Ashworth, Inc. net revenue for the fiscal third quarter ended July 31, 2006 increased 9.3% to $52.8 million as compared to $48.3 million for the third quarter of 2005. The Company reported consolidated third quarter net income of $0.7 million, or 5 cents per diluted share, compared to a net loss of $(3.4) million, or a loss of 24 cents per diluted share, for the same quarter of the prior year.

Net revenue for the domestic segment increased 7.0% to $42.8 million for the third quarter of fiscal 2006 from $40.0 million for the same period of the prior year. Net revenue from the international segment increased 20.8% to $10.0 million for the third quarter of fiscal 2006 from $8.3 million for the same period of the prior year.

Consolidated net revenue for the first nine months ended July 31, 2006 increased 6.7% to $159.4 million as compared to $149.5 million for the first nine months of fiscal 2005. The Company reported consolidated net income of $5.3 million, or $0.37 per diluted share, for the first nine months of fiscal 2006 compared to net income of $1.5 million, or $0.11 per diluted share, for the same period of the prior year. Included in the current results are special expenses related to the 2006 proxy contest, strategic alternatives process, implementation of FAS 123R and SOX 404, totaling approximately $0.4 million for the third quarter and $2.0 million for the first nine months that were not incurred in the same periods of the prior year. Net revenue for the domestic segment increased 5.1% to $130.4 million for the first nine months of fiscal 2006 from $124.0 million for the same period of the prior year. Net revenue from the international segment increased 14.1% to $29.0 million for the first nine months of fiscal 2006 from $25.4 million for the same period of the prior year.

In the third quarter of fiscal 2006, the Company’s gross margin was 41.0% compared to 31.1% for the third quarter of 2005. For the first nine months of fiscal 2006, the gross margin was 43.6% compared to 38.6% for the same period of fiscal 2005. This gross margin improvement was primarily due to the previously noted retail markdown charges and inventory provisions taken in 2005 and an improved merchandising strategy focused on classic key item products with a lower percentage of fashion products in the Company’s domestic retail distribution channel which resulted in improved sell-through at retail. The improved sell-through has resulted in a reduction in the actual markdown allowances requested and granted as well improvements in domestic inventory management, yielding lower reserve requirements as compared to the same quarter in the prior year. The gross margin also benefited from continued improvement in direct labor efficiencies at the Company’s domestic EDC.

Included in the selling, general and administrative (“SG&A”) expenses for the third quarter of fiscal 2006 are pre-tax charges of approximately $0.4 million, consisting primarily of consulting and legal expenses associated with the now-resolved issues relating to the Company’s 2006 Annual Meeting of Stockholders, the exploration of strategic alternatives and FAS 123R stock option expenses not incurred in the same period last year. Included in the first nine months of fiscal 2006 are pre-tax charges of approximately $2.0 million for these SG&A expenses including SOX 404 related expenses incurred in the first quarter of fiscal 2006 and not incurred in the same period of the prior year. On an after tax basis, these SG&A expenses equate to a $0.01 per diluted share reduction in earnings for the third quarter and $0.08 per diluted share for the first nine months of fiscal 2006.

Management noted that over the first three quarters of fiscal 2006 the Company has achieved solid results versus last year and has returned to profitability. These results reflect the benefit of the actions management has taken since the company implemented the initial phase of its profit improvement initiatives in late 2005. These included increased efficiency at the EDC, lower retail markdowns as compared to the second half of fiscal 2005, and improved domestic inventory management. Management also believes these and additional actions being taken will continue to improve the company’s operating performance.

Total revenues in the domestic golf channel in the third quarter of fiscal 2006 decreased to $17.3 million, or 18.5%, from the same period last year. Management believes that the overall softness in the golf industry combined with the proxy contest, strategic alternatives process and product mix adversely affected the Company’s sales in the first nine months of fiscal 2006. The Company has seen growth in its technical product lines, which has partially offset the decline in sales of the Company’s more traditional all-cotton product lines, and believes that its more balanced Spring/Summer 2007 product offering positions it for future growth in this channel which is supported by very early prebook results.

Some of the highlights for Spring/Summer 2007 in the Ashworth brand include the introduction of the “Ashworth Perfect Foursome” which includes the introduction of four new Authentic product offerings that are unique to the market and exclusive to Ashworth, along with an expanded offering of Ashworth Weather Systems® (AWS) including replenishment styles, seasonal key items and three Collections.

The Callaway Golf apparel line for Spring/Summer 2007 includes an expanded technical X Series line under the banner of The Callaway Golf Performance Center. The Performance Center introduces new elements of X Series including: Drysport(TM), Windsport(TM), Warmsport(TM) and Rainsport(TM) supporting the key performance needs of the core golf market.

In addition, Callaway Golf apparel has introduced a new luxury performance pant and short called Tour Authentic(TM). The Tour Authentic bottoms line continues a long history of strong bottoms business for the brand and takes it to the next level with an unprecedented combination of performance and comfort.

Revenues for the corporate distribution channel were $7.5 million for the third quarter of 2006, an increase of 7.1% over the same period last year. The increase in net revenues in the corporate distribution channel was primarily due to the success of certain sales promotions and the addition of technical performance product offerings.

Third quarter revenues for the retail distribution channel were $2.9 million, an increase of $2.3 million over the same period last year which was adversely impacted by the previously mentioned retail markdown. This year’s sales performance benefited from the Company’s enhanced merchandising strategy focused on classic key item products with a lower percentage of fashion products. Sell-through of early Fall/Holiday 2006 product in the channel continues to improve and, as a result, the Company anticipates continued success in managing markdown allowances.

