**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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**FORM 10-Q**

| **x**      | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE**                                                                                                                                                                                                                                                                                                                                                                                |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | **SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                                                                                                                                                                                   |
| ** ** | **For the Quarterly Period Ended April 2, 2006**                                                                                                                                                                                                                                                                                                                                                                                                 |
| ** ** | **or**                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **o**      | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE**                                                                                                                                                                                                                                                                                                                                                                               |
| ** ** | **SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                                                                                                                                                                                   |
| ** ** | **For the transition period from                                     to                                  ** |

 

**Commissionfile number 333-72343**

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**TRUE TEMPER SPORTS, INC.**

(Exact name of registrantas specified in its charter)

| **Delaware**                                 |   | **52-2112620**          |
|----------------------------------------------|--------|-------------------------|
| (State or other  jurisdiction of             |   | (I.R.S. Employer        |
| incorporation or  organization)              |   | Identification  Number) |
| **8275 Tournament Drive**                    |   |                    |
| **Suite 200**                           |   |                    |
| **Memphis, Tennessee**                       |   | **38125**               |
| **(Address of principal executive offices)** |   | (Zip Code)              |

 

**Telephone: (901) 746-2000**

**(Registrant's telephone number, including area code)**

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Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirementsfor the past 90 days. YesxNo o.

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer.

Large acceleratedfiler   o     Acceleratedfiler   o     Non-acceleratedfiler   x

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theAct). Yes  o No  x

As of May 17, 2006the Registrant had 100 shares of Common Stock, $0.01 par value per share,outstanding.

 

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**TRUE TEMPER SPORTS,INC.**

**INDEX**

|              | ** **        | ** **            | ** ** | ** **                                                                                  | **Page** |
|--------------|-------------------|-----------------------|------------|---------------------------------------------------------------------------------------------|----------|
| PART I  |              | FINANCIAL INFORMATION |       |                                                                                        |
|         |              | Item 1.          |       | Financial Statements                                                                        |     | 1 |
|         |              |                  |       | Condensed Consolidated Statements of Operations  (Unaudited)                                |     | 1 |
|         |              |                  |       | Condensed Consolidated Balance Sheets (Unaudited)                                           |     | 2 |
|         |              |                  |       | Condensed Consolidated Statements of Cash Flows  (Unaudited)                                |     | 3 |
|         |              |                  |       | Notes  to Condensed Consolidated Financial Statements (Unaudited)                           |     | 4 |
|         |              | Item 2.          |       | Management’s Discussion and Analysis of Financial  Condition and Results of Operations |     | 8 |
|         |              | Item 3.          |       | Quantitative  and Qualitative Disclosures About Market Risk                                 |     | 13 |
|         |              | Item 4.               |       | Controls and  Procedures                                                                    |     | 13 |
| PART II | OTHER INFORMATION |                  |       |
|         |              | Item 1.          |       | Legal Proceedings                                                                           |     | 14 |
|         |              | Item 1A.         |       | Risk  Factors                                                                               |     | 14 |
|         |              | Item 2.          |       | Unregistered  Sales of Equity Securities and Use of Proceeds                                |     | 14 |
|         |              | Item 3.          |       | Defaults Upon  Senior Securities                                                            |     | 14 |
|         |              | Item 4.          |       | Submission of  Matters to a Vote of Security Holders                                        |     | 14 |
|         |              | Item 5.          |       | Other Information                                                                           |     | 14 |
|         |              | Item 6.          |       | Exhibits                                                                                    |     | 14 |
| Signatures   |              | 16                    |
|              |                   |                       |            |                                                                                             |          |  |  |  |

 

i

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**PART I.FINANCIAL INFORMATION**

**Item 1.**                        *Financial Statements*

**TRUE TEMPER SPORTS,INC. AND SUBSIDIARIES(A wholly-owned subsidiary of True Temper Corporation)**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)(Dollars in thousands)**

| ** **                                                 | ** ** | **Quarter Ended**       | ** **  |
|------------------------------------------------------------|------------|-------------------------|-------------|
| ** **                                                 | ** ** | **April 2,  2006** | ** **  | **April 3,  2005** | ** ** |
| **NET  SALES**                                             |       |                    | **$31,659** | ** ** |   |   | **$** | **32,103** | ** ** |   |
| Cost of sales                                              |       |                    | 20,085      |   |   |   | 19,234 | ** ** |   |
| **GROSS PROFIT**                                           |       |                    | **11,574**  | ** ** |   |   | **12,869** | ** ** |   |
| Selling, general and administrative expenses               |       |                    | 3,527       |   |   |   | 4,188 | ** ** |   |
| Amortization of  intangible assets                         |       |                    | 3,461       |   |   |   | 3,456 | ** ** |   |
| Business  development, start-up costs and transition costs |       |                    | 12          |   |   |   | 65 | ** ** |   |
| **OPERATING INCOME**                                       |       |                    | **4,574**   | ** ** |   |   | **5,160** | ** ** |   |
| Interest expense, net of interest income                   |       |                    | 4,846       |   |   |   | 4,767 | ** ** |   |
| Other expenses,  net                                       |       |                    | 20          |   |   |   | 12 | ** ** |   |
| **INCOME (LOSS) BEFORE INCOME TAXES**                      |       |                    | **(292**    | **)** |   |   | **381** | ** ** |   |
| Income tax expense (benefit)                               |       |                    | (62         | ) |   |   | 197 | ** ** |   |
| **NET  INCOME (LOSS)**                                     |       |                    | **$**       | **(230** | **)** |   |   | **$** | **184** | ** ** |   |
|                                                            |            |                         |             |  |  |  |  |  |  |  |  |

 

See accompanying notes to condensed consolidated financial statements

1

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**TRUE TEMPER SPORTS,INC. AND SUBSIDIARIES(A wholly-owned subsidiary of True Temper Corporation)**

