True Temper Sports, Inc. announced its 2002 fourth quarter and annual results. Net sales for the fourth quarter increased 18.1% to $26.1 million from $22.1 million during the fourth quarter of 2001. For the full year, annual sales declined by 3.3% to $107.4 million in 2002 from $111.1 million the prior year. Excluding the impact in 2001 of an adjustment to a deferred tax asset valuation allowance, as discussed below, net income for the fourth quarter increased to $1.7 million from $.9 million in the fourth quarter of 2001, and on an annual basis net income increased to $9.3 million from $6.9 million in the prior year.
In the fourth quarter of 2001 True Temper eliminated a $17.6 million valuation allowance related to its net deferred tax assets and recorded the change in the valuation allowance against income tax expenses of $6.1 million, resulting in a net deferred income tax benefit of $11.5 million in calendar 2001. When you include the impact of this event in the fourth quarter of 2001, net income for the fourth quarter of 2002 decreased to $1.7 million from $18.5 million in the fourth quarter of 2001, and on an annual basis net income decreased to $9.3 million from $24.6 million in the prior year.
Adjusted EBITDA for the fourth quarter increased by 11.6% to $7.8 million in 2002 from $6.9 million in 2001. For the year Adjusted EBITDA remained unchanged at $32.4 million for both 2002 and 2001.
In his comments about the Company’s performance, Scott Hennessy, President and CEO said, “The first half of 2002 was challenging as net sales decreased by 14.1% compared to the first half of 2001. Fortunately, by mid-year incoming orders began to pick up and we produced solid improvements during the second half of the year in our sales, posting a year over year gain of 14.3%. This second half increase was driven by orders for our premium steel products such as our new TX 90(TM) lightweight steel shaft, as well as improvements in demand for steel putter and wedge shafts. Although sales declined 3.3% on a full year basis, we focused our efforts on cost and expense controls and turned in an operating performance which generated a slight increase in gross profit margins and held Adjusted EBITDA flat compared to 2001. During the year we also saw a continuation of our business growth internationally, and as a result, export sales to international customers increased $6.8 million, or 29.1%, to $30.3 million in 2002 compared to $23.4 million in 2001.”
In his comments about the Company’s future, Mr. Hennessy said, “Although our sales in the second half of 2002 increased compared to the same period on 2001, our outlook and forecast for 2003 is still very guarded. We believe that we will continue to perform well against our competition and that our new product initiatives and plans position us well for the future. Offsetting these positive trends for the Company, the current economic environment, global uneasiness from military conflict and current consumer confidence levels have cast a cautious tone over the outlook for 2003. The incoming order trend for True Temper continues to be encouraging, yet the general mood and sentiment from customers and retailers remains subdued. As a result we continue to receive orders with relatively short lead times that provide limited visibility for forecasting full year sales volume.”
STATEMENTS OF OPERATIONS
(Dollars in thousands)
For the Years Ended December 31, 2002 2001 2000 NET SALES $107,401 $111,083 $110,636 Cost of sales 65,161 67,735 65,382 GROSS PROFIT 42,240 43,348 45,254 Selling, general and 13,578 14,963 16,899 administrative expenses Amortization of goodwill -- 2,695 2,701 Impairment of long-lived assets -- -- 1,053 Business development and start-up costs 312 -- -- Restructuring costs -- -- 7 Loss on early extinguishment of long- term debt 777 -- -- OPERATING INCOME 27,573 25,690 24,594 Interest expense, net of 12,236 12,660 13,693 interest income Other expenses, net 93 (2) 56 INCOME BEFORE INCOME 15,244 13,032 10,845 TAXES Income taxes 5,992 (11,539) 5,218 NET INCOME $9,252 $24,571 $5,627