Head N.V. reported that net revenues for the second quarter increased by 5.1% to $83.2 million from $79.2 million in the year-ago period. The net loss for the period widened 244% to $30.7 million versus a net loss of $8.9 million in Q2 last year, due primarily to a $20.6 million hit to the income tax line. The operating loss before restructuring costs improved 37.4% to a $5.7 million from $9.1 million.

Winter Sports revenues for the three months ended June 30, 2004 increased by $1.4 million, or 22.9%, to $7.3 million from $6.0 million in the comparable 2003 period. For the six months ended June 30, 2004, Winter Sports revenues increased by $7.0 million, or 31.2%, to $29.4 million from $22.4 million in the comparable 2003 period. This increase was due to the strengthening of the euro against the U.S. dollar, higher sales volumes and better prices for bindings and a better product mix for skis and ski boots.

Racquet Sports revenues for the three months ended June 30, 2004 increased by $2.2 million, or 5.0%, to $46.9 million from $44.7 million in the comparable 2003 period. For the six months ended June 30, 2004, Racquet Sports revenues increased by $9.3 million, or 10.7%, to $96.4 million from $87.1 million in the comparable 2003 period. This mainly resulted from improved sales prices in tennis racquets, higher sales volumes in balls and the strengthening of the euro against the U.S. dollar.

Diving revenues for the three months ended June 30, 2004 decreased by $0.1 million, or 0.5%, to $26.0 million from $26.1 million in the comparable 2003 period. This decrease resulted mainly from earlier shipments during the three months ended March 31, 2004 with a reversal effect during the three months ended June 30, 2004. For the six months ended June 30, 2004, Diving product revenues increased by $7.3 million, or 19.1%, to $45.9 million from $38.5 million in the comparable 2003 period. This results mainly from increased sales volumes due to better product availability and the strengthening of the euro against the U.S. dollar.

Licensing revenues for the three months ended June 30, 2004 increased by $0.6 million, or 22.9%, to $3.0 million from $2.5 million in the comparable 2003 period. For the six months ended June 30, 2004, licensing revenues increased by $1.2 million, or 24.8%, to $5.9 million from $4.7 million in the comparable 2003 period due to increased revenues from existing contracts and from new licensing agreements as well as timing differences.



                         For the Three Months    For the Six Months
                            Ended 30 June,              Ended
                                                      30 June,
                             2003       2004        2003        2004
 Product category:
 Winter Sports......... $     5,956  $   7,321  $   22,407  $   29,402
 Racquet Sports........      44,688     46,902      87,112      96,415
 Diving.............         26,091     25,967      38,535      45,881
 Licensing............        2,450      3,011       4,731       5,902
   Total Revenues...... $    79,185  $  83,201  $  152,785  $  177,600

Second quarter gross margin increased to 39.6% in this period from 36.3% in the comparable 2003 period. Selling and marketing expenses remained stable at $28.4 million compared to the comparable 2003 period. General and administrative expenses increased by $0.9 million, or 9.2%, to $10.2 million from $9.3 million in the comparable 2003 period.

For the three months ended June 30, 2004, income tax expense was $20.6 million compared to income tax benefit of $3.0 million in the comparable 2003 period. This increase in income tax expense is mainly due to a reduction in Austrian tax rate which led to a decrease in deferred tax asset resulting from tax losses carried forward of $24.9 million for the first half, partially offset by an increase of deferred tax assets due to a higher loss before income taxes.

As a result of the foregoing factors, for the three months ended June 30, 2004, Head had a net loss of $30.7 million compared to a net loss of $8.9 million in the comparable 2003 period.
2004 Outlook

In terms of guidance for the remainder of 2004, Head is reiterating its February guidance.
Head expects reported revenues and operating profits, excluding one-time charges, for 2004 to be ahead of the levels achieved in 2003. Net income will be lower than in 2003 due to the one time, non cash impact of the change in Austrian tax rates as detailed above.



                      For the Three Months Ended  For the Six Months
                               30 June,             Ended 30 June,
                            2003         2004        2003       2004
 REVENUES
 Total revenues       $      79,185  $    83,201 $  152,785 $  177,600
 Cost of sales               50,458       50,234     97,306    108,086
    Gross profit             28,727       32,967     55,479     69,515
    Gross margin              36.3%        39.6%      36.3%      39.1%
 Selling & marketing         28,368       28,379     54,655     58,460
 expense
 General &
 administrative               9,340       10,197     17,998     20,902
 expense (excl.
 non-cash
 compensation
 expense)
 Non-cash                       164          139        327        277
 compensation expense
 Restructuring costs           (45)          981        485      1,252
    Operating loss          (9,099)      (6,728)   (17,987)   (11,377)
 Interest expense           (3,415)      (4,362)    (6,797)   (17,233)
 Interest income                295          566        558        970
 Foreign exchange               316          387        313        466
 gain
 Other income                  (44)           39       (18)         33
 (expense), net
    Loss from              (11,948)     (10,097)   (23,931)   (27,140)
 operations before
 income taxes
 Income tax benefit           3,015     (20,638)      5,144   (17,990)
 (expense)
    Net loss          $     (8,934)  $  (30,735) $ (18,787) $ (45,129)