Sport-Haley Q4 Sales Up 12%; Net Falls

Sport-Haley, Inc. saw net sales increase 12% to $7.9 million from $7.0 million for the fourth quarter. Net income, however decreased 65.2% to $204,000 from $587,000. Basic earnings per share reflected the income decrease at 8 cents per share, down from 23 cents per share for the same quarter last year.

Gross profit decreased by 10%, or $259,000, to $2.2 million from $2.5 million last year, while other operating costs increased approximately 19%, from $2.0 million in the comparable prior year period to $2.4 million this year.

The company attributed the comparative increase in net sales, decrease in gross profit, and increase in other operating costs to the consolidation of the operations of Reserve Apparel Group LLC with the operations of Sport Haley. As previously reported, Reserve Apparel was formed in November 2005 in order that for Sport Haley to be able to introduce Top-Flite branded apparel in Wal-Mart stores. The numerous problems the company encountered during the introduction of Top-Flite branded apparel within Wal-Mart stores, including poor performance of third party suppliers, extraordinary shipping charges and markdown money due to Wal-Mart as a result of the delivery delays and poor sell-through, caused Reserve Apparel to perform at a level “significantly below” SPOR's expectations.

As of June 30, 2006, the company moved substantially all of Reserve Apparel's operations to its Denver, Colorado facility. Before moving the operations to Denver, the product development, sourcing, logistics and sales invoicing operations of Reserve Apparel had been performed in Toronto, Ontario, Canada by employees of the minority interest owner. As previously reported, in September 2006, Sport Haley purchased the minority interest in Reserve Apparel, and has owned a 100% interest in Reserve Apparel since that time.

Wal-Mart informed the company in September that they do not intend to continue purchasing Top-Flite branded apparel into the near future. “The discontinuance of Top-Flite golf apparel in Wal-Mart stores allows us to refocus the direction that we envision for the Top-Flite brand,” stated Donald W. Jewell, CEO. “We recently developed a new limited line of apparel that was marketed specifically to Wal-Mart, which we believe greatly improved the style and quality of the Top-Flite garments from those that we sold to Wal-Mart through fiscal 2006. While we continue to believe that Top-Flite apparel could have produced mutually successful results had Wal-Mart continued to purchase it from us, we believe that the style and quality of products that we could offer under the Top-Flite brand were restricted by the limits imposed by Wal-Mart for golf apparel within their stores and that we can readily expand the Top-Flite apparel line to suit a number of other markets, which we have recently begun to explore.”

Commenting on the results of operations, Mr. Jewell continued, “Nevertheless, we're encouraged with the results of our fourth quarter. Our fashion apparel segment produced income from operations of $245,000 for our fourth quarter in fiscal 2006. Our Sport Haley and Ben Hogan collections continue to be well-accepted within the fashion golf apparel market, as noted by our customers, which have complemented us on the fashion designs, superior product quality, good sell-through in their shops and our premium customer service with regard to our shipping on time as well as our personable employees. We've all worked extremely hard over the last year to raise the image of our Company and our brands and to further refine our operations to properly position the Company to ensure our long-term financial success.

“Going forward, we intend to continue in our efforts to further improve our operations,” continued Mr. Jewell. “Our plans include focusing our efforts on growing our core business of fashion apparel, implementing additional efficiencies to decrease our operating costs and establishing one or two new major customers for our newly designed Top-Flite branded apparel. We believe that the results we achieved for the fourth quarter of fiscal 2006 are indicative that the improvements we implemented during the last fiscal year are beginning to produce positive results.”

                           SPORT-HALEY, INC.
                     Unaudited Financial Information


                              Three Months Ended      Fiscal Year Ended
                                   June 30,                June 30,
                           ----------------------- -----------------------
                               2006        2005        2006        2005
                           ----------- ----------- ----------- -----------
Statements of Income Data
  (2006 Consolidated)

Net sales                  $ 7,866,000 $ 7,016,000 $20,962,000 $22,041,000

Gross profit                 2,233,000   2,492,000   6,912,000   6,352,000

Other operating costs        2,355,000   1,973,000   8,017,000   9,833,000

Income (loss) from
 operations                   (122,000)    519,000  (1,105,000) (3,481,000)

Net income (loss)              204,000     587,000    (415,000) (3,281,000)