Corporate Plan"). For 1997, the "Executive Officers" who participated in the
Corporate Plan included the Chief Executive Officer, the Senior Vice President--
Finance, the Vice President and Director of Taxes, three other corporate vice
presidents, the Corporate Secretary and the Director of Business Development.
Pursuant to the Corporate Plan, the formula provided for an incentive
compensation bonus pool based on a percentage of incentive compensation income
in excess of a required return on average shareholders' equity. Performance
criteria were also adopted for the Corporate Plan participants to assist the
Committee in determining the allocation of the bonus pool.
In determining the Chief Executive Officer's incentive compensation award
for 1997, the Committee considered the Company's performance for the year in
terms of meeting sales and earnings targets, stock price performance, innovating
new products, generating sales from new products and implementing the Company's
quality and process improvement program. The Committee noted that the Company
did not meet its sales and earnings targets for 1997 (although actual earnings
were the second best in the Company's history) and that its stock price declined
nearly 16.5% for 1997 (which compares with a return of 11% for its peer
group--see Stock Price Performance Graph on page 5). The Committee, on the other
hand, noted that several recent product introductions allowed the Company to
extend its major brands into new categories, and that sales of new products in
its sporting goods and other recreational products segment accounted for more
than 20% of the segment's total. The Committee further noted that several key
process improvement measures demonstrated improved trends. Taking all of these
factors into consideration, an award of $223,300 was granted to the Chief
Executive Officer, which represents a decline of 47% from the $420,000 awarded a
year ago. The remaining named executive officers were also evaluated against
performance criteria and key objectives previously established under the
divisional or Corporate Plan, as appropriate, and awards totaling $517,900 were
granted to them. The 1997 awards represent a decline of 28% from the prior year
for those named executives who received awards in both years.
LONG-TERM STOCK INCENTIVE. For 1997, the Committee awarded long-term
incentives to key executives in the form of stock options having an exercise
price equal to the market price of the Company's stock on the date of grant and
vesting over three years. By utilizing such pricing and vesting, the Committee
intended that the full benefit would be realized only if stock price
appreciation occurs and if the key employee does not leave the Company during
that period.
In determining the number of options awarded to executive officers, the
Committee considered information provided by the Company's independent
compensation consultants, which included, among other things, market studies of
annual stock option grants as a percentage of shares outstanding. The
Committee's awards this year once again addressed management's concern regarding
the need to remain competitive in retaining and attracting executive talent by
granting stock options to a broader group of employees. The Committee believes
that equity interests held by management more closely align the interests of
shareholders and management. Against that background, in 1997 Mr. Rodstein was
granted options for 35,000 shares, and the other named executive officers were
granted options ranging from 20,000 to 8,000 shares.
John B. Simon, Chairman
Jerry E. Goldress
Hugh V. Hunter
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Goldress, Hunter, and Simon served on the Compensation Committee of
the Company during the year 1997. No member of the Committee was, during the
year 1997, either an officer or employee or a former officer or employee of the
Company or any of its subsidiaries, nor did any member have any relationship
with the Company which would be required to be disclosed.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Set forth below is the name, address and number of shares of Common Stock
beneficially owned as of March 31, 1998 by each person known to the Company to
own 5% or more of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
SHARES OF PERCENT OF
SHAREHOLDER COMMON STOCK CLASS
- ---------------------------------------------------------------------------------------- -------------- -----------
<S> <C> <C>
Trust under Company's Employee Stock Ownership Plan .................................... 2,009,374(a) 12.2
4900 South Eastern Avenue
Los Angeles, CA 90040
Franklin Resources, Inc. ............................................................... 1,359,432(b) 8.2
777 Mariners Island Boulevard
San Mateo, CA 94404
The Anthony Family Trust ............................................................... 1,001,249(c) 6.1
65 Park Lane Concord, MA 01742
</TABLE>
- ------------------------
(a) Includes shares allocated to the accounts of participants in the ESOP, the
voting of which is directed by such participants. Until shares are allocated
to the accounts of participants in the ESOP, the terms of the Trust require
the Trustee to vote those shares in the same proportion as the allocated
shares are voted.
(b) Based on the most recently filed Form 13G of Franklin Resources, Inc. dated
January 30, 1998.
(c) Based on the most recently filed Form 13D of The Anthony Family Trust dated
May 22, 1996.
13
<PAGE>
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED ON
NAME MARCH 31, 1998 (A) PERCENT OF CLASS (B)
- --------------------------------------------------------------------- ----------------------- ---------------------
<S> <C> <C>
Directors and Nominees for Director
Susan E. Engel..................................................... 700 *
Bernard I. Forester................................................ 407,898(d) 2.5
Jerry E. Goldress.................................................. 1,700 *
Abraham L. Gray.................................................... 623,433 3.8
Richard J. Heckmann................................................ 5,000 *
Hugh V. Hunter..................................................... 148,320 .9
Stewart M. Kasen................................................... 1,500 *
John H. Offermans.................................................. 2,107 *
Richard M. Rodstein................................................ 247,927 1.5
John B. Simon...................................................... 13,429 .1
Executive Officers (c)
John J. Rangel..................................................... 98,882 .6
David H. Herzberg.................................................. 60,850 .4
J. Wayne Merck..................................................... 9,090 .1
David G. Cook...................................................... 61,785 .4
All Directors and Executive Officers as a group (21)................. 1,881,316 11.2
</TABLE>
- ------------------------
(a) Includes the following shares subject to options exercisable within 60 days
of the date of this Proxy Statement: Susan E. Engel-200 shares; Bernard I.
