HEAD NV Announces Results for the Three and Nine Months ended 30 September 2009

November 12th, 2009

HEAD NV Announces Results for the Three and Nine Months ended 30 September 2009

Amsterdam – 12th November 2009 – Head N.V. (VSX: HEAD; U.S. OTC: HEDYY.PK), a leading global manufacturer and marketer of sports equipment, announced the following results today.

For the three months ended 30 September 2009 compared to the three months ended 30 September 2008:

Net revenues were down 1.0% to €92.2 million Operating profit, excluding share based compensation, restructuring costs and other operating expenses and income (non-recurring) increased by €3.2 million to a profit of €8.7 millionOperating profit as reported improved by €11.2 million to €16.0 millionThe net profit for the period, including the gain on exchange of senior notes, net of tax (€31.2 million) was €41.5 million compared to a €1.2 million net profit in Q3 2008.
For the nine months ended 30 September 2009 compared to the nine months ended 30 September 2008:

Net revenues were down 2.0% to €206.7 million Operating loss, excluding share based compensation, restructuring costs and other operating expenses and income (non-recurring) increased by €6.1 million from a loss of €9.2 million in 2008 to a loss of €3.1 million in 2009.Operating profit as reported improved by €7.4 million to €2.1 millionThe net profit for the period, including the gain on exchange of senior notes, net of tax (€29.3 million) was €24.4 million compared to a net loss of €8.5 million in the comparable 2008 period.
Johan Eliasch, Chairman and CEO, commented:

We continue to be affected by the current uncertain economic conditions. We believe all our markets have declined in the last twelve months. As expected, our diving division continues to be the most affected due to its link to travel and the relatively high price points of the products. Overall the sales in this division have fallen by 12% for the first nine months of the year compared to the first nine months of 2008. Although in the third quarter sales were broadly flat compared to prior year reversing the quarter on quarter decline we do not expect to see any significant recovery in the market in 2009.

The key selling season is now under way for our winter sports business and for the first nine months of the year volumes were down as anticipated in all key product groups due to cautious global preseason ordering brought about by the difficult economic conditions. In weak markets, for the nine months ski volumes were down by 20%, bindings 11% and boots 13%. Overall winter sports sales have declined by only 8.9% reflecting the improved product mix in 2009 and favourable exchange rate movements.

For the nine months our racquets division had mixed results – overall sales were up over 7% in what we believe has been a declining market, but volumes of our racquets fell by 8%. The improvement in sales was a result of the launch of a new series of products under the YouTek concept in conjunction with a brand repositioning which resulted in an improved product mix. Tennis ball volumes grew slightly in both the US and Europe and this, combined with the positive exchange impact on US balls, resulted in overall revenue growth.

Our gross margin for the period has seen an improvement from 38.2% to 40.3% which has helped improve our overall profitability. The improvement has come from lower manufacturing costs and an enhanced product mix in both our racquet and winter sports divisions.

For the full year 2009, we are still anticipating our sales to be lower than those achieved in 2008. We are not anticipating a quick recovery for the sporting goods market, and forecasting remains difficult during these challenging market conditions. We believe 2010 will be a difficult year, and we will seek to preserve cash as much as possible.

As previously announced, the Company has been focusing on reducing its debt and interest burden and in August this year announced the successful conclusion of an exchange of €85.7 million of unsecured senior notes plus €3.6 million of accrued interest for €43.7 million of new secured notes and 22.5 million shares. In addition, a €10.0 million short term working capital facility agreement was entered into to overcome the anticipated shortfall in cash in the third and fourth quarters of this year. In connection with this working capital facility, an additional 28.3 million shares were awarded.

The company will no longer be holding quarterly conference calls.

Total Revenues

For the three months ended September 30, 2009 total net revenues decreased by €0.9 million, or 1.0%, to €92.2 million from €93.1 million in the comparable 2008 period. This decrease was due to decreased sales volumes in Winter Sports partially offset by a better product mix, higher sales volumes in Racquet Sports and the strengthening of the U.S. dollar against the euro.
For the nine months ended September 30, 2009 total net revenues decreased by €4.3 million, or 2.0%, to €206.7 million from €211.0 million in the comparable 2008 period. This decrease was mainly due to lower sales volumes of our Winter Sports and Diving division, partly offset by favorable product mix and the strengthening of the U.S. dollar against the euro.

