Head N.V., for the first quarter ended 31 March 2006, reported net revenues were up 8.2% to €68.1 million ($81.9 mm). Operating result improved by €2.9 million ($3.5 mm) to a loss of €4.2 million ($5.1 mm). The net loss was €5.7 million ($6.9 mm), a €1.4 million ($1.7 mm) improvement on 2005.

Johan Eliasch, Chairman and CEO, commented, “The first quarter has provided a solid start to 2006, with a positive development in revenues and gross profit margin.

“Revenue increases are a result of increased sales in both the Winter and Racquet Sport divisions, partially offset by declines in Diving revenue.

“Despite completing the majority of our restructuring & cost saving initiatives during 2005, we continue to look for ways to improve efficiency; this is essential in order to remain competitive in today's market.

“The operating environment during 2006 remains challenging; however, given our strong start to the year, our outlook is an improvement on last year's result.”


Winter Sports


Winter Sports revenues during the quarter increased by €4.3 million ($5.2 mm), or 26.9%, to €20.2 million ($24.3 mm) from €15.9 million ($20.9 mm) in the comparable 2005 period. This increase was due to higher sales volumes of skis, bindings, ski boots and snowboard equipment as a consequence of good snow conditions in the winter season 2005/2006.


Racquet Sports


Racquet Sports revenues for the three months ended March 31, 2006 increased by €4.3 million ($5.2 mm), or 13.5%, to €36.2 million ($43.5 mm) from €31.9 million ($41.9 mm) in the comparable 2005 period. This increase was mainly due to higher sales volumes in tennis racquets and balls partly offset by decreased sales volumes of our bags. In addition, the weakening of the euro against the U.S. dollar in the reporting period contributed to the positive development.


Diving


Diving revenues during the quarter decreased by €3.4 million ($4.1 mm), or 23.5%, to €11.0 million ($13.2 mm)from €14.4 million ($18.9 mm) in the comparable 2005 period. This decrease was mainly due to a special product launch in the first quarter of 2005 (Limited Edition) which was not repeated in 2006.


Licensing


Licensing revenues During the quarter increased by €200,000 ($240,000), or 9.0%, to €2.5 million ($3.0 mm) from €2.3 million ($3.0 mm) in the comparable 2005 period due to increased income from existing agreements.


Profitability


Gross Profit for the three months ended March 31, 2006 increased by €3.8 million ($4.6 mm) to €27.0 million ($32.5 mm) from €23.2 million ($30.4 mm) in the comparable 2005 period. Gross margin increased to 39.7% in 2006 from 36.9% in the comparable 2005 period due to improved operating performance and product mix.

Selling and Marketing Expense during the quarter increased by €0.2 million, or 0.7%, to €23.4 million ($28.1 mm) from €23.3 million ($30.6 mm) in the comparable 2005 period. This increase was due to higher shipment costs and commissions as a consequence of increased sales and also to the weakening of the euro against the U.S. dollar.

General and Administrative Expenses for the three months ended March 31, 2006, increased by €0.7 million, or 10.1%, to €7.8 million ($9.4 mm) from €7.1 million ($9.3 mm) in the comparable 2005 period. This increase was due to higher non-cash compensation expenses of €0.3 million, resulting from the new Head Executive Stock Option Plan 2005 implemented in the third quarter 2005 as well as due to the weakening of the euro against the U.S. dollar.

As a result of the foregoing factors, operating loss for the three months ended March 31, 2006 decreased by €2.9 million to €4.2 million (5.1 mm) from €7.1 million ($9.3 mm) in the comparable 2005 period.

During the quarter, interest expense decreased by €0.3 million, or 8.3%, to €3.1 million from €3.4 million in the comparable 2005 period. This decrease was due to the repurchase of a portion of our 8.5% senior notes in 2005.

For the three months ended March 31, 2006, interest income increased by €0.2 million, or 67.7%, to €0.4 million from €0.2 million in the comparable 2005 period. This increase was due to higher interest bearing cash on hand.

During the quarter, Head had a foreign currency loss of €0.02 million compared to a gain of €0.7 million in the comparable 2005 period.

For the three months ended March 31, 2006, other income, net remained insubstantial as in the comparable 2005 period.

For the three months ended March 31, 2006, income tax benefit was €1.3 million, a decrease of €1.2 million compared to income tax benefit of €2.4 million in the comparable 2005 period due to the decrease in pre-tax loss.

As a result of the foregoing factors, for the three months ended March 31, 2006, Head had a net loss of €5.7 million ($6.9 mm), compared to a net loss of €7.1 million ($9.3 mm)in the comparable 2005 period.