HEAD NV

TRANSCRIPT OF Q3 2006 FINANCIAL RESULTS CONFERENCE CALL THURSDAY NOVEMBER 9TH 2006

CHAIRMAN: JOHAN ELIASCH

INTERCALL UK

Operator Thank you for standing by and welcome to the Head NV Q3 2006 Financial Results conference call. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session at which time if you wish to ask a question, you will need to press * 1 on your telephone. I must advise you that this conference is being recorded today, Thursday the 9th of November 2006. I would now like to hand the conference over to your speaker today, Vickie Booth. Please go ahead. Vickie Booth Good afternoon everybody. And thank you for joining us for Heads third quarter 2006 conference call. By now everybody should have received a copy of the press release that was sent out this morning and have access to the PowerPoint presentation that is posted to our web site. Joining me today is Johan Eliasch, Chairman and the Chief Executive Officer, and Ralf Bernhart, Chief Financial Officer. Before we start I would like to inform you that statements made in this conference call may be forward looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995. In connection with such oral forward looking statements, you should be aware that our actual results might vary materially from those projected in the forward looking statements. In addition, additional information concerning factors that could cause actual results to materially differ from those in the forward looking statements is contained in our press release, dated November the 9th 2006, as well as our prior filings on form 6K and our registration statements on form F1 and 20F, all of which are readily available. If you would now like to turn to the PowerPoint presentation on our web site, www.head.com, Johan and Ralf will present the results for the quarter and the 9 months, discuss the performance of each of our divisions, comment on our capital and resources and give you their thoughts on the outlook for 2006. We will then take your questions. I will now hand over to Johan.

Johan Eliasch

Thank you Vickie and welcome everybody. If you would like to turn to the third slide in the presentation entitled Summary I will begin. I would like to start by summarising the results for Q3 '06. Net revenues increased by 11.1% to 111.9 million compared to Q3 '05 and our revenues for the 9 months period increased by 5.5% to 243.5 million. The increase in revenue for the 9 month period relates to higher sales volumes in the winter and racket sports divisions, partly offset by decreased sales in diving equipment. In terms of operating results before restructuring costs, our Q3 '06 profit is 15.4 million compared with an 11.2 million profit in Q3 '05. For the 9 month period, the operating profit before restructuring costs and gain of sale of property stands at 8.2 million for '06 which is 3.8 million higher than the comparative 2005 period. Our gross margin for the 9 month period 06 is 40.3%, 80 basis points higher than the margin for the comparative period in 05 when it was 39.5%. The gross margin for Q3 '06 at 40.6% also shows an improvement compared to the third quarter '05 when the margin was 37.9%. The positive improvement in both the third and the 9 month period, sorry, the 3 and 9 month period, is mainly due to improved production efficiency in both our winter sports and diving divisions. Our profit for Q3 '06 is 9.6 million compared with a 5.8 million profit in Q3 '05. The profit in Q3 '05 was after the deduction of 1.6 million of restructuring costs. In the 9 month period, we recorded a small loss of 0.1 million compared with a 2 million profit in the comparative '05 period. However, the 9 month period in '05 saw the benefit of a gain on sale of property worth 5.9 million offset by restructuring costs of 4 million. Finally I would like to highlight that our cash flow continues to be strong with 13.4 million of cash provided by operational activities through the 9 month period compared to 10.5 million for the comparative '05 period. Next slide please. As you can see from the chart on slide 4, the majority 61% of our Q3 '06 revenue comes from winter sports. Our racket sports division represents 29% and diving 9%. In comparison to Q3 '05 the proportion Ralf Bernhart You are on again Johan?

Johan Eliasch I am on again. Yes, I will start again here with slide 4. We had a technical problem with the telephone line. As you can see from the chart in slide 4, the majority, 61% of our Q3 '06 net revenue comes from winter sports. Our racket sports division represents 29% and diving 9%. In comparison to Q3 '05, the proportion of winter sports sales is higher by 4% due to strong sales in this division in '06. Now I would like to move to the next slide. The split in geography shows that Europe represented 65% of group net revenues in Q3 '06, North America 26% and the rest of the world 9%. Which is broadly in line with Q3 '05. Next slide please. The third quarter sees the beginning of the main selling season in winter sports, nearly 90% of our winter sports sales tend to be made in this period, this half of the year. Both Q3 '06 and the 9 month period have shown strong revenue growth from 19.7 and 18% respectively. These revenues are due to high sales in all product categories and in all markets on account of good snow conditions in '05, '06. Improved logistics also resulted in better product availability. The product mix of sales in winter sports is broadly consistent in Q3 06 compared to Q3 05. Gross margin for Q3 06 improved 230 basis points to 40.1% while the 9 month period showed an improvement of 280 basis points to 36.7%. The improved margins in both period are due to better mix, product mix that is, as well as more efficient logistics.