Winter Sports

Winter Sports revenues for the three months ended September 30, 2009 decreased by €4.0 million, or 7.3%, to €50.4 million from €54.3 million in the comparable 2008 period. This decrease was due to lower sales volumes partially offset by favorable product mix and the strengthening of the U.S. dollar against the euro compared to the comparable 2008 period.
For the nine months ended September 30, 2009 Winter Sports revenues decreased by €6.9 million, or 8.9%, to €70.8 million from €77.7 million in the comparable 2008 period. This decrease was due to lower sales volumes of all of our major winter sports products partially offset by favorable product mix and the strengthening of the U.S. dollar against the euro.

Racquet Sports

Racquet Sports revenues for the three months ended September 30, 2009 increased by €2.8 million, or 9.3%, to €33.4 million from €30.5 million in the comparable 2008 period. This increase was due to higher sales volumes of tennis racquets and footwear and favorable product mix resulting from the launch of our new tennis racquets as well as the strengthening of the U.S. dollar against the euro.
For the nine months ended September 30, 2009 Racquet Sports revenues increased by €6.7 million, or 7.2%, to €100.5 million from €93.7 million in the comparable 2008 period. This increase was mainly due to the strengthening of the U.S. dollar against the euro and a favorable product mix. Lower sales volumes of tennis racquets were partially offset by higher sales volumes of balls, footwear and badminton products.

Diving

Diving revenues for the three months ended September 30, 2009 increased by €0.1 million, or 1.3%, to €10.1 million from €10.0 million in the comparable 2008 period due to the strengthening of the U.S. dollar against the euro compared to the comparable 2008 period.
For the nine months ended September 30, 2009, Diving revenues decreased by €5.0 million, or 12.0%, to €36.9 million from €41.9 million in the comparable 2008 period. This decrease was mainly driven by lower sales resulting from the overall decline in the economic environment and consumer spending as a result of the financial crisis.

Licensing

Licensing revenues for the three months ended September 30, 2009 remained stable at €1.2 million compared to the comparable 2008 period.
For the nine months ended September 30, 2009 Licensing revenues increased by €0.3 million, or 7.2%, to €4.4 million from €4.1 million in the comparable 2008 period due to the strengthening of the U.S. dollar against the euro.


Profitability

Gross Profit. For the three months ended September 30, 2009 gross profit increased by €2.2 million to €36.9 million from €34.7 million in the comparable 2008 period. Gross margin increased to 40.0% in 2009 from 37.3% in the comparable 2008 period.
For the nine months ended September 30, 2009 gross profit increased by €2.6 million to €83.2 million from €80.7 million in the comparable 2008 period. Gross margin increased to 40.3% in 2009 from 38.2% in the comparable 2008 period. This increase was due to improved manufacturing costs as well as a favorable product mix in Racquet Sports.

Selling and Marketing Expense. For the three months ended September 30, 2009, selling and marketing expense decreased by €0.3 million, or 1.2%, to €21.9 million from €22.1 million in the comparable 2008 period.
For the nine months ended September 30, 2009, selling and marketing expense decreased by €1.9 million, or 2.8%, to €66.0 million from €67.9 million in the comparable 2008 period. This decrease resulted from a reduction in departmental selling costs.

General and Administrative Expense. For the three months ended September 30, 2009, general and administrative expense decreased by €0.8 million, or 11.2%, to €6.3 million from €7.1 million in the comparable 2008 period.
For the nine months ended September 30, 2009, general and administrative expense decreased by €1.6 million, or 7.3%, to €20.4 million from €22.0 million in the comparable 2008 period mainly due to tough cost management.

Share-Based Compensation Expense (Income). For the three months ended September 30, 2009, the Company recorded €0.6 million of share-based compensation expense for our Stock Option Plans compared to €0.4 million of share-based compensation income in the comparable 2008 period.
For the nine months ended September 30, 2009, the Company recorded €0.8 million of share-based compensation expense for our Stock Option Plans compared to €4.4 million of share-based compensation income in the comparable 2008 period. The increase in the Company’s share price resulted in a higher liability and accordingly increased share-based compensation expense.

Other Operating Expense (Income), net. For the three months ended September 30, 2009, other operating income, net increased by €8.5 million, to €8.1 million from other operating expense, net of €0.3 million in the comparable 2008. This increase resulted mainly from the gain on a sale of certain trademarks registered in Korea of €7.6 million and foreign exchange rate fluctuations.
For the nine months ended September 30, 2009, other operating income, net increased by €8.0 million to €8.2 million from €0.2 million in the comparable 2008 mainly due to the gain on a sale of trademarks registered in Korea of €7.6 million.

Operating Profit (Loss). As a result of the foregoing factors, operating income for the three months ended September 30, 2009 increased by €11.2 million to €16.0 million from €4.8 million in the comparable 2008 period.
For the nine months ended September 30, 2009, the operating result increased by €7.4 million to an operating profit of €2.1 million from an operating loss of €5.3 million in the comparable 2008 period.

