True Temper Sports, Inc. reported sales for the fourth quarter increased 22.1%, to $29.5 million from the $24.2 million recorded during the fourth quarter of 2006. Adjusted EBITDA for the fourth quarter increased over 100%, to $6.7 million from $3.2 million in the fourth quarter of 2006. The company recorded a net loss for the 2007 fourth quarter $5.3 million versus a loss of $4.6 million a year earlier.


 

Net sales for the full year 2007 increased 7.7%, to $116.3 million from the $108.0 million level in 2006. Adjusted EBITDA for the full year was relatively flat at $23.3 million, compared to $23.8 million in 2006. The net loss was $33.5 million versus a deficit of $10.8 million the year before.

 

Scott Hennessy, president and CEO said, “The past year certainly was one of both great accomplishments and significant challenges. We were very pleased with the overall revenue gains of nearly 8%, but were even more encouraged by the increasing momentum in sales as we continued through the year. The fourth quarter marked our strongest performance of 2007, as compared to the same quarter from the previous year, with overall top line improvement of just over 22%. Importantly, the strength in sales during the fourth quarter was quite balanced, as every major product category showed marked improvement. This included increased steel and graphite golf shaft sales on the strength of our new branded products, as well as another quarter of double digit percentage gains in our key performance sports categories of hockey and cycling as we continue to gain marketshare in these new lines of business. We entered 2007 with expectations of solid revenue improvement, and while it was more year-end loaded, we believe the sales gains were relatively in line with our expectations.”

 


Hennessy continued, “Unfortunately overall profitability, and specifically our gross profit percentage, was not in line with initial expectations for 2007. As outlined previously, our cost of sales was negatively impacted by three main issues during most of year. Market prices for nickel hit all time highs. Healthcare cost inflation rose at a significant double digit rate. And lastly, we experienced certain inefficiencies in the manufacturing processes at our primary steel golf shaft facility in Mississippi. During the second half of 2007, along with moderating nickel prices, we put in place a number of initiatives to combat these cost drivers. These initiatives included a global price increase on our products, the implementation of a new, more affordable healthcare benefit plan for our US employees, and the initiation of several key productivity and efficiency programs in our Mississippi steel shaft plant. We saw the initial benefits of these programs begin to read through to overall profitability during the latter part of 2007, as our fourth quarter gross profit percentage rebounded to over 30%, and our Adjusted EBITDA more than doubled from the fourth quarter of 2006. While overall profitability for the full year was certainly disappointing, we were encouraged by the improvements during the fourth quarter, and look to continue that trend into the coming year.”


 


Outlook


 


Hennessy said, “Our outlook for 2008 revenue is heavily influenced by three key factors. First, the overall results we experience in steel golf shaft revenue are highly dependent upon the overall golf market conditions for irons, wedges and putters. As we survey the current group of new product introductions by major golf OEMs throughout 2008, we are encouraged by the potential, and the activity planned in all three of these categories. True Temper, along with the rest of the golf industry, will be closely observing the key second quarter reorder cycle for all club segments to get a better indication of the full year market direction for 2008. Secondly, we expect to continue the growth in graphite golf shaft sales that we initiated during the back half of 2007, primarily through a number of new branded product launches, as well as continued strengthening of key OEM partnerships utilizing our graphite wood and iron shaft offerings. Third, we anticipate continued revenue momentum and marketshare gains in all of our performance sports categories, as well as business expansion into new sporting goods segments during the second half of the year. Currently, all of these factors point toward a solid increase in overall revenue for 2008, beginning with 15% to 20% top line improvement during the first quarter of this year.”


 


Hennessy continued, “Based on the actions taken through our global pricing initiatives, our more affordable healthcare plan, and the continuing efficiency improvement programs in our manufacturing facilities, we are optimistic about improving operating margins during each quarter of 2008. These factors, along with improved leverage on unit volume increases, should help to provide increased gross profit and EBITDA levels throughout the year, beginning with a first quarter EBITDA growth percentage that will meet or exceed the sales growth level. While we still have a way to go in order to regain the metric of our historical operating margins, our goal remains to return the company to those levels, and we feel that target is quite achievable as we continue to implement our new initiatives. At the same time, we recognize that our industry, and the overall economy, has entered a new era of volatility as it relates to commodity prices and raw material inputs. While we certainly see more stability in 2008 that we experienced last year, we continue to watch the nickel, steel, natural gas and carbon fiber markets very closely. These raw materials make up a larger percentage of our overall cost structure than they did in previous years, and it is clear that in today's marketplace we must be able to react quickly to the changing landscape of commodity prices and take the necessary actions to minimize the impact to True Temper.”






TRUE TEMPER SPORTS, INC. AND SUBSIDIARIES

            (A wholly-owned subsidiary of True Temper Corporation)

                    CONSOLIDATED STATEMENTS OF OPERATIONS

                                 (Unaudited)

                            (Dollars in thousands)


                                                    Fourth Quarter Ended

                                               Dec. 31,   Dec. 31,   Dec. 31,

                                                 2007       2006       2005


    NET SALES                                  $29,517    $24,181    $27,406

    Cost of sales                               20,123     18,578     16,737

    GROSS PROFIT                                 9,394      5,603     10,669

    Selling, general and administrative

     expenses                                    3,918      3,466      2,927

    Amortization of intangible assets            3,736      3,648      3,472

    Business development, start-up and

     transition costs                              607        525         36

    Impairment charge on long-lived assets           –          –        357

    OPERATING INCOME                             1,133     (2,036)     3,877

    Interest expense, net                        6,336      5,363      4,697

    Other expenses (income), net                     5         12          2

    LOSS BEFORE INCOME TAXES                    (5,208)    (7,411)      (822)

    Income tax expense (benefit)                   124     (2,765)      (263)

    NET LOSS                                   $(5,332)   $(4,646)     $(559)