True Temper Sports, Inc. saw first quarter net sales slide 6.6% to $29.6 million from $31.7 for the same quarter in 2006. Adjusted EBITDA for the first quarter decreased to $7.1 million from $8.7 million in the first quarter of 2006, while net income for decreased to a net loss of $3.1 million from a net loss of $0.2 million in the first quarter of 2006.

In his comments about the company’s performance, Scott Hennessy, president and CEO said, “While we are never satisfied with delivering a quarterly sales decline, we do feel that the first quarter revenue results represent another step in the right direction. The first quarter of 2006 was a reasonably strong sales period. The fact that our top line results were only slightly off from the prior year, and considering that the 6.6% decline represented a significant improvement over the quarterly sales shortfall during the third and fourth quarters of 2006, we certainly see these results as trending upward. In addition, unlike our results in 2006, the sales decline during the first three months of 2007 is very closely tied to a small group of customers. This focused revenue issue is more manageable than the overall market and industry declines we experienced during the prior year.”

Mr. Hennessy continued, “Although our overall revenue is trending in the right direction, we remain intently focused on the gross profit and Adjusted EBITDA read-through to the bottom line. During the first quarter our gross profit percentage dropped 2.7% from the previous year, and similar to the sales decline, this shortfall was attributed to a very short list of issues impacting our company. First, we are absorbing a significant increase in the cost of nickel, a key raw material used in the manufacture of steel golf shafts. This commodity has nearly tripled in price during the recent months. In addition, we are continuing to experience the same double digit inflationary pressure for employee medical benefits that many companies are faced with. These two factors account for the majority of the decline in gross margins during the first quarter, but they were somewhat offset by a favorable shift in product mix toward our more premium steel and graphite golf shafts. This shift was anticipated, and represents the results of a strategic emphasis on product mix management during 2007.”


Outlook

Commenting about the company’s outlook for the future, Mr. Hennessy said, “From a sales perspective, we are very encouraged by recent developments in the industry and our business in particular. Overall, there are clearly more exciting new product launches both in the market and scheduled for introduction during the remainder of 2007. Many of these new products launches, particularly in the iron category, utilize True Temper’s proprietary golf shafts. In addition, our recently introduced branded golf shafts such as Grafalloy ProLaunch Red TM and the revolutionary new Grafalloy EPIC TM shafts continue to gain momentum in the marketplace and on the professional golf tours. We expect all these factors will contribute to increased revenue and profitability for 2007, and as previously indicated, we believe the year over year improvement on the revenue line will begin with the second quarter.”

Mr. Hennessy continued, “Our near-term outlook for sales and revenue momentum continues to improve, and we are certainly encouraged by the recent increase in new incoming orders versus last year. We should begin to see greater unit sales volume in the months ahead, and also begin to experience favorable manufacturing and cost leverage in our production facilities. That said, although we fully expect our second quarter sales to improve over 2006, we do expect to continue to see higher raw material and medical costs during the quarter. We plan to further manage our product mix in order to partially offset these factors, but with the nickel market holding above the $20.00 per pound level, we will be unable to fully mitigate the negative pressures on our gross profit results. We are actively pursuing cost control and productivity programs throughout the manufacturing, selling and administrative areas of our business, and we still believe that the full year Adjusted EBITDA will show marked improvement over 2006 levels.”