Interest Expense. For the three months ended September 30, 2009, interest expense decreased by €0.5 million, or 14.3%, to €2.7 million from €3.2 million in the comparable 2008 due to the waiver of €42.0 million of our 8.5% senior notes as a result of the exchange offer.
For the nine months ended September 30, 2009, interest expense decreased by €0.6 million, or 6.2%, to €8.9 million from €9.5 million in the comparable 2008 period.

Interest Income. For the three months ended September 30, 2009, interest income decreased by €0.1 million, or 68.1%, to €0.1 million from €0.2 million in the comparable 2008 period.
For the nine months ended September 30, 2009, interest income decreased by €0.5 million, or 53.4% to €0.4 million from €0.9 million in the comparable 2008 period. This decrease was due to lower cash and cash equivalents.

Gain on Exchange of Senior Notes. As a result of the successful closure of the exchange offer, the Company recorded a gain of €40.3 million consisting of €42.0 million waiver of the 8.5% senior notes, €3.6 million gain on interest forfeited, reduced by €5.4 million of expense relating to the exchange of the senior notes.

Other Non-operating Income, net. For the three months ended September 30, 2009, other non-operating income, net increased by €0.1 million to €0.5 million from €0.4 million in the comparable 2008 period mainly attributable to foreign currency gains.
For the nine months ended September 30, 2009, other non-operating income, net increased by €0.5 million to €2.0 million from €1.5 million in the comparable 2008 period mainly attributable to foreign currency gains.

Income Tax Benefit (Expense). For the three months ended September 30, 2009, the income tax expense was €14.6 million, an increase of €13.6 million compared to €1.0 million in the comparable 2008 period. This increase was mainly due to the tax expense incurred as a result of the gain on exchange of senior notes. Tax losses brought forward by the company have been utilised. For the nine months ended September 30, 2009, the income tax expense was €11.5 million compared to an income tax benefit of €3.9 million in the comparable 2008 period. This increase in income tax expense was due to the tax expense incurred as a result of the gain on exchange of senior notes, and higher current income tax expenses due to a provision for potential income tax liabilities of prior years of €1.2 million and lower taxable losses before share-based compensation (income) expense as this income/expense has no tax effect. Tax losses brought forward by the company have been utilised.

Net Profit (Loss). As a result of the foregoing factors, for the three months ended September 30, 2009, the Company had a net profit of €41.5 million, compared to a net profit of €1.2 million in the comparable 2008 period. For the nine months ended September 30, 2009, the Company had a net profit of €24.4 million compared to a net loss of €8.5 million in the comparable 2008 period.


About Head

HEAD NV is a leading global manufacturer and marketer of premium sports equipment.

HEAD NV’s ordinary shares are listed on the Vienna Stock Exchange (“HEAD”).

Our business is organized into four divisions: Winter Sports, Racquet Sports, Diving and Licensing. We sell products under the HEAD (tennis, squash and racquetball racquets, tennis balls, tennis footwear, badminton products, alpine skis, ski bindings and ski boots, snowboards, bindings and boots), Penn (tennis and racquetball balls), Tyrolia (ski bindings), and Mares/Dacor (diving equipment) brands.

We hold leading positions in all of our product markets and our products are endorsed by some of the world’s top athletes including Andre Agassi, Hermann Maier, Bode Miller, Lindsey Vonn, Amelie Mauresmo, Svetlana Kuznetsova, Novak Djokovic, Andrew Murray, Ivan Ljubicic, Didier Cuche, Marco Büchel, Patrick Staudacher, Maria Riesch and Sarka Zahrobska.

For more information, please visit our website: http://www.head.com

Analysts, investors, media and others seeking financial and general information, please contact:

Clare Vincent, Investor Relations
Tel: +44 207 499 7800
Fax: +44 207 491 7725
E mail: headinvestors@aol.com

Gunter Hagspiel, Chief Financial Officer
Tel: +43 5574 608 150
Fax +43 5574 608 130

This press release should be read in conjunction with the company’s report for the three and none months ended 30 September 2009.

This press release and the statements of Mr. Johan Eliasch quoted herein contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Investors are cautioned that all forward-looking statements involve risks and uncertainties. Although Head believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this press release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included and quoted herein, the inclusion of such information should not be regarded as a representation by Head or any other person that the objectives and plans of Head will be achieved.

Head N.V.
Rokin 55
NL 1012 KK Amsterdam
ISIN: NL0000238301
Stock Market: Official Market of the Vienna Stock Exchange