AMSTERDAM, Netherlands, Aug. 10, 2006 (PRIMEZONE) -- Head N.V. (NYSE:HED) (VSX:HEAD), a leading global manufacturer and marketer of sports equipment, announced the following results today.
For the three months ended June 30, 2006 compared to the three months ended June 30, 2005:
-- Net revenues were down 5.3% to EUR 63.8 million
-- Operating result before restructuring costs and gain on sale of
property, decreased by EUR 3.2 million to a loss of EUR 2.9 million.
-- The loss for the period was EUR 4.1 million compared to a profit of EUR
3.2 million in 2005.
For the six months ended June 30, 2006 compared to the six months ended June 30, 2005:
-- Net revenues were up 1.1% to EUR 131.5 million
-- Operating result, before restructuring costs and gain on sale of
property, decreased by EUR 0.3 million to a loss of EUR 7.1 million.
-- The loss for the period was EUR 9.7 million compared to EUR 3.8
million loss for HY 2005.
Johan Eliasch, Chairman and CEO, commented:
"The half-year results have met our expectations, with revenues & gross margins in line with prior year.
"The Winter Sports division, in particular, has performed strongly, with encouraging revenue growth, and solid margin improvement. Conditions for the Racquet Sports division have been challenging in Q2 06; the equivalent 05 period saw the launch of the Flexpoint technology, and 2006 margins have been impacted by raw material price increases for balls.
"Based on our half-year results, we remain positive in our outlook & continue to anticipate an improvement on last year's results."
Winter Sports
Winter Sports revenues for the three months ended June 30, 2006 decreased by EUR 0.6 million, or 6.0%, to EUR 9.6 million from EUR 10.2 million in the comparable 2005 period due to slower sales in the 2nd Quarter 2006. For the six months ended June 30, 2006, Winter Sports revenues increased by EUR 3.7 million, or 14.0%, to EUR 29.8 million from EUR 26.1 million in the comparable 2005 period. This increase was due to higher sales volumes of skis, bindings, ski boots and snowboard equipment as a consequence of good snow conditions in the winter season 2005/2006 and relatively low inventory at retail level.
Racquet Sports
Racquet Sports revenues for the three months ended June 30, 2006 decreased by EUR 0.8 million, or 2.1%, to EUR 36.6 million from EUR 37.4 million in the comparable 2005 period. This was mainly due to lower sales prices for tennis racquets due to the introduction of our Flexpoint racquets in the 2nd. quarter of 2005. For the six months ended June 30, 2006, Racquet Sports revenues increased by EUR 3.5 million, or 5.1%, to EUR 72.9 million from EUR 69.3 million in the comparable 2005 period. This increase was mainly due to higher sales volumes in tennis racquets and balls partly offset by decreased sales volumes of our bags. In addition, the weakening of the euro against the U.S. dollar in the reporting period contributed to the positive development.
Diving
Diving revenues for the three months ended June 30, 2006 decreased by EUR 0.9 million, or 5.1%, to EUR 16.8 million from EUR 17.7 million in the comparable 2005 period. For the six months ended June 30, 2006, Diving revenues decreased by EUR 4.3 million, or 13.3%, to EUR 27.9 million from EUR 32.1 million in the comparable 2005 period. This decrease was mainly due to a special product launch in the first quarter of 2005 (Limited Edition) which was not repeated in 2006.
Licensing
Licensing revenues for the three months ended June 30, 2006 decreased by EUR 1.1 million, or 32.7%, to EUR 2.2 million from EUR 3.3 million in the comparable 2005 period. For the six months ended June 30, 2006, licensing revenues decreased by EUR 0.9 million, or 15.7%, to EUR 4.7 million from EUR 5.6 million in the comparable 2005 period due to termination of a footwear license agreement which will be replaced by our own distribution and a termination of an apparel licence agreement in the UK which will be replaced next year.
Profitability
Sales deductions for the three months ended June 30, 2006 increased by EUR 0.2 million, or 11.4%, to EUR 1.5 million from EUR 1.3 million in the comparable 2005 period. For the six months ended June 30, 2006, sales deductions increased by EUR 0.5 million, or 18.3%, to EUR 3.7 million from EUR 3.1 million in the comparable 2005 period due to increased sales in winter sports and racquet sports.