**CONDENSEDCONSOLIDATED BALANCE SHEETS(Unaudited)(Dollars in thousands)**

| ** **                                                                                               | ** ** | **April 2,  2006** | ** **  | **December 31,  2005** | ** **  |
|----------------------------------------------------------------------------------------------------------|------------|-------------------------|-------------|-----------------------------|-------------|
| **ASSETS**                                                                                               |       |                    |        |                        |        |   |   |
| **CURRENT ASSETS**                                                                                       |       |                    |        |                        |        |   |   |
| Cash and cash equivalents                                                                                |       | $                       | 3,883       |                        |        | $ | 4,733 |   |   |
| Receivables, net                                                                                         |       | 22,585                  |        |                        | 17,949      |   |   |
| Inventories                                                                                              |       | 19,759                  |        |                        | 19,633      |   |   |
| Prepaid expenses and other current assets                                                                |       | 3,725                   |        |                        | 3,830       |   |   |
| **Total current assets**                                                                                 | ** ** | **49,952**              | ** **  | ** **                  | **46,145**  |   |   |
| Property, plant and equipment, net                                                                       |       | 12,242                  |        |                        | 12,210      |   |   |
| Goodwill, net                                                                                            |       | 150,883                 |        |                        | 150,883     |   |   |
| Intangible assets, net                                                                                   |       | 129,186                 |        |                        | 132,629     |   |   |
| Other assets                                                                                             |       | 6,482                   |        |                        | 6,188       |   |   |
| **Total assets**                                                                                         | ** ** | **$**                   | **348,745** | ** **                  | ** **  | **$** | **348,055** |   |   |
| **LIABILITIES &  STOCKHOLDER’S EQUITY**                                                    |       |                    |        |                        |        |   |   |
| **CURRENT LIABILITIES**                                                                                  |       |                    |        |                        |        |   |   |
| Current portion of long-term debt                                                                        |       | $                       | 1,280       |                        |        | $ | 245 |   |   |
| Accounts payable                                                                                         |       | 7,321                   |        |                        | 4,410       |   |   |
| Accrued expenses and other current liabilities                                                           |       | 8,620                   |        |                        | 9,896       |   |   |
| **Total current liabilities**                                                                            | ** ** | **17,221**              | ** **  | ** **                  | **14,551**  |   |   |
| Deferred tax liability, net                                                                              |       | 4,409                   |        |                        | 4,531       |   |   |
| Long-term debt, net of current portion                                                                   |       | 219,125                 |        |                        | 220,480     |   |   |
| Other liabilities                                                                                        |       | 8,456                   |        |                        | 8,729       |   |   |
| **Total liabilities**                                                                                    | ** ** | **249,211**             | ** **  | ** **                  | **248,291** |   |   |
| **STOCKHOLDER’S  EQUITY**                                                                           |       |                    |        |                        |        |   |   |
| Common stock—par value $0.01 per share; authorized 1,000  shares; issued and outstanding 100 shares |       | —                  |        |                        | —      |   |   |
| Additional paid-in capital                                                                               |       | 111,943                 |        |                        | 111,943     |   |   |
| Accumulated deficit                                                                                      |       | (11,160                 | )           |                        | (10,930     | ) |   |
| Accumulated other comprehensive loss, net of taxes                                                       |       | (1,249                  | )           |                        | (1,249      | ) |   |
| **Total stockholder’s equity**                                                                      | ** ** | **99,534**              | ** **  | ** **                  | **99,764**  |   |   |
| Commitments and contingent liabilities                                                                   |       | —                  |        |                        | —      |   |   |
| **Total  liabilities and stockholder’s equity**                                                     | ** ** | **$**                   | **348,745** | ** **                  | ** **  | **$** | **348,055** |   |   |

 

See accompanying notes to condensed consolidated financial statements

2

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**TRUETEMPER SPORTS, INC. AND SUBSIDIARIES(A wholly-owned subsidiary of True Temper Corporation)**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)(Dollars in thousands)**

| ** **                                                                                | ** ** | **Quarter Ended**  | ** ** |
|-------------------------------------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                                                | ** ** | **April 2,  2006** | ** ** | **April 3,  2005** | ** ** |
| **OPERATING  ACTIVITIES**                                                                 |       |                    |       |   |   |
| Net income (loss)                                                                         |       | $                       | (230       | ) | $ | 184 |   |
| Adjustments to  reconcile net income (loss) to net cash provided by operating activities: |       |                    |       |   |   |
| Depreciation and amortization                                                             |       | 544                     |       | 685 |   |
| Amortization of deferred financing costs                                                  |       | 310                     |       | 363 |   |
| Amortization of intangible assets                                                         |       | 3,461                   |       | 3,456 |   |
| Loss on disposal of property, plant and equipment                                         |       | 25                      |       | — |   |
| Deferred taxes                                                                            |       | (122                    | )          | 128 |   |
| Changes in operating assets and liabilities, net                                          |       | (3,542                  | )          | (3,391 | ) |
| **Net cash provided by operating activities**                                             | ** ** | **446**                 |       | **1,425** |   |
| **INVESTING ACTIVITIES**                                                                  |       |                    |       |   |   |
| Purchase of property, plant and equipment                                                 |       | (601                    | )          | (435 | ) |
| Other investing activity                                                                  |       | (18                     | )          | — |   |
| **Net cash used in investing activities**                                                 | ** ** | **(619**                | )          | **(435** | ) |
| **FINANCING ACTIVITIES**                                                                  |       |                    |       |   |   |
| Principal payments on bank debt                                                           |       | (320                    | )          | — |   |
| Other financing activity                                                                  |       | (357                    | )          | (41 | ) |
| **Net cash used in financing activities**                                                 | ** ** | **(677**                | )          | **(41** | ) |
| Net increase (decrease) in cash                                                           |       | (850                    | )          | 949 |   |
| Cash at beginning  of period                                                              |       | 4,733                   |       | 3,337 |   |
| **Cash at end of period**                                                                 | ** ** | **$**                   | **3,883**  |   | **$** | **4,286** |   |