Next slide please. This shows the split of winter sport revenues by geography for Q3 06. Europe continues to dominate our winter sports sales at 79% with North America representing 16% and the rest of the world revenues 5%. This is consistent with 05. In terms of sold during the 9 months ended the 30th of September 06 compared to the equivalent 05 period. Skis increased from 240,000 pairs to 314,000 pairs. This includes contract manufacturing. Bindings again including contract manufacturing were up from 850,000 pairs to 961,000 pairs. Ski boots including contract manufacturing again went up from 283,000 pairs to 304,000. Snowboard equipment also increased from 140,000 units to 177,000 units. Despite favourable market conditions for the 05 / 06 season,

which will positively impact our 06 full year sales, the general consensus is the winter sports is not a growth market and that this is unlikely to change during 06. However, due to our strong performance, the company may see an improvement in their market share for 06. Next slide please. Racket sports - for the 9 month period, racket sports revenue has increased by 1.8% mainly due to the US dollar strengthening against the euro. Revenues for Q3 06 decreased slightly by 4.8% to just under 2 million. Gross margin for Q3 06 increased however by 180 basis points to 37.7% due mainly to better margins on rackets. The margin for the 9 month period declined slightly by 80 basis points to 38.7%. This is mainly because of raw material prices, which have in particular affected tennis ball manufacture. During Q3 06, rackets accounted for 66% of the racket sports division's gross revenues and balls 34%. This is identical to Q3 05. Next slide please. Our racket sports sales are spread more evenly by geography than our other divisions with Q3 06 gross revenues split 48% North America, 38% Europe and 14% rest of the world. In term of quantities, tennis racket sales were up from 1.467 million units to 1.542 million units. Tennis balls also increased from 5.1 million dozen to 5.347 million dozen. And then that figure also includes the new Head branded ball as well as Penn. From the available market data for 06, the favourable market conditions experienced in 05 continued in 06. Both the US and European markets improved significantly with 5% for the( first 6 months) and 10% (for the first quarter) growth in tennis rackets, tennis racket revenues respectively. Only the Japanese tennis market continued to decline with a 2% decrease in the first4 months. The global tennis ball market declined in 05 despite a stable US market. This was due to declines in both the European and Japanese ball markets. In 06, the market for tennis balls declined in the US by 2% while the European market increased by 10% over the prior year. The launch of the Head branded tennis balls in Europe and Asia has been very well received. Next slide please. Diving - the diving division's gross revenue or Q3 06 compared to Q3

05 has increased by 26.9%. Though overall for the 9 month period, there has been a small decline of 5.3% or approximately 2 million. The decline in the 9 month period is due to an intentional decision to reduce our Dacor branded business, a strategy that is to eliminate an unprofitable line. Despite reduced Dacor revenues, our Maris brand continues to grow. Gross margins have shown a positive development for both the third quarter and the 9 months of 06, increasing by 1,440 and 340 basis points respectively, reflecting our strategy to improve margins as opposed to sales. Market conditions for 06 showed a slight improvement in eastern Europe and the Middle East, the US market displaying stable positive trend and the south east Asian market experienced moderate growth. Next slide please. Geographically, Europe is our largest market for diving sales, representing 58% of our Q3 06 gross revenues, with North America and the rest of the world at 21%. We recently established a Mares subsidiary in the Asia Pacific region in a step to increase our sales outside of our core European market. Next slide please. Licensing - net revenues from the licensing division declined by 24.3% and 17.6% in the third quarter and the 9 months periods of 06 respectively. The reason is twofold. Firstly we terminated our footwear licence, which will be replaced by our own distribution, and secondly we terminated our UK apparel license, this will be replaced during 07. This covers all our divisions and now I will hand over to Ralph who will comment on the consolidated results. Over to you Ralf. Ralf Bernhart Thank you Johan. If you would like to turn now to slide 13, I will start with a review of the P&L account. Net revenue for quarter 3 increased by 11.1% to 111.9 million. The operating profit excluding restructuring costs improved by 4.1 million to 15.4 million. For the 9 month period, net revenues increased by 5.5% compared to 2005, to 243.5m. The operating profit before gain on sale of property and restructuring costs increased by 3.8 million to a profit of 8.2 million. The increased revenues are due to higher sales volumes in the winter and racket sports divisions, partly offset by decreased diving sales. The strengthening of the US dollar against the euro also

