Head N.V. reported that net revenues for the first quarter increased 7.5% to 61.6 million from 57.3 million last year. The company slimmed its net loss to a loss of 3.5 million compared to a 9.6 million loss in Q1 2007.
“Following our poor results for 2007, the first quarter for 2008 has been positively impacted by the good conditions experienced during the recent Winter Sport season and the success of our race team. This however has not been fully reflected in the operating profit of the company as a result of lower gross margins in Winter Sports and Diving and higher selling and marketing costs. Overall our operating loss, excluding the share based compensation income and expense, has improved by 0.6m in the quarter.
“We feel that the Winter Sports Industry has not fully recovered from the poor season it experienced in 2006/07 and the results in Q1 2008 are not indicative of the full year outcome. Bookings for the 2008/09 season, which will make up the majority of our sales in the Winter Sports Division in 2008, suggest that while we should see an improvement this year, we will not reach sales levels achieved in 2006.
“In our other divisions, market conditions are tough due to the current economic climate and the discretionary nature of our products and as a result, for the group, we are currently anticipating an operating loss in the region of that achieved in 2007.”
Winter Sports
Winter Sports revenues for the three months ended March 31, 2008 increased 43.2%, to 15.4 million from 10.8 million in the comparable 2007 period. This increase was due to higher sales volumes of all of the company's winter sports products compared to sales volumes of the first quarter 2007 which were extremely low due to bad snow conditions in the winter season 2006/07 causing lower re-orders.
Racquet Sports
Racquet Sports revenues for the three months ended March 31, 2008 decreased 1.7%, to 32.4 million from 33.0 million in the comparable 2007 period. This decrease was due the strengthening of the euro against the U.S. dollar in the reporting period partially offset by higher sales volumes of tennis racquets and sales from our newly introduced tennis footwear.
Diving
Diving revenues for the three months ended March 31, 2008 increased 3.3%, to 13.9 million from 13.4 million in the comparable 2007 period. This increase was mainly driven by the introduction of new advanced products but negatively affected by the strengthening of the euro against the U.S. dollar.
Licensing
Licensing revenues for the three months ended March 31, 2008 decreased 5.1%, to 1.6 million from 1.7 million in the comparable 2007 period due to fewer licensing agreements.
Profitability
Sales deductions for the three months ended March 31, 2008 increased 11.5%, to 1.7 million from 1.5 million in the comparable 2007 period due to increased sales.
Gross Profit. For the three months ended March 31, 2008 gross profit increased by 1.5 million to 24.8 million from 23.4 million in the comparable 2007 period. This increase was due to higher sales. Gross margin decreased to 40.3% in 2008 from 40.7% in the comparable 2007 period negatively affected by increased raw material prices.
Selling and Marketing Expense. For the three months ended March 31, 2008, selling and marketing expense increased by 0.6 million, or 2.6%, to 24.9 million from 24.2 million in the comparable 2007 period. This increase was mainly due to higher advertising costs mainly for our ski racing team.
General and Administrative Expense. For the three months ended March 31, 2008, general and administrative expenses remained stable compared to the comparable 2007 period.
Share-Based Compensation Expense (Income).For the three months ended March 31, 2008, we recorded 3.6 million of share-based compensation income for our Stock Option Plans compared to 1.3 million of share-based compensation expense in the comparable 2007 period due to the decrease in our share price which led to a decrease of the liability due to the option holders.
Other Operating Income, net. For the three months ended March 31, 2008, other operating income, net decreased by 0.2 million, or 32.3%, to 0.4 million from 0.6 million in the comparable 2007 period due to a release of an environmental accrual for our Estonian premises in 2007.
Operating Loss. As a result of the foregoing factors, operating loss for the three months ended March 31, 2008 decreased by 5.5 million to 3.4 million from 8.9 million in the comparable 2007 period.
Interest Expense. For the three months ended March 31, 2008, interest expense remained stable compared to the comparable 2007 period.
Interest Income. For the three months ended March 31, 2008, interest income decreased by 0.2 million, or 41.0% to 0.3 million from 0.6 million in the comparable 2007 period. This decrease was due to lower cash and cash equivalents.
Other Non-operating Income (Expense), net. For the three months ended March 31, 2008, other non-operating expense, net decreased by 0.5 million to income of 0.1 million from expense of 0.4 million in the comparable 2007 period mainly attributable to foreign currency loss in 2007.
Income Tax Benefit (Expense). For the three months ended March 31, 2008, the income tax benefit was 2.6 million, an increase of 0.3 million compared to income tax benefit of 2.3 million in the comparable 2007 period due to lower current income tax expense. For the three months ended March 31, 2008, the deferred income tax benefit remained stable based on the comparable loss before share-based compensation (income) expense as this income/expense has no tax effect.
Net Loss. As a result of the foregoing factors, for the three months ended March 31, 2008, we had a net loss of 3.5 million, compared to a net loss of 9.6 million in the comparable 2007 period.