Third quarter revenues for Ashworth East were $11.9 million, an increase of 34.4% over the same period last year. The increase was primarily due to cross-selling of Ashworth® apparel into the collegiate/bookstore channel, the direct import headwear program, increased sales in the NASCAR/racing channel as well as a result of being the exclusive on-site event merchandiser for the 2006 Kentucky Derby.

Revenues from the Company-owned outlet stores were $2.9 million for the third quarter of 2006, an increase of 38.5% over the same period last year. Since the end of the third quarter of 2005, the Company added a net of two new outlet stores (four outlet openings and two outlet closings) bringing the Company’s total number of outlet stores to 16. The new outlet stores net of closings contributed $0.3 million in sales in the third quarter of fiscal 2006 while sales on a comparative store basis increased 12.6% as compared to last year’s third quarter.

Third quarter revenues from the international distribution channel were $10.0 million, an increase of 20.8% over the same period last year. The increase in revenues was primarily driven by growth in the Company’s European subsidiary which is attributable to increased demand in the United Kingdom and Ireland and the addition of new corporate channel partners in mainland Europe, partially offset by lower royalty revenues from international distributors.

The Company’s EDC continues to meet operating direct labor efficiency targets. Results for the EDC were driven by efficiency measures that focused on direct labor utilization. As a result of the improved efficiency, the Company has been able to better serve customers, provide quicker turnaround to the Company’s corporate and golf customers for their at-once needs, improve the quality of the Company’s embroidery operations, reduce customer returns for processing defects, achieve higher customer satisfaction, provide additional capacity for improved economies of scale, and support the Company’s multi-brand, multi-channel growth strategy. The Company also noted that labor overtime at the EDC continues to trend favorably and is significantly below last year’s levels.

The Company’s Balance Sheet, which was a key area of focus in the initial phase of the profit improvement initiatives, continued to show improvement in the third quarter of fiscal 2006 primarily due to a focus on domestic inventory management and accounts receivable initiatives.

As a result of the Company’s implementation of multiple inventory and supply chain initiatives, overall net inventory decreased 2.2% to $53.0 million as of July 31, 2006 as compared to $54.2 million as of July 31, 2005. Domestic net inventory, excluding Ashworth East, decreased 10.9% from the third quarter of 2005. All other inventory grew 18.1% to $19.1 million as of July 31, 2006 as compared to $16.2 million as of July 31, 2005 in support of third quarter fiscal 2006 sales growth, which was up 27.9% for these operations as compared to the third quarter of fiscal 2005.

Net accounts receivable increased 1.4% to $39.3 million at July 31, 2006 as compared to $38.8 million at July 31, 2005, while revenues increased 9.3% for the third quarter as compared to last year.

The Company stated that consolidated revenues for fiscal 2006 are expected to be at the lower end of the previously indicated range of $210 to $220 million. The Company noted that its previous guidance for consolidated net earnings (EPS) for fiscal 2006 of $0.48 to $0.56 per diluted share excluded the additional SG&A expenses associated with the 2006 proxy contest and the strategic alternatives process. Management also advised that this guidance was dependent on many factors such as but not limited to achieving traditional in-season order rates. Due to somewhat lower at-once order rates in the domestic golf channel, the Company now expects its normal operating results will be modestly below the low end of the previously provided EPS guidance. In addition, the Company noted that certain SG&A expenses may be higher that previously expected due to potential additional profit improvement initiatives, organizational / structural changes, and other actions the Company is considering in order to position the Company for further growth in 2007.

Commencing in November 2005, the Company’s Board of Directors, in consultation with its independent financial advisor, Houlihan Lokey Howard & Zukin, undertook an extensive review and evaluation of a range of strategic alternatives, including a possible sale of the Company, to enhance value for all stockholders. At the present time, the Board has determined that the interests of the Company’s stockholders will best be served by focusing principally on improving the Company’s operations and financial performance. The Board remains committed to enhancing value for all Ashworth stockholders and remains open to considering any and all alternatives that would achieve that goal. As a result, the Company will continue to carefully consider available strategic alternatives opportunities if and when presented as it focuses on key areas of potential operational improvement.

ASHWORTH, INC.
Consolidated Statements of Income
Third Quarter and Nine Months ended July 31, 2006 and 2005
(Unaudited)
                                             Summary of Results of
                                                  Operations
                                               2006          2005
                                           ------------- -------------
THIRD QUARTER
-------------
Net Revenue                                 $52,816,000   $48,304,000
Cost of Sales                                31,190,000    33,298,000
                                           ------------- -------------
 Gross Profit                                21,626,000    15,006,000
Selling, General and Administrative
 Expenses                                    19,836,000    19,866,000
                                           ------------- -------------
Income (Loss) from Operations                 1,790,000    (4,860,000)
Other Income (Expense):
 Interest Income                                 21,000        15,000
 Interest Expense                              (828,000)     (624,000)
 Other Income (Expense), net                    151,000      (169,000)
                                           ------------- -------------
 Total Other Expense, net                      (656,000)     (778,000)
                                           ------------- -------------
Income (Loss) Before Provision for Income
 Taxes                                        1,134,000    (5,638,000)
Provision for Income Taxes                     (453,000)    2,255,000
                                           ------------- -------------
 Net Income (Loss)                             $681,000   ($3,383,000)
                                           ============= =============

Income (Loss) Per Share - BASIC                   $0.05        ($0.24)
Weighted Average Common Shares Outstanding   14,495,000    13,929,000
                                           ============= =============

Income (Loss) Per Share - DILUTED                 $0.05        ($0.24)
Adjusted Weighted Average Shares and
 Assumed Conversions                         14,624,000    13,929,000
                                           ============= =============