 

See accompanying notes to condensed consolidated financial statements

3

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**TRUE TEMPER SPORTS, INC. AND SUBSIDIARIES (A wholly-owned subsidiary of True Temper Corporation)**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in thousands unless otherwise indicated)**

**1)  Basis of Presentation**

The accompanying unaudited financial statements ofTrue Temper Sports, Inc. (“True Temper” or the “Company”) have beenprepared in accordance with the rules and regulations of the Securitiesand Exchange Commission (“SEC”) for quarterly reports on Form 10-Qand consequently do not include all the disclosures required by accountingprinciples generally accepted in the United States of America. It is suggestedthat these financial statements be read in conjunction with the audited financialstatements and the notes thereto for the year ended December 31, 2005. Inthe opinion of management, the financial statements as of and for the periodsended April 2, 2006 and April 3, 2005 include all adjustments,consisting of only normal recurring adjustments, which are necessary for thefair presentation of results for interim periods.

The Company’s fiscal year begins on January 1 andends on December 31 of each year. During the course of the year theCompany closes its books on a monthly and quarterly basis following a4,4,5 week closing calendar. Since the Company uses Sunday as the last dayof each period (with the exception of December) the number of days in the firstand fourth quarters of any given year can vary depending on which day of theweek January 1st falls on.

On January 30, 2004, TTS Holdings LLC, a companyformed by Gilbert Global Equity Partners, L.P. and its affiliated funds (“GilbertGlobal”), entered into a stock purchase agreement with the Company’s directparent company, True Temper Corporation, pursuant to which TTS Holdings LLC andcertain of the Company’s senior management purchased all of the outstandingshares of True Temper Corporation. In connection with this acquisition, andeffective on March 15, 2004, the Company repaid all of its outstanding2002 senior credit facility, redeemed all of its 107¤8%senior subordinated notes due 2008, and made certain payments of the netremaining equity of the predecessor company to the selling shareholders. Thesepayments were financed with the net proceeds of a new senior credit facilityand new 83¤8%senior subordinated notes due 2011.

This transaction wasaccounted for by the Company’s parent company using the purchase method ofaccounting. As the Company is a wholly owned subsidiary of True TemperCorporation, the Company has “pushed down” the effect of the purchase method ofaccounting to the financial statements of True Temper Sports, Inc.

**2)  Stock Based Compensation**

On August 10, 2005 the Company’s parent company,True Temper Corporation (“TTC”), issued, to certain employees in return forservice, a total of 525,400 stock options and stock appreciation rights(“Equity Incentive Awards”) to purchase common stock of TTC for $13.56 pershare. The Equity Incentive Awards vest and become exercisable at various timesand under various conditions through August 10, 2012; based on servicewith certain acceleration features based on performance criteria.

OnJanuary 1, 2006 the Company adopted Statement of Financial AccountingStandards No. 123(R) (Revised December 2004), *Share Based Payment*(“SFAS 123(R)”). All equity incentive awards issued subsequent toJanuary 1, 2006 will be accounted for using the guidance provided in thisstatement, which requires the measurement and recognition of compensationexpense for all share-based payment awards to employees and directors based onestimated fair values. As allowed by SFAS 123(R), the Company has elected tomake this adoption on a prospective basis because the Company meets thedefinition of a non-

4

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**TRUE TEMPER SPORTS, INC. AND SUBSIDIARIES**

**(A wholly-owned subsidiary of True Temper Corporation)**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**(Unaudited)**

**(Dollars in thousands unless otherwise indicated)**

public entity. For awards issued prior toJanuary 1, 2006, the Company continues to apply the intrinsic-value-basedmethod of accounting prescribed by Accounting Principles Board (APB) OpinionNo. 25, Accounting for Stock Issued to Employees, and relatedinterpretations including Financial Accounting Standards Board InterpretationNo. 44,*Accounting for Certain Transactions InvolvingStock Compensation, An Interpretation of APB Opinion No. 25*,issued in March 2000, to account for its fixed-plan Equity IncentiveAwards. Under this method, compensation expense is recorded on the date ofgrant only if the current market price of the underlying stock exceeded theexercise price of the Equity Incentive Award.

**3)  Inventories**

| ** **      | ** ** | **April 2,  2006** | ** ** | **December 31,  2005** | ** ** |
|-----------------|------------|-------------------------|------------|-----------------------------|------------|
| Raw materials   |       | $                       | 4,354      |                        |       | $ | 4,556 |   |   |
| Work in process |       | 2,339                   |       |                        | 1,734      |   |   |
| Finished goods  |       | 13,066                  |       |                        | 13,343     |   |   |
| Total           |       | $                       | 19,759     |                        |       | $ | 19,633 |   |   |

 

**4)  Segment Reporting**

TheCompany operates in two reportable business segments: golf shafts andperformance sports. The Company’s reportable segments are based on the type ofproduct manufactured and the application of that product in the marketplace.The golf shaft segment manufactures and sells steel, composite, andmulti-material golf club shafts for use exclusively in the golf industry. Theperformance sports segment manufactures and sells high strength, tight tolerancetubular components for bicycle, hockey and other recreational sport markets.The Company evaluates the performance of these segments based on segment salesand gross profit. The Company has no inter-segment sales.

| ** **         | ** ** | **Quarter Ended**  | ** ** |
|--------------------|------------|-------------------------|------------|
| ** **         | ** ** | **April 2,  2006** | ** ** | **April 3,  2005** | ** ** |
| Net sales:         |       |                    |       |   |   |
| Golf shafts        |       | $                       | 29,541     |   | $ | 30,645 |   |
| Performance sports |       | 2,118                   |       | 1,458 |   |
| Total              |       | $                       | 31,659     |   | $ | 32,103 |   |
| Gross profit:      |       |                    |       |   |   |
| Golf shafts        |       | $                       | 11,282     |   | $ | 12,578 |   |
| Performance sports |       | 292                     |       | 291 |   |
| Total              |       | $                       | 11,574     |   | $ | 12,869 |   |