increased revenue. The gross margin for both quarter 3 and the 9 month period increased by 270 and 80 basis points respectively. For the 9 month period, the margin is 40.3%. The margin improvement for both periods can be attributed to improved production efficiency in our winter and diving divisions. Selling and marketing expenses reported in euros increased by 3.4 million or 5.4% for the 9 month period rising from 64 million to 67.4 million. This increase is mainly due to higher advertising and departmental selling costs, as well as the weakening of the euro against the dollar in the 9 month period in comparison to the 9 months before. General and administrative costs reported in euros for the 9 months ended 30th of September 06 increased by 0.7 million or 3.2% to 23.1 million. This increase was due to higher non cash compensation expenses of 0.6 million for the new Head executive stock option plan 2005, as well as the weakening of the euro against the dollar. Our net profit for quarter 3 is 9.6 million compared to 5.8 million profit for quarter 3 05. The 2005 third quarter profit is after the deduction of 1.6 million of restructuring costs. Our net result for the 9 month period is a 0.1 million loss compared to a 2 million profit in the comparable 05 period. However, in 2005, there was an upside of 1.9 million as a result of the net of a gain on sale of property and the restructuring costs. Before moving on to discuss the balance sheet, I would just like to point out that in line with the provisions of Sarbanes Oxley, a reconciliation of our EBITDA numbers is provided at the end of the presentation. Next slide please. Our balance sheet continues to be impacted by exchange rate movements with dollar assets and working capital decreasing in euro terms, due to the strengthening of the euro at 30th of September 06 in comparison to the 31st of December 05. This is just for the very last date. Our working capital at the end of quarter 3 is lower than quarter 3 05 mainly due to lower inventory levels at quarter 3 06. Inventory balances were higher than average at quarter 3 05, due to a build up in anticipation of moving racket sourcing to China. Our net debt has increased from 112

million at the 31st of December 05 to 121 million at the 30th of September, but decreased from 126.4 million at 30 Sept 05. If we deduct from these figures the available for sale financial assets, the respective net debt figures would be 30th September 05 111.5, 31st of December 05, 97.2 and 30th of September 06, 101 million. As with EBITDA, I would like to make you aware that a reconciliation of our working capital is provided at the end of the presentation. Next slide please. As we can see on this capital and resources slide, the increase in net debt at the 30th of September 06 compared with December 05 is predominantly due to decreased cash on hand which is consistent with our typical annual working capital cycle in conjunction with the recent capital repayment. Cash generated from operating activities in the 9 month period was 13.4 million, a 2.9 million improvement on the 10.5 million generated in the equivalent 2005 period. This improvement is mainly due to higher cash from income. I would now like to hand back to Johan to finish our presentation with his thoughts on the outlook for Head in 2006. Johan please? Johan Eliasch Thank you Ralf. The 9 month results are positive with overall revenue growth of nearly 6% and an encouraging development in gross margins. The third quarter results have been particularly strong with revenue growth of 11% and a 270 basis point margin improvement. The results of the winter sport division have exceeded our expectations and here the 9 month period revenues grew 18% and gross margin for the division rose 280 basis points. Racket sports and diving division results for the 9 month period are in line with expectations. Market conditions have not been easy in either division and raw material price increases have affected the racket sports division in particular. Based on the encouraging results for the 9 month period, we continue to remain positive in our outlook and anticipate improvement on last years operating results. That is the end of the presentation, so I would like to open up the call to answer any questions that you may have. Operator We will now begin the question and answer session. If you wish to ask a question please press * 1 on your telephone keypad and wait for your name to be announced.

If you wish to cancel your question, please press the hash key. Your first question comes from Peter Delener from Citigroup, please ask your question. Peter Delener - Citigroup Hi, Peter Delener from Citigroup you mentioned more efficient logistics within the winter sports segment. One of your competitors in the winter sports segment, Amer Group had some logistic and distribution problems recently. Has this given you any particular opportunities to gain market share? Johan Eliasch I would say that our market share improvements in our segments have been., first of all remember that the selling season is February through to June. So logistics problems would not actually affect the numbers at this stage for any company. So in our case it is very much due to very strong product offering and very good performing products and good marketing and sales and not due to the demise of any competitor. Peter Delener - Citigroup Okay. In respect to diving, you had a rebound in Q3, is that more of a temporary flip or is that maybe perhaps indicative of a longer term trend? Johan Eliasch We feel that this is part of a longer term trend. Peter Delener - Citigroup Okay, was that driven by just general consumer spending? Or just better management within the diving segment? Johan Eliasch Better management within the diving segment. Peter Delener - Citigroup Okay. And then with oil prices stabilising, should we expect to see a stabilisation in your raw material prices on a year over year basis? Johan Eliasch Again, this is very dependent on raw material price development. So it is difficult to, we dont have a crystal ball, it is difficult to answer that question. Peter Delener - Citigroup Okay. And then my final question and this is probably important to what the shareholders have had is that on enterprise value you traded at a substantial discount

