Head NV saw growth across most divisions in Q4, with only Diving showing a decline, but net income took a plunge for the quarter and the net loss for the year widened almost six fold. Head again benefited greatly from its reporting format in U.S. dollars, which showed total Q4 sales increasing 19.2% to $161.8 million.
Measured in Euros, the business would have shown an increase of just 0.3%. Net income fell 76.7% to $1.9 million from $8.4 million in the year-ago quarter, due primarily from $7.5 million in pre-tax restructuring costs in the quarter. Before restructuring, operating profit actually rose 6.3% for the quarter.
At constant exchange rates, full year sales would have declined 12.9% for the year to approximately $382.5 million. In Euros, sales dipped 7.1%. Europe accounted for 59% of sales for the year, while North America contributed 28% and the Rest of World region made up the 13% balance.
Winter Sports sales increased 30.6% for the quarter to $106.3 million from $81.4 million in the prior year period. The stronger Euro was a key driver for the quarter and the year, but the company also pointed to a “positive reaction” to new products that leads Head to believe they can expand market share in 2004. Winter Sports dominated late in the year, accounting for almost 66% of the total business for the quarter versus 60% in the year-ago quarter and almost 44% for the year compared to just over 37% last year.
Racquet Sports reported a 5.5% gain in quarterly sales to $37.6 million from $35.6 million in Q4 2002. Margins for the quarter improved 120 basis points to 36.5% of sales from 35.3% in the year-ago period, but full year margins slipped 120 basis points to 38.3% from 39.5% last year.
The declines in sales and margins for the year were a result of a tough first half, “particularly in the U.S. tennis racquet and tennis ball markets”. Racquet sales for the year actually declined about 5% versus 2002 to approximately $80 million, or 48% of Racquet Sports sales versus 50% of sales last year. Sales of tennis Balls increased roughly 7% for the year to approximately $63 million, or 38% of the divisions sales, up from 35% in 2002.
In units, tennis racquets were down almost 4% to 1.77 million units for the year. Tennis Balls sales were off roughly 2% to 6.67 million dozen in 2003.
The increased revenues and gross margin for the fourth quarter were attributed to “excellent sales” of the brands new Liquidmetal tennis racquets series. Head is expecting the Q4 momentum to carry over into 2004.
Already, bookings are up about 8% over last year, with racquet sales up approximately 20% versus LY.
Diving revenues decreased by 6.2% for the quarter to $14.9 million, down from $15.9 million in the comparable 2002 period. The slight increase in sales for the year is a bit deceiving with 67% of Diving sales coming from Europe where sales actually declined about 6% for the year when measured in Euros.
Gross margins for the division were “impacted by declines in certain local currency sales” and by the “impact of currency movements on costs”. Gross margin fell 840 basis points to 25.5% of sales during the quarter and was off 440 basis points for the year to 32.4% of sales versus 36.8% in 2002.
Mares makes up 81% of the Diving division sales for the year and Dacor contributes 12% of sales. The balance is comprised of Sporasub sales.
Licensing revenues increased by $200,000 to $2.9 million for the fourth quarter.
Inventory, while showing an increase in U.S. dollars, is actually down 4.7% from the same period last year, when measured in constant currencies.