 

5

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**TRUE TEMPER SPORTS, INC. AND SUBSIDIARIES**

**(A wholly-owned subsidiary of True Temper Corporation)**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**(Unaudited)**

**(Dollars in thousands unless otherwise indicated)**

Followingis a reconciliation of total reportable segment gross profit to total Companyincome (loss) before income taxes:

| ** **                                                 | ** ** | **Quarter Ended**  | ** ** |
|------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                 | ** ** | **April 2,  2006** | ** ** | **April 3,  2005** | ** ** |
| Total reportable  segment gross profit                     |       | $                       | 11,574     |   | $ | 12,869 |   |
| Less:                                                      |       |                    |       |   |   |
| Selling, general and administrative expenses               |       | 3,527                   |       | 4,188 |   |
| Amortization of intangible assets                          |       | 3,461                   |       | 3,456 |   |
| Business development, start-up costs and transition  costs |       | 12                      |       | 65 |   |
| Interest expense, net of interest income                   |       | 4,846                   |       | 4,767 |   |
| Other expense, net                                         |       | 20                      |       | 12 |   |
| Total Company income  (loss) before income taxes           |       | $                       | (292       | ) | $ | 381 |   |

 

**5)  Comprehensive Income**

Totalcomprehensive income and its components for the periods covered by this reportare as follows:

| ** **                                                               | ** ** | **Quarter Ended**  | ** ** |
|--------------------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                               | ** ** | **April 2,  2006** | ** ** | **April 3,  2005** | ** ** |
| Net income (loss)                                                        |       |                    | $          | (230 | ) |   |   | $ | 184 |   |   |
| Mark to market  adjustment on derivative instruments, net of taxes  |       |                    | —     |   |   |   | (15 | ) |   |
| Total comprehensive income (loss)                                        |       |                    | $          | (230 | ) |   |   | $ | 169 |   |   |

 

**6)  Pension and Other Postretirement Benefits**

Thefollowing table reflects the Company’s net periodic pension benefit expense andcash contributions to its pension plan, as well as the postretirement benefitexpense related to its unfunded health care plan for retirees, for the periodscovered by this report:

| ** **                                   | ** ** | **Quarter Ended**  | ** ** |
|----------------------------------------------|------------|-------------------------|------------|
| ** **                                   | ** ** | **April 2,  2006** | ** ** | **April 3,  2005** | ** ** |
| *Pension  Plan:*                             |       |                    |       |   |   |   |   |   |   |
| Net periodic  pension benefit expense        |       |                    | $          | 114 |   |   |   | $ | 149 |   |   |
| Cash contributions  to the pension plan      |       |                    | $          | 46 |   |   |   | $ | — |   |   |
| *Postretirement  Health Plan:*               |       |                    |       |   |   |   |   |   |   |
| Net periodic postretirement  benefit expense |       |                    | $          | 78 |   |   |   | $ | 90 |   |   |

 

6

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**Item 2.**                        *Management’s Discussion and Analysis of Financial Condition and Resultsof Operations*

The following discussionshould be read in conjunction with the more detailed information in the TrueTemper Sports, Inc. 2005****annual financialstatements, including the notes thereto, appearing most recently in the 2005Annual Report on Form 10-K, filed with the SEC on March 28, 2006.

**Company Overview**

True Temper Sports, Inc. (“True Temper” or the“Company”), a wholly owned subsidiary of True Temper Corporation (“TTC”), is aleading designer, manufacturer and marketer of steel, composite, andmulti-material golf club shafts for original equipment manufacturers (“OEM’s”)and distributors in the golf equipment industry. In addition, True Temper producesand sells a variety of performance sports products that offer high strength andtight tolerance tubular components to the bicycle, hockey and otherrecreational sports markets. In calendar 2005, golf shaft sales represented 94%of total revenues, and performance sports sales represented 6%. During the first quarter of 2006, sales ofperformance sports products increased to represent 7% of total revenue for thequarter.

**Purchase Agreementfor True Temper Corporation**

On January 30, 2004, TTS Holdings LLC, a companyformed by Gilbert Global Equity Partners, L.P. and its affiliated funds (“GilbertGlobal”), entered into a stock purchase agreement with the Company’s direct parent company, True Temper Corporation,pursuant to which TTS Holdings LLC and certain of the Company’s seniormanagement purchased all of the outstanding shares of TTC (“Gilbert GlobalAcquisition”). In connection with this acquisition, and effective on March 15,2004, the Company repaid all of its outstanding 2002 senior credit facility,redeemed all of its 107¤8%senior subordinated notes due 2008, and made certain payments of the net remaining equity of the predecessor company to theselling shareholders. These payments were financed with the net proceedsof a new senior credit facility and new 83¤8% seniorsubordinated notes due 2011.

The Gilbert GlobalAcquisition was accounted for by the Company’sparent company using the purchase method of accounting. As the Company is awholly owned subsidiary of TTC, the Company has “pushed down” the effect of thepurchase method of accounting to the financial statements of True TemperSports, Inc.