Gross Profit for the three months ended June 30, 2006 decreased by EUR 3.8 million to EUR 26.1 million from EUR 29.9 million in the comparable 2005 period. Gross margin decreased to 40.9% in 2006 from 44.4% in the comparable 2005 period. This was mainly due to decreased gross profit in tennis balls due to increased material prices, tennis racquets caused by unfavorable country mix and the launch of Flexpoint racquets in 2nd quarter 2005 and lower gross profit in license due to lower revenues. For the six months ended June 30, 2006 gross profit decreased by EUR 0.2 million to EUR 52.7 million from EUR 52.9 million in the comparable 2005 period. Gross margin decreased to 40.1% in 2006 from 40.7% in the comparable 2005 period. Positive development in all of our winter sports product lines were offset by reduced gross profit in diving and licensing due to lower revenues.
Selling and Marketing Expense for the three months ended June 30, 2006, increased by EUR 0.2 million, or 1.1%, to EUR 21.6 million from EUR 21.4 million in the comparable 2005 period. For the six months ended June 30, 2006, selling and marketing expenses increased by EUR 0.2 million, or 0.5%, to EUR 44.6 million from EUR 44.4 million in the comparable 2005 period. This increase was mainly due to the weakening of the euro against the U.S. dollar and higher advertising and departmental selling expenditures.
General and Administrative Expenses for the three months ended June 30, 2006, remained stable compared to the comparable 2005 period at EUR 7.7 million. For the six months ended June 30, 2006, general and administrative expenses increased by EUR 0.5 million, or 3.3%, to EUR 15.5 million from EUR 15.0 million in the comparable 2005 period. This increase was due to higher non-cash compensation expenses of EUR 0.6 million, resulting from the new Head Executive Stock Option Plan 2005 implemented in the third quarter 2005 as well as due to the weakening of the euro against the U.S. dollar.
As a result of the foregoing factors, for the three months ended June 30, 2006, the Company reported an operating loss of EUR 2.9 million compared to an operation profit of EUR 3.7 million in the comparable 2005 period. For the six months ended June 30, 2006 the operating loss increased by EUR 3.7 million to EUR 7.1 million from EUR 3.4 million in the comparable 2005 period. Operating loss for the six months ended June 30, 2006 before the sale of property and restructuring costs increased by EUR 0.3 million compared to the comparable 2005 period.
For the three months ended June 30, 2006, interest expense decreased by EUR 0.1 million, or 4.0%, to EUR 3.1 million from EUR 3.2 million in the comparable 2005 period. For the six months ended June 30, 2006, interest expense decreased by EUR 0.4 million, or 6.2%, to EUR 6.1 million from EUR 6.6 million in the comparable 2005 period. This decrease was due to the repurchase of a portion of our 8.5% senior notes in 2005.
For the three months ended June 30, 2006, interest income decreased by EUR 0.8 million, or 62.5%, to EUR 0.5 million from EUR 1.3 million in the comparable 2005 period. For the six months ended June 30, 2006, interest income decreased by EUR 0.7 million, or 43.9%, to EUR 0.9 million from EUR 1.5 million in the comparable 2005 period. This decrease was due to the gain of EUR 0.9 million on the repurchase of our 8.5% senior notes realized in 2005.
For the three months ended June 30, 2006, the Company had other non-operating expense, net of EUR 0.1 million compared to other non-operating income, net of EUR 0.8 million in the comparable 2005 period. For the six months ended June 30, 2006 other non-operating result decreased by EUR 1.5 million mainly due to foreign currency fluctuations which resulted in a gain in the comparable 2005 period.
For the three months ended June 30, 2006, income tax benefit was EUR 1.5 million, an increase of EUR 0.8 million compared to income tax benefit of EUR 0.7 million in the comparable 2005 period. For the six months ended June 30, 2006, income tax benefit was EUR 2.8 million, a decrease of EUR 0.4 million compared to income tax benefit of EUR 3.1 million in the comparable 2005 period due to the decrease in pre-tax loss for which the realization through future taxable profits is probable.
As a result of the foregoing factors, for the three months ended June 30, 2006, the Company had a loss of EUR 4.1 million, compared to an income of EUR 3.2 million in the comparable 2005 period. For the six months ended June 30, 2006, the Company had a loss of EUR 9.7 million, compared to a loss of EUR 3.8 million in the comparable 2005 period.
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 and tennis balls), 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, Marat Safin, Swetlana Kusnezowa, Bode Miller, Johann Grugger, Marco Buchel 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 report for the 6 months ended June 30, 2006.
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 full press release including tables can be downloaded from the following link: http://hugin.info/133711/R/1068360/181011.pdf