ROTTERDAM, The Netherlands, Feb. 24, 2005 (PRIMEZONE) -- Head N.V. (NYSE:HED) (VSX:HEAD), a leading global manufacturer and marketer of sports equipment, announced the following unaudited results today.For the three months ended 31 December 2004 compared to the three months ended 31 December 2003:
* Net revenues increased by 10% to $177.9 million
* Operating profit before restructuring costs decreased by $6.2 million to $11.8 million
* Operating profit after restructuring costs increased by $0.6 million to $11.1 million
For the twelve months ended 31 December 2004 compared to the twelve months ended 31 December 2003:
* Net revenues increased by 11% to $479.1 million
* Substantial sales growth in Winter Sports division
* Operating profit before restructuring costs and gain on sale of property increased by $3.1 million to $11.7 million
* Operating profit after restructuring costs and gain on sale of property increased by $14.8 million to $15.0 million
* Market share increases through innovative products in both Winter and Racquet Sports
Johan Eliasch, Chairman and CEO, commented: "The final quarter of the year 2004 proved to be a mixed bag for the group. As anticipated the momentum experienced in the nine months to September trailed off, especially in the Racquet Sports division where tough market conditions, particularly for balls, resulted in declining sales. In the Winter Sports division however, sales improved in the final quarter of the year versus 2003. This was due in part to higher volumes but also due to the continued strengthening of the euro against the U.S. dollar.
"Our restructuring programme continues, in 2004 we finalised the shut down of the US diving warehouse, the closure of our Irish tennis ball facility and the move of our manufacturing operations in Estonia to the Czech Republic. The positive effects of these measures are impacting our results, but we recognise that in part, they will also be offset by substantial raw material price increases and pricing pressures in the market. We plan to continue to identify and implement cost savings initiatives in order to compete effectively.
"Our outlook remains cautious and we believe that it will be difficult to match the 2004 operating results in 2005, although our net income should improve."
Revenues
For the Three Months For the Twelve Months
Ended 31 December, Ended
31 December,
2003 2004 2003 2004
(in thousands)
Product category:
Winter Sports......... $ 106,343 $ 124,920 $ 188,768 $ 223,211
Racquet Sports........ 37,612 32,507 166,417 168,037
Diving............. 14,939 16,846 66,322 75,453
Licensing............ 2,948 3,225 9,702 11,059
Other........... 409 386 1,394 1,326
Total Revenues...... $ 162,251 $ 177,884 $ 432,602 $ 479,085
Winter Sports
Winter Sports revenues for the three months ended December 31, 2004 increased by $18.6 million, or 17.5%, to $124.9 million from $106.3 million in the comparable period in 2003. For the twelve months ended December 31, 2004 Winter Sports revenues increased by $34.4 million, or 18.2%, to $223.2 million from $188.8 million in 2003. This increase was due to the strengthening of the euro against the U.S. dollar, higher sales volumes for bindings, skis and snowboard equipment and higher sales volumes and prices for our ski boots.
Racquet Sports
Racquet Sports revenues for the three months ended December 31, 2004 decreased by $5.1 million, or 13.6%, to $32.5 million from $37.6 million in the comparable 2003 period. For the twelve months ended December 31, 2004 Racquet Sports revenues increased by $1.6 million, or 1.0%, to $168.0 million from $166.4 million in 2003. This increase resulted mainly from the strengthening of the euro against the U.S. dollar. Although sales of our racquets remained stable we faced a decrease in sales volumes and prices for our balls.
Diving
Diving product revenues for the three months ended December 31, 2004 increased by $1.9 million, or 12.8%, to $16.8 million compared with $14.9 million in the same period in 2003. For the twelve months ended December 31, 2004, revenues increased by $9.1 million, or 13.8%, to $75.5 million from $66.3 million in 2003. This results mainly from increased sales volumes due to better product availability and the strengthening of the euro against the U.S. dollar.
Licensing
Licensing revenues for the three months ended December 31, 2004 increased by $0.3 million, or 9.4%, to $3.2 million from $2.9 million in the comparable 2003 period. For the twelve months ended December 31, 2004, revenues increased by $1.4 million, or 14.0%, to $11.1 million from $9.7 million in 2003 mainly due to increased revenues from existing contracts and from new licensing agreements. Other
Other revenues include amounts billed to customers for shipping and handling and are recognized also as selling and marketing expense.