**Results ofOperations**

Thefollowing table sets forth the components of net income as a percentage of netsales for the periods indicated:

| ** **                                                 | ** ** | **Quarter Ended**  | ** ** |
|------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                 | ** ** | **April 2,  2006** | ** ** | **April 3,  2005** | ** ** |
| Net sales                                                  |       |                    | 100.0      | % |   |   | 100.0 | % |   |
| Cost of sales                                              |       |                    | 63.4       |   |   |   | 59.9 |   |   |
| Gross profit                                               |       |                    | 36.6       |   |   |   | 40.1 |   |   |
| Selling, general  and administrative expenses              |       |                    | 11.1       |   |   |   | 13.0 |   |   |
| Amortization of  intangible assets                         |       |                    | 10.9       |   |   |   | 10.8 |   |   |
| Business  development, start-up costs and transition costs |       |                    | 0.0        |   |   |   | 0.2 |   |   |
| Operating income                                           |       |                    | 14.4       |   |   |   | 16.1 |   |   |
| Interest expense,  net of interest income                  |       |                    | 15.3       |   |   |   | 14.8 |   |   |
| Other expenses,  net                                       |       |                    | 0.1        |   |   |   | — |   |   |
| Income (loss) before income taxes                          |       |                    | (0.9       | ) |   |   | 1.2 |   |   |
| Income tax  expense (benefit)                              |       |                    | (0.2       | ) |   |   | 0.6 |   |   |
| Net income (loss)                                          |       |                    | (0.7       | )% |   |   | 0.6 | % |   |

 

8

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***First Quarter Ended April 2, 2006 Compared to theFirst Quarter Ended April 3, 2005***

***Net Sales*********for the first quarter of 2006decreased approximately $0.4 million, or 1.4%, to $31.7 million from$32.1 million in the first quarter of 2005. Golf shaft sales decreased $1.1 million,or 3.6%, to $29.5 million compared to the $30.6 million realized inthe first quarter of 2005. This decline in revenue resulted primarily from areduction in the sales of premium steel golf shafts. This unit sales reductionwas driven by several factors, but was predominantly impacted by the currentlack of exciting new product introductions in the iron category from leadinggolf equipment companies; many of which are scheduled for launch during thesecond half of 2006. Offsetting the sluggish market environment for steel golfshafts, the Company achieved record sales, in both dollars and units, of itsgraphite golf shaft products. The increased unit volume in graphite golf shaftproducts can be attributed to the continued success of branded products such asthe Grafalloy ProLaunch, as well as continued momentum surroundingthe Company’s strategic expansion into the stock OEM graphite market.

Performance sports sales increased approximately $0.6 million,or 45.0%, to $2.1 million in the first quarter of 2006 from $1.5 millionin the first quarter of 2005. This increase is reflective of the Company’scontinued shift in product focus away from non-branded, non-sporting goodsofferings, and to the growing bike and composite hockey markets where TrueTemper continues to build momentum for its new product offerings.

Net sales to international customers decreased $1.8 million,or 15.4%, to $10.1 million in the first quarter of 2006 from $11.9 millionin the same period of 2005. This decrease resulted primarily from the sameoverall golf industry drivers and True Temper specific issues described above.In addition, the Company experienced a decline in foreign sales of $0.5 milliondue to fluctuations in foreign currency levels in the British Pound, JapaneseYen and Australian Dollar.

***Gross Profit***for the first quarter of 2006 decreased $1.3 million, or 10.1%, to $11.6 millionfrom $12.9 million in the first quarter of 2005. Gross profit as apercentage of net sales decreased to 36.6% in the first quarter of 2006 from40.1% in the first quarter of 2005. The decrease in gross profit as apercentage of net sales was driven primarily by (i) an increase in thecost of raw materials and natural gas, (ii) unfavorable fluctuations inforeign currency exchange rates, and (iii) the expected decline in profit marginsdue to the mix of products sold being more heavily weighted toward graphitegolf and performance sports. These unfavorable factors were partially offset byincreased selling prices on the Company’s steel and graphite golf products, aswell as its performance sports offerings, which were effective January 1,2006.

***Selling, Generaland Administrative Expenses*** (“SG&A”) for thefirst quarter of 2006 decreased $0.7 million, or 15.8%, to $3.5 millionfrom $4.2 million in the first quarter of 2005. SG&A as a percentageof net sales decreased to 11.1% in the first quarter of 2006 from 13.0% in thefirst quarter of 2005. This decline in SG&A spending between periods was inresponse to the softness on the gross profit line, as the Company put specificexpense controls in place to ensure the best possible read-through to operatingprofit. These cost controls encompass a variety of functional areas within theorganization, and are representative of both permanent cost savings as well asthe delay of certain non-essential business activities.

***Amortization ofIntangible Assets*** remained relatively flat duringthe first quarter of 2006 at $3.5 million. Intangible assets were acquiredin connection with the Gilbert Global Acquisition. Intangible assets withdefinitive lives are being amortized using a straight-line method over periodsfrom 2 to 59 years.

***BusinessDevelopment, Start-Up Costs and Transition Costs*** forthe first quarter of 2006 decreased $0.1 million, to $0.0 millionfrom $0.1 million in the first quarter of 2005. These costs representvarious start-up business expenses related to the opening of the Company’scomposite manufacturing operation in Southern China, and the relateddown-sizing costs incurred at the Company’s El Cajon, California facility. 

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The transition ofmanufacturing capability is now substantially complete, and the Company willnow turn its focus to eliminating the remaining duplicate overhead at itsCalifornia facility.

***Operating Income***for the first quarter of 2006 decreased approximately $0.6 million, or 11.4%,to $4.6 million from $5.2 million in the first quarter of 2005. This decreasereflects the gross profit and SG&A impact of the items described above.

***Interest Expense*** for the first quarter of 2006 was relatively flatat $4.8 million. An increase in interest expense, driven primarilyby an increase in the variable interest rate on the Company’s bank debt, waspartially offset by the decrease in outstanding principal amounts of variablerate bank debt due to the voluntary prepayments recorded during 2005.

***Income Tax Expense(Benefit)*** decreased in the first quarter of 2006to an income tax benefit of $0.1 million compared to an income tax expenseof $0.2 million in the first quarter of 2005. The effective tax rateduring these periods differs from a federal statutory rate of 34% due primarilyto the incremental tax rate for state and foreign income tax purposes.

