Golfsmith International Holdings, Inc. saw fourth quarter net revenues amount to $75.0 million, up 4.5% from $71.8 million in the year-ago quarter. The increase was due to sales from 10 stores opened in fiscal 2006 and a 1.2% increase in net revenues from its direct-to-consumer channel that was “partially offset by a decrease in sales in existing stores.”

Comparable store sales were negative 5.5% compared with a positive 13.5% for the same period a year ago. Comparable store sales were impacted by increased competition in certain markets and a decline in sales in the clubmaking industry. Additionally, we believe that consumers delayed metal wood purchases in the fourth quarter in anticipation of major manufacturer's products that are debuting in the first half of 2007.

The company reported an operating loss of $0.6 million compared with operating income of $0.7 million for the same period of fiscal 2005. These results were affected by a larger proportion of sales in lower-margin categories, such as golf clubs and electronic accessories; and increased selling, general and administrative expenses associated with 10 store openings since the fourth quarter of 2005.

The company also reported a net loss of $1.6 million, or a loss per diluted share of 10 cents based on 15.7 million fully diluted weighted average shares outstanding. This compares with a net loss of $2.3 million, or a loss per diluted share of 23 cents based on 9.8 million fully diluted weighted average shares outstanding, in the three months ended December 31, 2005.

“In the fourth quarter and full year of fiscal 2006, we delivered on several of our strategic initiatives, such as growing the golf club category, expanding our presence in tennis, strengthening our apparel business and distinguishing ourselves through our Guest First program,” said Jim Thompson, chief executive officer and president of Golfsmith. “We executed our strategy in light of increasingly challenging market conditions.”

For fiscal year 2006, Golfsmith reported net revenues of $357.9 million compared with $323.8 million for fiscal 2005. The increase of 10.5% was due to sales from 10 stores opened in the fiscal 2006, a 2.7% increase in net revenues from its direct-to-consumer channel and an increase in sales in existing stores.

Comparable store sales increased 2.0% compared with 2.6 percent in the same period a year ago primarily due to increased sales of golf clubs, apparel, electronics and tennis products. Growth in these categories in the first half of the year were partially offset by slower growth rates in the second half of the year and the continued decline of clubmaking.

The company reported operating income of $11.6 million in fiscal 2006 compared with operating income of $14.7 million in fiscal 2005. These results were affected by a larger proportion of sales in lower margin categories, such as golf clubs and electronics; aggressive shipping promotions; increased selling, general and administrative expenses associated with 10 store openings; and a decline in sales in the clubmaking industry. Furthermore, operating results were impacted by a $3.0 million fee paid to terminate a management consulting agreement with First Atlantic Capital, Ltd., and a $0.6 million non-cash stock compensation expense.

The company also reported a net loss of $7.0 million, or loss per diluted share of 54 cents, compared with net income of $3.0 million, or earnings per diluted share of 30 cents for fiscal 2005. The 2006 full-year results included net charges of $15.1 million related to charges incurred at the time of the company's initial public offering on June 15, 2006. These charges included $12.8 million for the extinguishment of the company's long-term debt that was retired with the proceeds raised in the IPO.

Excluding these charges, pro forma results for the year were net income of $8.1 million and pro forma earnings per share of 61 cents compared with 2005 net income of $3.0 million and 30 cents of earnings per share. Pro forma per share results were based on 13.3 million fully diluted weighted average shares outstanding at December 30, 2006.


Fiscal 2007 Outlook

The company's long-term strategy is to increase revenues through opening new stores, increasing sales in existing stores and growing the direct-to-consumer channel. Additionally, Golfsmith expects to deliver operating income increases, albeit at a slower growth rate than revenues due to heightened competition and a shifting product mix.

For the first quarter of fiscal year 2007, the company anticipates net revenues to range from $77 million to $79 million, and comparable store sales of between negative 7% and negative 6%. The diluted loss per share is expected to be between 22 cents and 20 cents based on fully diluted weighted average shares outstanding of 15.7 million.

For the full year of fiscal 2007, the company expects net revenues to range from $417 million to $430 million, and comparable store sales of 1.5% to 3.0%. The diluted earnings per share are expected to be between 69 cents and 79 cents based on fully diluted weighted average shares outstanding of 16.2 million. The company plans to open 12-14 stores, the majority of which will be in the first six months of the year.

               Golfsmith International Holdings, Inc.
                Consolidated Statements of Operations

                         Fiscal Year            Three Months Ended
                 December 30,  December 31,  December 30, December 31,
                     2006           2005         2006         2005
                  (Unaudited)                 (Unaudited)
                 ------------- ------------- ------------ ------------

Net revenues     $357,890,195  $323,794,225  $74,961,509  $71,821,251
Cost of products
 sold             232,073,044   208,044,286   49,019,416   46,549,587
                 ------------- ------------- ------------ ------------
Gross profit      125,817,151   115,749,939   25,942,093   25,271,664

Selling, general
 and
 administrative   112,456,208    99,310,158   26,206,960   24,506,924
Store pre-
 opening
 expenses           1,799,836     1,764,685      379,953       22,296
                 ------------- ------------- ------------ ------------
Total operating
 expenses         114,256,044   101,074,843   26,586,913   24,529,220
                 ------------- ------------- ------------ ------------
Operating income
 (loss)            11,561,107    14,675,096     (644,820)     742,444

Interest expense   (7,669,944)  (11,744,232)  (1,020,215)  (3,055,502)
Interest income       434,042        73,263        1,023        6,585
Other income        1,782,829       469,841      264,680      404,072
Other expense        (164,237)     (116,331)     (19,148)     (28,613)
Loss on debt
 extinguishment   (12,775,270)            -            -            -
                 ------------- ------------- ------------ ------------
Income (loss)
 before income
 taxes             (6,831,473)    3,357,637   (1,418,480)  (1,931,014)

Income tax
 expense             (186,725)     (400,003)    (155,609)    (324,022)
                 ------------- ------------- ------------ ------------

Net income
 (loss)           $(7,018,198)   $2,957,634  $(1,574,089) $(2,255,036)
                 ============= ============= ============ ============
Net income
 (loss) per
 share:
   Basic               $(0.54)        $0.30       $(0.10)      $(0.23)
   Diluted             $(0.54)        $0.30       $(0.10)      $(0.23)
Weighted average
 number of
 shares
 outstanding:
   Basic           13,037,024     9,803,712   15,720,743    9,803,712
   Diluted         13,037,024     9,943,443   15,720,743    9,803,712