True Temper Sports, Inc. posted net sales for the first quarter were $31.7 million down slightly from $32.1 million recorded during the first quarter of 2005. Net income for the first quarter decreased approximately $0.4 million, to a net loss of $0.2 million from net income of $0.2 million in the first quarter of 2005.

In his comments about the company’s performance, Scott Hennessy, President and CEO said, “While we continually strive for revenue growth each quarter, given the industry backdrop and overall market conditions during this first half of 2006, we were pleased to deliver sales that were basically in-line with expectations and prior year levels. There is a general lack of new product momentum in the iron category at this time, and as expected, that has negatively impacted our sales of premium steel golf shafts. Many of our OEM partners are in the later stages of prior year iron product lines, and are actively working on the next wave of introductions scheduled for launch during the second half of 2006. Despite our disappointment in the overall steel shaft market, the growth acceleration of our graphite golf and performance sports categories are very encouraging; both of which set new quarterly sales records and posted strong double digit growth rates for the first quarter. Our graphite golf business continues to prosper behind the demand for our Grafalloy ProLaunch line and the new stock OEM business that we secured during 2005. Our performance sports division posted revenue improvement of 45% during the first quarter, as our diversification into the hockey and cycling markets continues to expand, and supplement our base tubing business.”

Mr. Hennessy continued, “With the success we achieved in our graphite golf and performance sports categories, we had an anticipated shift in product mix during the quarter. While still quite positive, the gross margin for these two product categories is somewhat lower than that of our premium steel golf shafts. In addition, we continue to experience commodity pressure and higher energy costs than the same period during 2005. Compounding these issues, the US dollar, while retreating somewhat in recent months, remains markedly stronger than this time during 2005, and in fact our revenue and Adjusted EBITDA were negatively impacted by $0.5 million during the first quarter related to foreign exchange rates in the British Pound, Japanese Yen and Australian Dollar. Given this headwind, we did embark on a number of productivity and cost containment programs during the quarter in an effort to mitigate the impact to our overall profitability. We have several initiatives in process at our manufacturing facilities centered around quality improvement and waste reduction, and we continue to refocus our efforts surrounding supply chain logistics in order to improve delivery time and reduce overall freight cost. In addition, we also addressed targeted reductions to our SG&A area to reduce costs there by approximately $0.5 million during the quarter. These actions, combined with continued cost savings from the complete transition of graphite operations from our California facility into our new China plant, allow us to continue to be optimistic about the direction and profitability of the company.”


Outlook

Commenting about the company’s outlook for the future, Mr. Hennessy said, “As indicated previously, we believe the sluggish environment for irons will continue through the current quarter, but should be reversed during the second half of the year when new iron introductions are scheduled at several major golf equipment OEM’s. While we expect to continue to grow our share in the graphite golf and performance sports categories, similar to the first quarter we do not believe this growth will fully compensate for the decline in premium steel golf shaft sales. On a positive note, it does appear that inventory in the distribution channel is at a very manageable level, and will not result in the overall industry correction experienced during 2004. This, combined with the current OEM launch schedule for the back half and our own internal new product pipeline, provides some encouragement that in the third and fourth quarters we will see overall top line growth as we combine improved steel golf shaft sales with the momentum developing in our other business segments.”

Mr. Hennessy continued, “On the profitability front, we do expect to be faced with similar unfavorable product mix issues during the second quarter, as well as continued pressure from energy sources and commodities. Contrary to these negative pressures, we do anticipate some relief from foreign currency exchange rates in the months ahead. Along with our productivity initiatives, we hope this will help to mitigate some of the negative pressure on our gross profit line. In addition, we will continue to monitor our SG&A spending very closely, and make necessary, targeted reductions that will improve profitability without compromising our marketing and advertising programs which are driving brand awareness.”



TRUE TEMPER SPORTS, INC. AND SUBSIDIARIES



(A wholly-owned subsidiary of True Temper Corporation)



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



(Unaudited)



(Dollars in thousands)

 

 


Quarter Ended

 

 

 


April 2,

 


April 3,

 

 

 

2006

 

2005

 



NET SALES



 



$



31,659



 



$



32,103



 



 



 



 



 



 



 

Cost
of sales

 

20,085

 

19,234

 

 

 

 

 

 

 



GROSS PROFIT



 



11,574



 



12,869



 

 

 

 

 

 

 

 

 

 

 

 

 


Selling, general and administrative expenses

 

3,527

 

4,188

 

 

 

 

 

 

 


Amortization of intangible assets

 

3,461

 

3,456

 

 

 

 

 

 

 


Business development, start-up costs and transition costs

 

12

 

65

 

 

 

 

 
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