***Net Income (Loss)*** for thefirst quarter of 2006 decreased to a net loss of $0.2 million as comparedto $0.2 million of net income in the first quarter of 2005. This decreasereflects the profit impact of the items described above.

**Liquidity andCapital Resources**

***General***

As part of the Gilbert Global Acquisition the Companyentered into a new senior credit facility (the “2004 Senior Credit Facility”)which includes a $20.0 million non-amortizing revolving credit facility and a$110.0 million Term B loan (as amended from time to time). The term loanrequires cash interest payments and quarterly principal payments beginning June 30,2004 and continuing through March 15, 2011.

Also in conjunction with the Gilbert GlobalAcquisition the Company issued new 83¤8% Senior SubordinatedNotes due 2011 (the “83¤8%Notes”). The 83¤8%Notes require cash interest payments each March 15th and September 15thcommencing on September 15, 2004. The 83¤8% Notes areredeemable at the Company’s option, under certain circumstances and at certainredemption prices, beginning March 15, 2008.

The Company used the proceeds from the 2004 SeniorCredit Facility and the 83¤8% Notes to payoff the existing debt that was outstanding at closing on March 15, 2004,and to make a distribution of the net remaining equity to the sellingshareholders.

On September 24, 2004 the Company executed anamendment to its 2004 Senior Credit Facility (the “Amendment”). The Amendmentprovided adjustments to certain specified financial ratios and tests includedin the 2004 Senior Credit Facility. As part of the Amendment, the margin adderon LIBOR based loans was increased from 2.50% to between 2.75% and 3.00%,depending on financial ratios, beginning September 24, 2004 and continuingthrough December 31, 2005.

On March 27, 2006 theCompany amended and restated its 2004 Senior Credit Facility (the “2006 RestatedCredit Facility”). The 2006 Restated Credit Facility includes additional termloans under the Company’s existing Senior Secured Credit Facilities ofapproximately $15.0 to $18.0 million, amendments that enable the Companyto pursue future acquisitions, and the necessary flexibility to execute on theCompany’s global strategic and operational initiatives.

Both the 2006 Restated Credit Facility and the 83¤8%Notes contain covenants and events of default, including substantialrestrictions and provisions which, among other things, limit the Company’sability to 

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incur additionalindebtedness, make acquisitions and capital expenditures, sell assets, createliens or other encumbrances, make certain payments and dividends, or merge orconsolidate. The 2006 Restated Credit Facility also requires the Company tomaintain certain specified financial ratios and tests including minimuminterest coverage and fixed charge coverage ratios, and maximum leverageratios. Furthermore, the 2006 Restated Credit Facility requires certainmandatory prepayments including payments from the net proceeds of certain assetsales and a portion of the Company’s excess cash flow as defined within thecredit agreement.

At April 2, 2006 theCompany was in compliance with all of the covenants in both the 2006 RestatedCredit Facility and the 83¤8% Notes.

***First Quarter Ended April 2, 2006 Compared to theFirst Quarter Ended April 3, 2005***

Net cash provided by operatingactivities declined approximately $1.0 million between periods whichrelates primarily to the decrease in gross profit, as described more fullyabove. Overall working capital remained relatively flat during the firstquarter of 2006.

Net cash used in investing activities increasedslightly, as the Company spent $0.6 million during the first quarter of2006 for capital expenditures, as compared to $0.4 million in the firstquarter of 2005.

Net cash used in financingactivities increased by approximately $0.6 million during the firstquarter of 2006, as compared to the first quarter of 2005 where less than$0.1 million was used for financing. This increase relates primarily to(i) additional principal payments on term debt of $0.3 million, and(ii) payments made on behalf of its parent company, True Temper Corporation,totaling $0.3 million related to state taxes.

***Existing Contractual Cash Obligations***

Thefollowing table reflects the Company’s contractual cash obligations forlong-term debt and capital and operating leases as of April 2, 2006(dollars in millions):

| ** **        | ** ** | **Total** | ** ** | **2006** | ** ** | **2007  through  2008** | ** ** | **2009  through  2010** | ** ** | **Thereafter** | ** ** |
|-------------------|------------|-----------|------------|----------|------------|-------------------------|------------|-------------------------|------------|----------------|------------|
| Long-Term Debt(1) |       | $         | 220.4      |     | $          | 1.0                     |       |                    | $          | 2.6            |       |   |   | $ | 91.8 |   |   |   | $ | 125.0 |   |   |
| Operating Leases  |       | 3.4       |       | 0.8      |       |                    | 1.9        |                    |       |           | 0.6        |   |   |   | 0.1 |   |   |
| Total(2)          |       | $         | 223.8      |     | $          | 1.8                     |       |                    | $          | 4.5            |       |   |   | $ | 92.4 |   |   |   | $ | 125.1 |   |   |

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(1)          The Company’s long-termdebt agreements contain customary change of control provisions that could,under certain circumstances, cause accelerated debt repayment.

(2)          Thistable does not include the Company’s future obligations related to the fundingof its pension benefits.

***Future CashGeneration and Use***

Currentlyour intention is to use existing cash and cash provided from future operations,if any, as allowed within the covenants of the 2006 Restated Credit Facilityand the 83¤8%Notes, to:

·       Repaythe principal on the 2006 Restated Credit Facility; and/or

·       Tomake additional investments in the business for growth, which may include,among other things, capital expenditures, business acquisitions, and/orexpenditures for business development and expansion in China.

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In addition to the debtservice obligations for principal and interest payments, the Company’sliquidity needs largely relate to working capital requirements and capitalexpenditures for machinery and equipment. The Company intends to fund itscurrent and long-term working capital, capital expenditure and debt servicerequirements through cash flow generated from operations. However, since therecan be no assurance of future performance, as of April 2, 2006 the Companyhas the $20.0 million revolving credit facility available for future cashrequirements. The maximum amount the Company may use of the $20.0 million revolvingcredit facility is limited by the financial covenants contained within the 2006Restated Credit Facility.

