Head NV again saw tremendous benefit to reporting their first quarter results in U.S. Dollars, as currency exchange rates added the appearance of large increases that were still pretty healthy when measured in the companys native Euro currency. But the upside on the top-line and gross margins was also a drag on the bottom as expenses also increased, due in large part to the stronger Euro against the Dollar. Head also took a one-time charge of $7.5 million due to the early redemption of old 10.75% senior notes and other debt issuance costs associated with newer 8.5% senior notes issued in January.
The charge and the FX rate impact combined to force a wider net loss for the period, but the company pointed out that the operating loss was considerably improved since Q1 last year, narrowing 47.7% to $4.6 million this year versus $8.9 million in the year-ago period.
Measured in Euros, sales would have still increased more than 10% to 75.6 million for the quarter and the net loss would have increased 24.9% to 11.5 million. Europe delivered 60% of overall revenue for the quarter, while North America contributed 29% and the Rest of World represented 11% of consolidated sales.
Winter Sports revenues, which are primarily generated in Europe, grew 15.0% in the quarter when measured in Euros. Europe increased 23.8% in Euros and represented 84% of Winter Sports sales. North America was 13% of sales and the Rest of World region was just 3% of total sales. Gross margins in the division increased 600 basis points to 25.7% of sales.
HED said that Q1 revenue growth was primarily driven by Bindings, which grew 62%, or up 37% in Euros, in the period versus last year. Skis reportedly increased 30% in Q1, while Boot sales inched up 2.4%. In Euros, Skis would have increased approximately 10%, while Boots would have declined roughly 12% versus Q1 2003. Snowboard sales were up 34% in U.S. Dollars, or 15% in Euros. North America saw the only regional sales decline in Winter Sports.
The product mix as a percentage of revenues changed slightly this year at Head. Ski sales fell 200 basis points to 41.0% of sales, while snowboard showed a significant increase in dollars, but remained flat at 9.0% of sales. Bindings increased 600 basis points to 37.0% of sales but boots decreased 400 basis points to 13.0%.
Racquet Sports, which is fairly balanced between North America and Europe, was relatively flat to last year when measured in Euros, but showed a 16.7% gain in U.S. Dollar terms. The company said that the segment rode a wave of renewed energy in the U.S. in Q1, citing TIA data that showed the tennis racket market increased 23.2% in the period. Gross margins for the division rose 150 basis points to 41.7% of sales.
Diving division revenues, 72% of which are generated in Europe, increased roughly 38% in Euro terms. Europe sales increased nearly 40% measured in Euros and jumped 63% in the reporting U.S. Dollar. North America sales declined about 5% in Dollars, while the Rest of World region saw sales triple in both $ and .
