Head NV reported that sales for the 2012 first quarter increased 17.1 percent to €70.1 million ($92 mm) compared to the first three months of the prior year driven by Racquet Sports and compounded by favorable exchange rate movements and positive results from the other divisions. Sales for the quarter were up 15.6 percent in currency-neutral terms.

Winter Sports sales for the period where up 4.2 percent to €13.6 million ($18 mm). This, however, is not a key delivery period for the division and consists mainly of close out sales and some deliveries of bindings under contract manufacturing agreements for the next season. The increase in the quarter was mainly due to earlier shipment of the bindings under contract manufacturing.

The company said the period is key for the Winter Sports Division in securing orders for the forthcoming 2012/13 winter season. Due to the very mild winter and late snow in both Europe and North America in 2011/12, sell through at retail was said to be “considerably down” and this is impacting pre-season orders for next year. “We believe that the worldwide winter sports market will be substantially down in 2012 and this will significantly impact our winter sports sales in the year,” said the company in a release.

Head said the warm weather that has impacted the winter sports market has had the opposite effect on the racquet sports market which has started the year positively in North America. In addition Japan also seems to have recovered from the impact of the tsunami.

Racquet Sports Division sales jumped 21.3 percent to €42.2 million ($55.4 mm) during the first three months of 2012 compared to the first three months of 2011. Growth came from both increases in volumes of racquets and balls and positive movements in average selling prices. A number of new products were introduced in the first quarter of the year, and we would not expect the current growth to continue throughout the year.

Diving Division sales grew 12.3 percent €12.7 million ($16.7 mm) in the first quarter compared to the comparable period in 2011. As the second quarter is more reliant on our European sales we believe that this level of growth will be hard to maintain.

Both Licensing and Sportswear Divisions increased in the period, but from a low base.

Adjusted operating loss for the period improved by €2.9 million due to higher sales being offset in part by higher selling and marketing costs. Gross margins stayed flat, with higher raw material prices being compensated for by higher average selling prices.

Net Interest decreased by €1.3 million in the three months ended March 31, 2012 compared to the first three months in 2011 as the interest rates for our new financing agreements are lower than those of the Senior Secured Notes that we had in place in 2011.

The non-cash disagio costs incurred in 2011 were due to the buy back of the Senior Secured Notes in March of that year which led to the acceleration of the amortization of the non-cash Disagio costs.

As a result of the foregoing factors, for the three months ended March 31, 2012, Head had a net loss of €2.2 million (-$3 mm), compared to a net loss of €7.7 million (-$11 mm) in the comparable 2011 period.

Net cash provided by operating activities improved by €1.3 million in the first quarter of 2012 compared to 2011 due to the net impact of higher profitability and increased working capital.
Net debt increased by €13.8 million from 31st March 2011 to 31st March 2012 due mainly to higher working capital needs.

Head said that the overall 2012 appears to have started well, but will be marred by the warm weather at the beginning of the 2011/12 ski season and weak consumer demand. “We expect to see a slow down in our sales, especially in the third and fourth quarters of the year and anticipate that this will cause operating results for 2012 to deteriorate compared to 2011,” said the press release.