In addition to the Company’scash obligations for interest and principal payments related to its debtobligations, the Company also has a management services agreement with anaffiliate of Gilbert Global, which requires the payment of an annual advisoryfee of $0.5 million.

Depending on the size, anyfuture acquisitions, joint ventures, capital expenditures or similartransactions may require significant capital resources in excess of cashprovided from operations, and potentially in excess of cash available under therevolving credit facility. There can be no assurance that the Company will beable to obtain the necessary capital, under acceptable terms, from creditors orother sources that will be sufficient to execute any such business investmentor capital expenditure.

**Forward-Looking Statements**

The Private SecuritiesLitigation Reform Act of 1995 (the “Act”) provides a safe harbor for forward-lookingstatements made by the Company. This document contains forward-lookingstatements, including but not limited to Item 2 “Management’s Discussionand Analysis of Financial Condition and Results of Operations”. All statementswhich address future operating or financial performance, events or developmentsthat the Company expects, plans, believes, hopes, wishes, forecasts, predicts,intends, or anticipates will occur in the future, and other similar meanings orphrases, are forward-looking statements within the meaning of the Act.

The forward-lookingstatements are based on management’s current views and assumptions regardingfuture events and operating performance. However, there are many risk factors,including but not limited to, the Company’s substantial leverage, the Company’sability to service its debt, the general state of the economy, the Company’sability to execute its plans, fluctuations in the price and availability ofenergy, fluctuations in the price and availability of raw materials, potentiallysignificant increases to employee health and welfare costs, competitivefactors, and other risks that could cause the actual results to differmaterially from the estimates or predictions contained in the Company’s forward-lookingstatements. Additional information concerning the Company’s risk factors iscontained from time to time in the Company’s public filings with the SEC; andmost recently in the Risk Factors section of Item 1A to Part 1 of theCompany’s 2005 Annual Report on Form 10-K filed with the SEC onMarch 28, 2006.

The Company’s views,estimates, plans and outlook as described within this document may changesubsequent to the release of this statement. The Company is under no obligationto modify or update any or all of the statements it has made herein despite anysubsequent changes the Company may make in its views, estimates, plans oroutlook for the future.

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**Item 3.**                        *Quantitative and Qualitative Disclosures About Market Risk*

**Interest RateSensitivity**

Thetable below provides information about the Company’s debt obligations as of April 2,2006 that are sensitive to changes in interest rates. The table presents cashflows and related weighted average interest rates by expected maturity dates(dollars in millions).
|                                                  | ** ** | **Expected Maturity Date** | ** ** | ** **    | ** ** |
|--------------------------------------------------|------------|--------------------------------------|------------|---------------|------------|
| **LONG TERM DEBT**                     | ** ** | **2006**                             | ** ** | **2007**      | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **There-  after** | ** ** | **Total** | ** ** |
| Fixed-Rate 83¤8%  Senior Subordinated Notes |       | $ —                        |       | $ — |       | $ — |   | $ — |   | $   — |   | $ 125.0 |   | $ 125.0 |   |
| Average Interest Rate                            |       |                                 |       |          |       |   |   |   |   |   |   | 8.38 | % | 8.38 | % |
| 2006 Restated  Credit Facility                   |       | $ 1.0                           |       | $ 1.3    |       | $ 1.3 |   | $ 1.3 |   | $ 90.5 |   | $     — |   | $ 95.4 |   |
| Average Interest  Rate(a)                        |       |                                 |       |          |       |   |   |   |   |   |   |   |   | 7.53 | % |

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(a)           Variable rate long-term debt is comprised ofterm loans under the 2006 Restated Credit Facility, which provides for interestat the Company’s option, at (1) the base rate of the bank acting asadministrative agent plus a margin adder of 2.00%, or (2) under a LIBORoption with a borrowing spread of LIBOR plus 2.50% to 3.00%.

The Company’s operating results are affected bychanges in interest rates primarily as a result of borrowings under the 2006Restated Credit Facility. If interest rates increased by 25 basis points,interest expense would have increased by approximately $0.1 million forthe quarterly period ended April 2, 2006, based on balances outstandingduring the quarterly period then ended.

Information concerning theCompany’s market risks related to foreign exchange rates and commodities iscontained in the “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” section of the Company’s 2005 Annual Report on Form 10-K,as filed with the SEC on March 28, 2006. This information has been omittedfrom this report as there have been no material changes to the Company’s risksrelated to foreign exchange rates and commodities as of April 2, 2006.

**Item 4.**                        *Controls and Procedures*

**Evaluation ofDisclosure Controls and Procedures**

Evaluations required by Rule 13a-15of the Securities Exchange Act of 1934 of the effectiveness of the Company’sdisclosure controls and procedures (as defined in Rule 13a-15(e) underthe Securities Exchange Act of 1934) as of the end of the period covered bythis Report have been carried out under the supervision and with the participationof the Company’s management, including its Chief Executive Officer and ChiefFinancial Officer. Based upon such evaluations, the Chief Executive Officer andChief Financial Officer concluded that the Company’s disclosure controls andprocedures were effective. There have been no changes in the Company’s internalcontrols over financial reporting during the period covered by this Report thatwere identified in connection with the evaluation referred to above that havematerially affected, or are reasonably likely to materially affect, the Company’sinternal controls over financial reporting.

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**PART II. OTHERINFORMATION**

**Item 1.**                        *Legal Proceedings*

Variousclaims and legal proceedings generally incidental to the normal course ofbusiness are pending or threatened against the Company. While the Company cannotpredict the outcome of these matters, in the opinion of management, anyliability arising from these matters will not have a material adverse effect onthe Company’s business, financial condition or results of operations.

