HEAD NV announces Results for the Three and Six Months ended 30 June 2009

August 21st, 2009

HEAD NV announces Results for the Three and Six Months ended 30 June 2009

Amsterdam – 21st August 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 six months ended 30 June 2009 compared to the six months ended 30 June 2008:

Reported net revenues decreased 2.9% to €114.4 million On a constant currency basis, net revenues decreased by 6.6%Reported Operating loss deteriorated by €3.8 million to a loss of €13.9 million from a loss of €10.1 million in June 2008.Excluding the impact of the non cash share based compensation, and restructuring costs, operating loss would have improved by €2.3 million to a loss of €11.7 million from a loss of €14.1 million in June 2008The net loss for the period was €17.1 million compared to a net loss in June 2008 of €9.7 million.
For the three months ended 30 June 2009 compared to the three months ended 30 June 2008:

Reported net revenues increased 1.9% to €57.3 million On a constant currency basis, net revenues decreased by 1.8%.Reported Operating loss improved by €3.2 million to a loss of €3.8 million from a loss of €7.0 million in Q2 2008.Excluding the impact of the non cash share based compensation, and restructuring costs, operating loss would have improved by €4.4 million from a loss of €7.7 million in Q2 2008 to a loss of €3.3 million for the same period in 2009.

Johan Eliasch, Chairman and CEO, commented:

We continue to be effected by the current uncertain economic conditions. As expected, our diving division has been the most effected due to its link to travel and the relatively high price points of the products. Overall the sales in this division have fallen by 18.4% on a constant currency basis for the first six months of the year compared to the first six months of 2008. We estimate on a world wide basis that the market declined by around 15%-20% for the period, with the US being particularly badly effected. We do not see a significant recovery in the market in 2009.

Whilst the first six months of the year is not a key selling period for our winter sports business, volume sales were down significantly in all key product groups due to lower re-orders and sell outs: skis units sold for the period were down 21% to 60 thousand, unit sales of bindings down 20% to 216 thousand and unit sales of boots were down 31% to 44 thousand.

Sales value did not decline to the same extent due to the positive impact of exchange rate movements and some increase in average prices due to improved mix resulting in an overall decline in sales of 12.5% for the first six months of 2009 compared to the same period in 2008.

We have now collected a significant proportion of our orders for the 2009/2010 season and our order book is, as expected, below last years level due mainly to caution by retailers given the current suppressed consumer demand particularly in the US.

Our racquets division, on the other hand, showed some growth in the second quarter of 2009 as we launched a new series of products under the YouTek concept in conjunction with a brand repositioning, this compares to the second quarter last year when no new products were launched. The launch improved volumes in the second quarter, but overall for the first six months volumes of racquets were still down 10% to 963 thousand.

Ball sales grew in volume for the first six months of the year by 4.8% to 3.8 million douzen with increases in both the Penn ball in the US and in our Head ball in Europe.

The combination of the improved racquet mix due to the new product launch, higher ball sales and the positive impact of exchange rate movements, has resulted in our sales for this division being up by 6.2% for the first six months.

Our gross margin for the period has seen an improvement from 39.0% to 40.5% which has helped improve our overall profitability. The improvement has come from lower manufacturing costs and an enhanced product mix, particularly in racquet sports.

For the full year 2009, we are still anticipating our sales to be lower than those achieved in 2008. The expected decline in sales, together with a lower cash and available for sale financial assets balance at June, 2009 (€24.0 million) compared to the same period in 2008 (€30.7 million), combined with the cash costs of our interest expense and our capital expenditures, will result in us having to use additional lines of credit during the third and fourth quarters this year.

The Company has been focusing on reducing its debt and interest burden. In April 2009, the Company announced a private exchange offer to exchange its existing €135.0 million 8.5% senior notes due 2014 for its new 10% senior secured notes due 2014. It supplemented this with a revised offer in July, and the offer closed on the 13th August 2009 and was settled on the 19th of August.

The results of the exchange offer were that €85,723,000 of existing notes validly tendered (75.3% taking into account the cancellation of €21.2 million 8.5% senior notes held by a subsidiary) and have been exchanged into approximately €43,738,000 of new secured notes and 22,491,278 ordinary shares in Head NV. This reduced the par value of the outstanding liability to our bondholders on our balance sheet by nearly €42.0 million and also reduces our annual interest cost relating to these notes by nearly €3.0 million. In 2009, there will also be a one off further reduction of interest of €3.6 million due to the non-payment of the accrued interest to those note holder who tendered. In addition, as part of the exchange offer, the Company now has access to €10.0 million of working capital finance in 2009, which it anticipates utilising in the third and fourth quarters of the year.


The company will no longer be holding quarterly conference calls.

Results for the three and six months ended June 30, 2009 and 2008:


Winter Sports revenues for the three months ended June 30, 2009 decreased by €1.4 million, or 17.3%, to €6.5 million from €7.9 million in the comparable 2008 period. This decrease was due to lower sales volumes partially offset by a favorable product mix.
For the six months ended June 30, 2009 Winter Sports revenues decreased by €2.9 million, or 12.5%, to €20.4 million from €23.3 million in the comparable 2008 period. This decrease was due to lower sales volumes of all of our winter sports except protection wear.

Racquet Sports revenues for the three months ended June 30, 2009 increased by €5.1 million, or 16.6%, to €35.9 million from €30.8 million in the comparable 2008 period. This increase was due to higher sales volumes 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 six months ended June 30, 2009 Racquet Sports revenues increased by €3.9 million, or 6.2%, to €67.1 million from €63.2 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 and badminton products.

