Head N.V. saw sales decrease 3.4% for the second quarter to 61.6 million ($83.1 mm). The company posted an operating loss that increased by 51.4% to 5.3 million ($7.1 mm) and a net loss for the period the was 6.5 million ($8.8 mm), growing 38.3% from a 4.7 million ($5.9 mm) loss in Q2 2006.
Johan Eliasch, chairman and CEO, commented, “Q2 2007 results for Head have been mixed. In terms of revenues, the Winter Sports division performed better than Q2 06, however, this is mainly due to earlier pre-season orders compared with the prior year. The adverse impact of the poor snow conditions during the recent 06/07 season is still of concern, and we continue to estimate that, for the market as a whole, pre-season orders for alpine ski equipment are down 25-30%. Gross margin for the division continues to be adversely affected.
“Although Racquet Sport division revenues are down for both the 3 and 6 month periods, gross margins have improved. The Diving division continues to perform well and we believe, has gained market share through the first half of 2007; revenues are up nearly 9% compared with prior year. Overall, however, primarily due to the adverse conditions affected the Winter Sports market, we continue to anticipate that we may record an operating loss for 2007,” said Eliasch.
Winter Sports revenues for the second quarter increased by 0.3 million, or 3.4%, to 9.9 million ($13.3 mm) from 9.6 million ($12.1 mm) in the comparable 2006 period. This increase was due to earlier pre-season sales of skis and higher sales volumes of bindings.
Racquet Sports revenues for the quarter decreased by 5.8%, to 34.5 million ($46.5 mm) from 36.3 million ($45.6 mm) in the comparable 2006 period. This decrease was due to lower sales volumes in squash and racquetball racquets and balls and the strengthening of the euro against the U.S. dollar in the reporting period.
Diving revenues for the quarter increased insignificantly to the comparable 2006 period despite a negative impact of the strengthening of the euro against the U.S. dollar in the reporting period.
Licensing revenues for the three months ended June 30, 2007 decreased by 6.4%, to 2.1 million ($2.8 mm) from 2.2 million ($2.8 mm) in the comparable 2006 period.
Sales deductions for the quarter increased by 20.7%, to 1.8 million ($2.4 mm) from 1.5 million ($1.9 mm) in the comparable 2006. Gross margin decreased to 38.9% in 2007 from 40.9% in the comparable 2006.
Selling and Marketing Expenses for the second quarter, decreased by 1.0% to 21.4 million ($28.9 mm) from 21.6 million ($27.1 mm) in the comparable 2006 period. General and Administrative Expenses decreased by 1.7%, to 7.2 million ($9.7 mm) from 7.3 million ($9.2 mm) in the comparable 2006 period.
For the three months ended June 30, 2007, we recorded 0.8 million ($1.1 mm) of share-based compensation expense for our Stock Option Plans compared to 1.2 million ($1.5 mm) in the comparable 2006 period. Other operating income, net decreased by 77.4%, to 0.1 million ($0.1 mm) from 0.5 million ($1.9 mm) in the comparable 2006 period due lower foreign exchange gains.
As a result of the foregoing factors, operating loss for the quarter increased by 51.4% to a loss of 5.3 million ($7.1 mm) from a loss of 3.5 million ($4.4 mm) in the comparable 2006 period. For the quarter, other non-operating expense, net increased by to 0.3 million ($0.4 mm) from 0.1 million ($0.1 mm) in the comparable 2006 period mainly attributable to foreign currency loss. For the quarter, the income tax benefit was 1.6 million ($2.2 mm), an increase of 6.7% compared to income tax benefit of 1.5 million ($1.9 mm) in the comparable 2006 period.
As a result of the foregoing factors, the company posted a 38.3% larger net loss of 6.5 million ($8.8 mm), widening from a net loss of 4.7 million ($5.9 mm) in the comparable 2006 period.