Head N.V. needed a weaker dollar to help post any significant increase in sales revenues for the year, a benefit that the Austria-based company will soon cease to realize as it moves to de-list its shares on the NYSE.

The company has seen considerable upside over the last couple of years from its practice of reporting in U.S. Dollars while most of its business resides primarily in non-U.S. markets. Europe accounted for roughly 62% of total sales for the company last year, while North America represented just 26% of sales. This represents a three point gain in Europe’s share of the business and a two point decline in North America share. The share inequity is even more pronounced in the fourth quarter when the Winter Sports division makes up more than 70% of sales. Europe contributed about 75% of Winter Sports sales for the year, up about 400 basis points from its 71% of the business last year.

Winter Sports revenues for the fourth quarter increased 17.5% to $124.9 million from $106.3 million in the year-ago period, but rose 7.9% when measured in Euro terms for the quarter. Gross margin in the division was down about 10 basis points to 41.1% of sales.

For the year, sales of Skis rose 12.2% in US Dollars to approximately $83 million, or 37% of total Winter Sports revenues, versus 39% of sales in 2003. In Euro terms, Ski sales rose just 2% for the year. In pairs, Ski sales were up nearly 5% to 584,000 pairs for the year. Bindings led growth for the division and the company, increasing about 26% (15% in Euro terms) to roughly $71 million, or 32% of Winter Sports revenues. Binding sales jumped 19% to 1.64 million pairs versus 1.38 million pairs in the prior year. Boots weren’t far behind, growing about 24% for the year to approximately $49 million, or a gain of nearly 13% in Euro terms. Ski Boot pairage increased more than 8% to 567,000 pairs, compared to 524,000 pairs in 2003. Snowboard revenues declined 3.2% in Euros, but rose more than 6% in US Dollars to roughly $20 million for the year. Snowboard equipment unit sales were up nearly 12% to 268,000 units, reflecting a sharp decline in average selling prices for the category.

Full year gross margin for the Winter Sports group was up 70 basis points to 38.5% of sales, due primarily to a shift in product mix to Bindings and Boots.

Racquet Sports revenues for the quarter fell 13.6% to $32.5 million from $37.6 million in Q4 last year, and sank nearly 21% when measured in Euro terms, due primarily to pricing pressure in the racquet market and reduced OEM business following the closure of a ball manufacturing facility in Ireland. Gross margin fell 410 basis points to 32.4% of sales from 36.5% of sales in the year-ago period.

The small increase in total year Racquet Sports sales was said to be mainly from the strengthening of the Euro against the U.S. dollar, but management also said in a release that stable Racquet sales helped. They did see a decrease in sales volumes and prices in Balls. The Racquets Sports division lost ground against the other divisions, falling to 35% of total Head NV sales in 2004, from 38.5% of sales in the prior year.

North America makes up a bit more of the full year number in this division, contributing about 46% of total Racquet Sports sales for 2004, compared to roughly 43% of sales derived from the Europe region. For the year, sales of Racquets rose more than 5% to approximately $84 million, or 50% of total Racquet Sports division sales, compared to nearly $80 million, or 48% of division sales in 2003. Measured in Euros, sales of Racquets declined 4.4% for the year. Measured in units, sales were up just over 1% to 1.79 million units. Ball sales decreased roughly 7% for the year to almost $59 million, or 35% of total division sales, compared to more than $63 million, or about 38% of division sales, in the prior year.

Sales of Balls fell more than 15% when measured in the hometown Euro currency, while unit sales rose a bit to 6.4 million dozen in 2004 from 6.38 million dozen in 2003.
Full year gross margin for Racquet Sports improved to 39.2% of sales, up 90 basis points from 38.3% of sales in 2003.

Diving division revenues increased 12.8% to $16.8 million in the fourth quarter compared with $14.9 million in the same period in 2003. This results mainly from increased sales volumes due to better product availability and the strengthening of the Euro against the U.S. dollar. Sales rose just 3.5% when measured in Euros. Europe makes up about 67% of Diving revenues for the year, compared to just 18% of revenues originating in North America. The Mares brand contributes roughly 84% of Diving sales, up from 81% in the prior year.

Licensing revenues increased 9.4% in the quarter, but actually rose just 0.4% for the period when measured in Euros.

Fourth quarter net income fell nearly 96% to $84,000, compared to $1.9 million in the year-ago quarter. Management said this sharp decline, as well as the full year increase in the net loss, were due to high interest expenses associated with the issuance of senior notes in January 2004, as well as a big hit from tax charges in Austria. Excluding the tax issue, the net loss for the year would have declined nearly a third and Q4 income would have risen 6.3% for the period. Head also reported a $5.7 million gain from the sale of the Irish tennis ball factory.

As for the NYSE de-listing, HED said the cost of compliance with Sarbanes-Oxley Act requirements has had, and will continue to have an impact on operating results. The Supervisory Board of the company approved a proposal by the Management Board to de-list the shares from the NYSE and to terminate the Common Share Agreement. The action is subject to the approval of company shareholders. If approved, the company will then apply for the de-listing, but will not be able to file for de-registration from the SEC unless or until the number of U.S. shareholders, whether holding directly or through nominees, falls below 300 and remains below that level.