Profitability
For the three months ended December 31, 2004, gross profit increased by $1.5 million to $65.5 million from $64.1 million in the comparable 2003 period. Gross margin decreased to 36.8% for the three months ended December 31, 2004 from 39.5% in the comparable 2003 period. For the twelve months ended December 31, 2004, gross profit increased by $18.1 million to $184.7 million from $166.6 million in 2003 due to increased revenues. Gross margin increased to 38.6% in 2004 from 38.5% in 2003 due to improved operating performance and product mix of sales.
For the three months ended December 31, 2004, selling and marketing expense increased by $6.8 million, or 19.6%, to $41.7 million from $34.9 million in the comparable 2003 period. For the twelve months ended December 31, 2004, selling and marketing expense increased by $12.1 million, or 10.2%, to $130.6 million from $118.5 million in 2003. The increase was due mainly to the strengthening of the euro against the U.S. dollar, which adversely impacted our predominantly euro denominated costs. In addition, our variable distribution costs increased due to higher sales.
For the three months ended December 31, 2004, general and administrative expense (excluding non-cash compensation expense) increased by $0.9 million, or 8.0%, to $11.9 million from $11.1 million in the comparable 2003 period. For the twelve months ended December 31, 2004, general and administrative expense increased by $3.0 million, or 7.8%, to $41.9 million from $38.8 million in 2003. The increase was due mainly to the strengthening of the euro against the U.S. dollar, which adversely impacted our predominantly euro denominated costs.
We recorded $0.2 million and $0.7 million, in the three month and twelve month periods ended December 31, 2003, respectively and $0.1 million and $0.6 million, in the three month and twelve month periods ended December 31, 2004, respectively, as non-cash compensation expense due to the grant of stock options under our stock option plans of 1998 and 2001, and the resulting amortization expense.
We recorded a gain from the sale of our premises in Ireland of $5.7 million in the twelve month period ended December 31, 2004.
We recorded restructuring costs of $0.7 million and $2.3 million, in the three month and twelve month periods ended December 31, 2004 consisting of dismissal and transfer costs in connection with the closing of our production facility in Mullingar, Ireland and our plant in Tallinn, Estonia. In comparison, in 2003 we incurred $7.5 million and $8.4 million, in the three month and twelve month periods ended December 31, 2003, respectively, to implement a cost reduction program.
As a result of the foregoing factors, for the three months ended December 31, 2004, operating income slightly increased by $0.6 million to $11.1 million from $10.5 million in the comparable 2003 period. For the twelve months ended December 31, 2004, operating income increased by $14.8 million to $15.0 million from $0.2 million in 2003.
For the three months ended December 31, 2004 interest expense increased by $0.5 million, or 13.7%, to $4.3 million from $3.8 million in the comparable 2003 period. For the twelve months ended December 31, 2004 interest expense increased by $11.7 million or 83.6% to $25.7 million from $14.0 million in 2003. This increase was mainly due to the following: write-off of the capitalized debt issuance costs of $3.2 million relating to our former 10.75% senior notes, which were repaid with proceeds from our new 8.5% senior notes in January 2004; the premium of $4.4 million for the early redemption of the 10.75% senior notes and higher interest expenses due to increased debt of the group. The strength of the euro against the U.S. dollar further impacted these predominantly euro denominated expenses.
For the three months ended December 31, 2004 interest income increased by $0.5 million to $0.8 million from $0.3 million in the comparable 2003 period. For the twelve months ended December 31, 2004 interest income increased by $1.1 million to $2.1 million from $1.1 million in the comparable 2003 period. This increase was due mainly to higher cash on hand as well as due to the strengthening of the euro against the U.S. dollar.
For the three months ended December 31, 2004 we recorded a foreign currency exchange loss of $0.9 million, compared to a loss of $0.9 million in the comparable 2003 period. For the twelve months ended December 31, 2004, we recorded a foreign currency exchange loss of $0.6 million, compared to a loss of $1.1 million in 2003.
For the three months ended December 31, 2004 we incurred other expense, net of $0.1 million compared to $0.1 million other income, net in the comparable 2003 period. For the twelve months ended December 31, 2004, other expense, net increased by $0.08 million to a net expense of $0.1 million from $0.02 million in 2003.