to a lot of your competitors. Are you implementing any initiatives to move the share price? I mean right now you trade at an enterprise value of, you know, EBITDA enterprise value of under 6.5 times and your, many of your competitors are 8 or 9 times or even higher. I was just wondering what you thought about that and you know, how you thought you might want to increase some of the equity value? Johan Eliasch Well I mean all we can do is to continue to perform well. And hopefully with that the value of the stock will improve. Peter Delener - Citigroup Okay, thank you. Operator your line is now open. Once again, if you wish to ask a question please press * 1 on your telephone and wait for your name to be announced. That is * 1 if you wish to ask a question. Your next question comes from Joseph Kowunda from Real Asset Management, please ask your question. Joseph Kowunda - Real Asset Management Yes, hi, a quick question on the balance sheet. Available for sale financial assets is 19.9 million. I am just wondering how can this keep increasing compared to last year and if you could also point out the three largest assets? Ralf Bernhart It is mainly a cash fund where we use it instead of having it bound and where we use it until a short term, short term and we use it then when we need the most financing in October and November. So this is really a short term money but it is in marketable security and therefore we have to put it on a different line than cash in the balance sheet. Joseph Kowunda - Real Asset Management Okay, what is the return? Ralf Bernhart The return is, yes, about average as we have it.. Joseph Kowunda - Real Asset Management Ballpark?

Ralf Bernhart just a little bit more than 2%. Because it is short term only. Joseph Kowunda - Real Asset Management Okay. And this fluctuates by how much? Ralf Bernhart I am sorry? Joseph Kowunda - Real Asset Management During the year, how much does this position fluctuate? Minimum and maximum. Ralf Bernhart Only in October and November because we now need the money and it might come a little bit up again towards the end of the year. But we were last year around 10 to 14 million and Joseph Kowunda - Real Asset Management Wait a minute, last year, you were at? Ralf Bernhart We were last year at 14 million. Joseph Kowunda - Real Asset Management Yes, I can see that, 14.8. But I am just wondering how much does it fluctuate, what is the minimum and maximum? Does it go.? Ralf Bernhart I think last November we were down to zero. Joseph Kowunda - Real Asset Management To zero, okay. Okay, perfect. Ralf Bernhart Yes, you are welcome. Joseph Kowunda - Real Asset Management Thank you. Operator Your next question comes from Peter Bernfried from CAIB please ask your question. Peter Bernfried - CAIB Yes, hello Mr Eliasch, revenue growth and margin growth in winter sports was pretty strong in the third quarter. So would you expect this trend to continue in the fourth

quarter? Or maybe even a decline in the fourth quarter so it might remain on the same level as last year? Ralf Bernhart Johan do you want to answer, or shall I? Johan Eliasch You answer. Ralf Bernhart What as mainly meant also with better logistics in the winter sport was that we had earlier shipments than the year before so it might be that in the last quarter now we might even have maybe a lower winter sport revenue than we had in the last quarter year. But in total we definitely will still be very positive. Peter Bernfried - CAIB Okay. Ralf Bernhart That is the anticipation, yes. Peter Bernfried - CAIB So it is the strong momentum will most probably continue in the fourth quarter? Because of these earlier shipments? Ralf Bernhart Yes, it was just that, it was we had earlier shipments. So it depends now on the weather clearly how the re-orders are. Peter Bernfried - CAIB All right. There were no restructuring costs on the P&L this year but for next year are there some restructuring measures, further restructuring measures planned? And on the other hand, what might we expect in terms of cost savings for the full year next year based on the restructuring that has been taking place? Johan Eliasch We are permanently restructuring but to show it as a one time charge in the balance sheet is very specific. When the P&L is a very specific moment, it would mean that we had to close one sector of something else. Our investment into the tennis ball factory in China in total is we see, is also including some extra costs but they are not shown as a one time charge for example.

Peter Bernfried - CAIB All right. Johan Eliasch This effect of the Chinese plant will only be there in the year2008 or 2009 not yet in the year 2007. Peter Bernfried - CAIB Okay. Ralf Bernhart The full effect we have said in 2004 when we issued the bond that we expect a 15 million to 16 million savings. We can now say that as comparing clearly raw material prices, and comparing revenues, we will have fully reached these savings and in addition the savings that we have anticipated also for the move of the tennis racket production to China. But the savings in the next years will only come when, additional saving will only come when the tennis plant is fully functioning in 2008. Peter Bernfried - CAIB All right. Thank you gentlemen. Operator If you wish to ask a question, please press * 1 on your telephone keypad. There are no further questions sir, please continue. Johan Eliasch Thank you. No further questions? Ralf Bernhart No further questions, no, then I think Johan Eliasch Then we thank you very much for this call and look forward to the next call. Operator That does conclude our conference for today. Thank you for participating, you may now all disconnect.