Forester-600 shares; Jerry E. Goldress-200 shares; Abraham L. Gray-1,900
shares; Hugh V. Hunter-1,900 shares; John H. Offermans-1,900 shares; Richard
M. Rodstein-105,420 shares; John B. Simon-1,900 shares; John J.
Rangel-48,075 shares; David H. Herzberg-20,108 shares; J. Wayne Merck-1,000
shares; David G. Cook-19,454 shares; and all directors and officers as a
group-283,839 shares. With the exception of the shares referred to in the
preceding sentence and the shares allocated to the accounts of Mr. Rodstein
(13,338 shares), Mr. Rangel (6,892 shares), Mr. Herzberg (13,644 shares),
Mr. Merck (1,090 shares), Mr. Cook (2,687 shares), and all directors and
officers as a group (72,698 shares), under the Company's ESOP, each of the
named persons has sole voting and investment power with respect to the
shares beneficially owned by him.
(b) The shares subject to options described in note (a) for each individual were
deemed to be outstanding for purposes of calculating the percentage owned by
such individual.
(c) Executive officers named in the Summary Compensation Table (other than Mr.
Rodstein, whose securities holdings are listed above).
(d) Includes 3,469 shares held by the Bernard & Venessa Forester Foundation,
over which Mr. Forester exercises voting and investment power as an officer
of the Foundation.
* Less than .1%.
14
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file initial reports of ownership and
reports of changes of ownership of the Company's Common Stock with the
Securities and Exchange Commission. Executive officers and directors are
required to furnish the Company with copies of all Section 16(a) forms that they
file. Based upon a review of these filings and written representations from
certain of the Company's directors and executive officers that no other reports
were required, all such Forms were filed on a timely basis by reporting persons.
EMPLOYMENT OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors has
chosen the firm of Ernst & Young LLP as independent auditors to examine the
consolidated financial statements of the Company for the year 1998. A
representative of Ernst & Young LLP is expected to be present at the annual
meeting with the opportunity to make a statement, if he so desires, and to be
available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder intended to be presented at the Company's 1999
annual meeting of shareholders must be received by the Company no later than
December 4, 1998 for inclusion in the proxy statement and form of proxy for that
meeting.
OTHER MATTERS
The Board of Directors knows of no other business to be presented at the
meeting. If other matters do properly come before the meeting, the persons
acting pursuant to the proxy will vote on them in their discretion. A copy of
the 1997 Annual Report to shareholders is being mailed with this Proxy
Statement.
UPON THE WRITTEN REQUEST OF ANY SHAREHOLDER OF RECORD AS OF MARCH 31, 1998,
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1997 (EXCLUDING EXHIBITS) AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION WILL BE SUPPLIED WITHOUT CHARGE. REQUESTS SHOULD BE DIRECTED TO THE
SECRETARY OF K2 INC., 4900 SOUTH EASTERN AVENUE, LOS ANGELES, CALIFORNIA 90040.
/s/ Richard Rodstein
RICHARD M. RODSTEIN
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
LOS ANGELES, CALIFORNIA
APRIL 3, 1998
15
<PAGE>
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS PROXY
RICHARD M. RODSTEIN, BERNARD I. FORESTER and SUSAN E. McCONNELL, and each of
them, with full power of substitution, are hereby authorized to represent and to
vote the stock of the undersigned in K2 INC. at the Annual Meeting of
Shareholders to be held on May 7, 1998 and at any adjournment thereof as set
forth below:
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
FOR all nominees listed at right / / SUSAN E. ENGEL
(EXCEPT AS MARKED TO THE WILFORD D. GODBOLD, JR.
CONTRARY BELOW) RICHARD M. RODSTEIN
</TABLE>
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED ABOVE / /
CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
2. PROPOSAL TO RATIFY THE SELECTION OF ERNST & YOUNG LLP as independent
auditors for 1998.
/ / FOR / / AGAINST / / ABSTAIN
3. Upon or in connection with the transaction of such other business as may
properly come before the meeting or any adjournment thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED AND, UNLESS OTHERWISE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR PROPOSAL 2.
Date _______________________, 1998
__________________________________
Signature
__________________________________
Signature if held jointly
Please sign exactly as name
appears at left. When shares are
held by joint tenants, both should
sign. When signing as attorney,
executor, administrator, trustee
or guardian, please give full
title as such. If a corporation,
please sign in full corporate name
by President or other authorized
officer. If a partnership, please
sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __
__ __ __ __ __ __ __ __ __