For the three months ended December 31, 2004 income tax expense increased by $2.3 million to $6.5 million from $4.3 million in the comparable 2003 period. For the twelve months ended December 31, 2004, income tax expense increased by $26.8 million to $27.7 million from $0.8 million in 2003. This increase in income tax expense is mainly due to a reduction in the Austrian tax rate which led to a decrease in deferred tax assets resulting from tax losses carried forward of $24.9 million.
As a result of the foregoing factors, for the three months ended December 31, 2004 the Company had net income of $0.1 million, compared to net income of $1.9 million in the comparable 2003 period. For the twelve months ended December 31, 2004, the Company had a net loss of $36.9 million, compared to a net loss of $14.7 million in 2003. Consolidated Results
Consolidated Results
For the Three Months For the Twelve Months
Ended 31 December, Ended 31 December,
2003 2004 2003 2004
(in thousands)
Total $ 162,251 $ 177,884 $ 432,602 $ 479,085
revenues.............
Cost of 98,184 112,367 266,023 294,360
sales................
Gross 64,067 65,517 166,580 184,725
profit...............
Gross 39.5% 36.8% 38.5% 38.6%
margin..............
Selling & marketing 34,850 41,671 118,465 130,582
expense......
General & administrative
expense (excl. non-cash 11,057 11,945 38,847 41,883
compensation expense)...
Non-cash compensation 164 139 654 555
expense....
Gain on sale of - - - (5,650)
property........
Restructuring 7,493 676 8,368 2,347
costs...........
Operating 10,503 11,087 245 15,008
income............
Interest (3,759) (4,273) (13,999) (25,699)
expense..........
Interest 319 821 1,050 2,121
income............
Foreign exchange (938) (906) (1,103) (606)
loss.........
Other income (expense), 97 (115) (18) (97)
net......
Income tax (4,273) (6,529) (832) (27,661)
expense..........
Net income $ 1,949 $ 84 $ (14,657) $ (36,935)
(loss)..........
New York Stock Exchange Listing
As noted in our third quarter results announcement, the cost of compliance with the requirements of the Sarbanes-Oxley Act has had, and will continue to have an impact on our operating results. In light of these costs our Management Board analysed and discussed the benefits and issues associated with our current listings, particularly the listing on the New York Stock Exchange (the "NYSE"). As a result of this analysis, the Management Board made a proposal to the Supervisory Board to de-list our shares from the NYSE and to terminate the Common Share Agreement. The Supervisory Board approved this proposal.
The delisting and termination of the Common Share Agreement is subject to the approval of our shareholders at the Annual General Meeting to be held on May 25th. We will provide details regarding the Annual General Meeting in early May.
If the resolution is approved by the shareholders, we will apply for the de-listing. However, we will need to comply with current regulations and will not therefore be able to file for de-registration from the SEC unless and until the number of US shareholders, whether holding directly or through nominees, falls below 300. Furthermore, the number of US shareholders must remain below 300 after de-registration in order to avoid re-commencement of SEC reporting requirements.
Whilst we retain our registration with the SEC, we will continue to comply with all reporting requirements of the SEC including those of the Sarbanes-Oxley Act.
About Head
Head NV is a leading global manufacturer and marketer of premium sports equipment.
Head NV's ordinary shares are listed on the New York Stock Exchange ("HED") and the Vienna Stock Exchange ("HEAD").
Our business is organized into four divisions: Winter Sports, Racquet Sports, Diving and Licensing. We sell products under the Head (tennis, squash and racquetball racquets, alpine skis and ski boots, snowboards, bindings and boots), Penn (tennis and racquetball balls), Tyrolia (ski bindings), and Mares/Dacor (diving equipment) brands.
We hold leading positions in all of our product markets and our products are endorsed by some of the world's top athletes including Andre Agassi, Gustavo Kuerten, Marat Safin, Juan Carlos Ferreira, Johann Grugger and Maria Riesch.
For more information, please visit our website: www.head.com
This press release should be read in conjunction with the company's quarterly report for the period ended 31 December 2004.
This press release and the statements of Mr. Johan Eliasch quoted herein contain certain 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, which are intended to be covered by the safe harbors created thereby. Investors are cautioned that all forward-looking statements involve risks and uncertainties. Although Head believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this press release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included and quoted herein, the inclusion of such information should not be regarded as a representation by Head or any other person that the objectives and plans of Head will be achieved.
The press release including tables can be downloaded from the following link: http://hugin.info/133711/R/981989/145884.pdf