**Item 1A.**                *Risk Factors*

—Nochanges—

**Item 2.**                        *Unregistered Sales of Equity Securities and Use of Proceeds*

—Notapplicable—

**Item 3.**                        *Defaults Upon Senior Securities*

—None—

**Item 4.**                        *Submission of Matters to a Vote of Security Holders*

Therewere no matters submitted to a vote of security holders during the quarterended April 2, 2006.

**Item 5.**                        *Other Information*

—NotApplicable—

**Item 6.**                        *Exhibits*
| 1.1  |   | Purchase Agreement, dated as of March 3, 2004,  among True Temper Sports, Inc., Credit Suisse First Boston LLC and  Goldman, Sachs & Co. (filed as Exhibit 1.1 to True Temper  Sports, Inc.’s Registration Statement on Form S-4, as filed  with the Securities and Exchange Commission on April 13, 2004).*                                                                                               |
|------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.1  |   | Indenture, dated as of  March 15, 2004, among True Temper Sports, Inc., the Guarantors  identified therein, and The Bank of New York (filed as Exhibit 4.1 to  True Temper Sports, Inc.’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on April 13,  2004).*                                                                                                           |
| 4.2  |   | Form of Senior  Subordinated Note due 2011 (filed as Exhibit 4.2 to True Temper  Sports, Inc.’s Registration Statement on Form S-4, as filed  with the Securities and Exchange Commission on April 13, 2004).*                                                                                                                                                                                                           |
| 4.3  |   | Registration Rights  Agreement, dated as of March 15, 2004, among True Temper  Sports, Inc., El Cajon Equipment Corporation, True Temper Sports-PRC  Holdings, Inc., Credit Suisse First Boston LLC and Goldman,  Sachs & Co (filed as Exhibit 4.3 to True Temper  Sports, Inc.’s Registration Statement on Form S-4, as filed  with the Securities and Exchange Commission on April 13, 2004).* |
| 10.1 |   | Management Services  Agreement, dated as of March 15, 2004, between GGEP  Management, L.L.C., GGEP Management (Bermuda) Ltd., and True Temper  Sports, Inc. (filed as Exhibit 10.1 to True Temper  Sports, Inc.’s Registration Statement on Form S-4, as filed  with the Securities and Exchange Commission on April 13, 2004).*                                                                               |

 

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| 10.2 |   | Shareholders Agreement,  dated as of March 15, 2004, by and among True Temper Corporation, TTS  Holdings LLC and the Other Investors identified therein (filed as  Exhibit 10.2 to True Temper Sports, Inc.’s Registration Statement  on Form S-4, as filed with the Securities and Exchange Commission  on April 13, 2004).*                                                                                                                                                                           |
|------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.3 |   | True Temper Corporation  2004 Equity Incentive Plan, dated as of March 15, 2004 (filed as  Exhibit 10.3 to True Temper Sports, Inc.’s Registration Statement  on Form S-4, as filed with the Securities and Exchange Commission  on April 13, 2004).*                                                                                                                                                                                                                                                   |
| 10.4 |   | Credit Agreement, dated as of March 15, 2004,  by and among True Temper Corporation, True Temper Sports, Inc, the  Lenders identified therein, Credit Suisse First Boston, Antares Capital  Corporation, Goldman Sachs Credit Partners L.P. and Merrill Lynch  Capital (filed as Exhibit 10.4 to True Temper Sports, Inc.’s  Registration Statement on Form S-4, as filed with the Securities  and Exchange Commission on April 13, 2004).*                                                   |
| 10.5 |   | Tax Sharing and Administrative  Services Agreement, dated as of March 15, 2004, by and among True Temper  Corporation, True Temper Sports, Inc., El Cajon Equipment Corporation  and True Temper Sports-PRC Holdings, Inc. (filed as Exhibit 10.5 to  True Temper Sports, Inc.’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on April 13,  2004).*                                                                                              |
| 10.6 |   | Employment Agreement,  dated as of January 30, 2004, by and between True Temper  Sports, Inc. and Scott C. Hennessy (filed as Exhibit 10.6 to  True Temper Sports, Inc.’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on April 13,  2004).*                                                                                                                                                                                                     |
| 10.7 |   | First Amendment, dated  as of September 24, 2004, to the Credit Agreement, dated as of  March 15, 2004, by and among True Temper Corporation, True Temper  Sports, Inc, the Lenders identified therein, Credit Suisse First Boston,  Antares Capital Corporation, Goldman Sachs Credit Partners L.P. and  Merrill Lynch Capital (filed as Exhibit 10.1 to True Temper Sports, Inc.’s  report on Form 8-K, as filed with the Securities and Exchange  Commission on September 30, 2004).* |
| 10.8 |   | Amended and Restated  Credit Agreement dated as of March 27, 2006, (amending and restating the  Credit Agreement dated as of March 15, 2004, by and among True Temper  Corporation, True Temper Sports, Inc, the Lenders identified therein, Credit  Suisse First Boston, Antares Capital Corporation, Goldman Sachs Credit  Partners L.P. and Merrill Lynch Capital).*                                                                                                                                                     |
| 31.1 |   | Certification pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002**                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 31.2 |   | Certification pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002**                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 32.1 |   | Certification pursuant  to Section 906 of the Sarbanes-Oxley Act of 2002.**                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 32.2 |   | Certification pursuant  to Section 906 of the Sarbanes-Oxley Act of 2002.**                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

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*                    Incorporatedby reference.

**             Filed herewith

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**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized, in the City of Memphis, State of Tennessee, on May 17,2006.

|        | True Temper Sports, Inc. |
|--------|-------------------------------|
|   | By:                           | /s/ SCOTT C. HENNESSY |
|   | Name:                    | Scott C. Hennessy |
|   | Title:                        | President and Chief Executive Officer |
|   | By:                           | /s/ JASON A. JENNE |
|   | Name:                    | Jason A. Jenne |
|   | Title:                        | Vice President, Chief Financial Officer |
|   |                          | and Treasurer |
|        |                               |  |  |

 

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