Diving revenues for the three months ended June 30, 2009 decreased by €3.4 million, or 18.7%, to €14.6 million from €18.0 million in the comparable 2008 period due to decreased sales.
For the six months ended June 30, 2009, Diving revenues decreased by €5.2 million, or 16.2%, to €26.7 million from €31.9 million in the comparable 2008 period. This decrease was mainly driven by the overall decline in the economic environment and consumer spending as a result of the financial crisis.

Licensing revenues for the three months ended June 30, 2009 increased by €0.4 million, or 29.7% to €1.7 million from €1.3 million in the comparable 2008 period.
For the six months ended June 30, 2009 Licensing revenues increased by €0.3 million, or 10.6%, to €3.2 million from €2.9 million in the comparable 2008 period due to the strengthening of the U.S. dollar against the euro.

Sales deductions for the three months ended June 30, 2009 decreased by €0.3 million, or 15.5%, to €1.5 million from €1.8 million in the comparable 2008 period due to promotion sales of close out products in 2008.
For the six months ended June 30, 2009 sales deductions decreased by €0.5 million, or 13.7%, to €3.0 million from €3.5 million in the comparable 2008 period due lower sales.

Gross Profit. For the three months ended June 30, 2009 gross profit increased by €3.4 million to €24.6 million from €21.1 million in the comparable 2008 period. Gross margin increased to 42.9% in 2009 from 37.6% in the comparable 2008.
For the six months ended June 30, 2009 gross profit increased by €0.4 million to €46.4 million from €46.0 million in the comparable 2008 period. Gross margin increased to 40.5% in 2009 from 39.0% 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 June 30, 2009, selling and marketing expense increased by €0.3 million, or 1.6%, to €21.8 million from €21.4 million in the comparable 2008 period.
For the six months ended June 30, 2009, selling and marketing expense decreased by €1.6 million, or 3.6%, to €44.1 million from €45.7 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 June 30, 2009, general and administrative expense decreased by €0.6 million, or 7.5%, to €6.9 million from €7.4 million in the comparable 2008 period.
For the six months ended June 30, 2009, general and administrative expense decreased by €0.8 million, or 5.4%, to €14.0 million from €14.8 million in the comparable 2008 period mainly due to tough cost management.

Share-Based Compensation Expense (Income). For the three months ended June 30, 2009, we recorded €0.2 million of share-based compensation expense for our Stock Option Plans compared to € 0.7 million of share-based compensation income in the comparable 2008 period.
For the six months ended June 30, 2009, we recorded €0.2 million of share-based compensation expense for our Stock Option Plans compared to € 4.1 million of share-based compensation income in the comparable 2008 period. This was a result of the increased liability as of June 30, 2009 due to the higher share price compared to December 31, 2008.

Other Operating Income, net. For the three months ended June 30, 2009, other operating income, net increased by €0.7 million, to €0.7 million from €0.0 million in the comparable 2008.
For the six months ended June 30, 2009, other operating income, net decreased by €0.5 million to €0.1 million from €0.6 million in the comparable 2008 mainly due to foreign exchange rate fluctuations.

Operating Loss. As a result of the foregoing factors, operating loss for the three months ended June 30, 2009 decreased by €3.2 million to €3.8 million from €7.0 million in the comparable 2008 period.
For the six months ended June 30, 2009, operating loss increased by €3.8 million to €13.9 million from €10.1 million in the comparable 2008 period.

Interest Expense. For the three months ended June 30, 2009, interest expense increased by €0.5 million, or 14.3%, to €3.6 million from €3.2 million in the comparable 2008 due to €0.6 million relating to our exchange offer.
For the six months ended June 30, 2009, interest expense increased by €2.4 million, or 37.4%, to €8.7 million from €6.3 million in the comparable 2008. Costs in connection with our exchange offer of €2.5 million were recorded.

Interest Income. For the three months ended June 30, 2009, interest income decreased by €0.2 million, or 55.4%, to €0.2 million from €0.4 million in the comparable 2008 period.
For the six months ended June 30, 2009, interest income decreased by €0.3 million, or 49.7% to €0.3 million from €0.7 million in the comparable 2008 period. This decrease was due to lower cash and cash equivalents.

Other Non-operating Income, net. For the three months ended June 30, 2009, other non-operating expense, net decreased by €0.7 million to an income, net of €0.7 million from an income, net of €1.4 million in the comparable 2008 period mainly attributable to fewer foreign currency gains.
For the six months ended June 30, 2009, other non-operating income, net increased by €1.0 million to an income, net of €2.1 million from an income, net of €1.1 million in the comparable 2008 period mainly attributable to foreign currency gains.

Income Tax Benefit. For the three months ended June 30, 2009, the income tax benefit was €1.3 million, a decrease of €1.0 million compared to an income tax benefit of €2.3 million in the comparable 2008 period.
For the six months ended June 30, 2009, the income tax benefit was €3.1 million, a decrease of €1.8 million compared to an income tax benefit of €4.9 million in the comparable 2008 period. This decrease resulted from 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.

Net Loss. As a result of the foregoing factors, for the three months ended June 30, 2009, we had a net loss of €5.3 million, compared to a net loss of €6.1 million in the comparable 2008 period. For the six months ended June 30, 2009, we had a net loss of €17.1 million compared to a net loss of €9.7 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, Amelie Mauresmo, Svetlana Kuznetsova, Novak Djokovic, Andrew Murray, Ivan Ljubicic, Didier Cuche, Marco Büchel, Patrick Staudacher, Maria Riesch and Sarka Zahbrovska.

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 0
Fax +43 5574 608 130


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