**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

## **Washington, D.C. 20549**

## ** **

----

 

**FORM 10-Q**

 

| **ý****QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
|--------------------------------------------------------------------------------------------------------------|
|                                                                                                         |
| **For the Quarterly Period Ended March 28, 2004**                                                       |
|                                                                                                         |
| **or**                                                                                                       |
|                                                                                                         |
| **o****TRANSITION REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**     |
|                                                                                                         |
| **Commission file number 333-72343**                                                                    |

 

----

 

**TRUE TEMPERSPORTS, INC.**

(Exact name of registrant asspecified in its charter)

 
| **Delaware**                                                                                                                 |   | **3949**                                                                                       |   | **52-2112620**                           |
|------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------|--------|------------------------------------------|
| (State of other jurisdiction of  incorporation or organization)                                                              |   | (Primary Standard Industrial  Classification Code Number)                                      |   | (I.R.S. Employer  Identification Number) |
|                                                                                                                         |   |                                                                                           |   |                                     |
|                                                                                                                         |   | **8275 Tournament Drive  Suite 200  Memphis, Tennessee 38125  Telephone: (901) 746-2000** |   |                                     |
| (Address, including zip code,  and telephone number, including area code, of registrant’s principal  executive offices) |

 

----

 

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past90 days.  Yes   ý   No   o.

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2 of theAct) Yes   o   No   ý.

 

As of May 12, 2004 the Registrant had 100 shares of CommonStock, $0.01 par value per share, outstanding.

 

 

----

 

**TRUETEMPER SPORTS, INC.**

 

**INDEX**

 
|          |                   | **Page**                                                                                    |
|---------------|------------------------|---------------------------------------------------------------------------------------------|
| PART I.  | FINANCIAL  INFORMATION |                                                                                        |
|          |                   |                                                                                        |
|          | Item 1.           | Financial Statements                                                                        |   |
|          |                   |                                                                                        |   |
|          |                   | 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 | 9 |
|          |                   |                                                                                        |   |
|          | Item 3.           | Quantitative and Qualitative Disclosures  About Market Risk                                 | 15 |
|          |                   |                                                                                        |   |
|          | Item 4.                | Controls and Procedures                                                                     | 15 |
|          |                   |                                                                                        |   |
| PART II. | OTHER  INFORMATION     |                                                                                        |
|          |                   |                                                                                        |   |
|          | Item 1.           | Legal Proceedings                                                                           | 16 |
|          |                   |                                                                                        |   |
|          | Item 2.           | Changes in Securities and Use of Proceeds                                                   | 16 |
|          |                   |                                                                                        |   |
|          | Item 3.           | Defaults Upon Senior Securities                                                             | 16 |
|          |                   |                                                                                        |   |
|          | Item 4.           | Submission of Matters to a Vote of Security  Holders                                        | 16 |
|          |                   |                                                                                        |   |
|          | Item 5.           | Other Information                                                                           | 16 |
|          |                   |                                                                                        |   |
|          | Item 6.           | Exhibits and Reports on Form 8-K                                                       | 16 |
|          |                   |                                                                                        |   |
| Signatures    | 19                     |

 

----

 

### **PART I**         FINANCIALINFORMATION

 

**Item 1.****          *Financial Statements***

 

**TRUETEMPER SPORTS, INC.**

**(Awholly-owned subsidiary of True Temper Corporation)**

 

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

**(Dollarsin thousands)**

 
|                                            |   | **Successor  Company**                         |       |       | **Predecessor  Company**                        |                                      |
|-------------------------------------------------|--------|------------------------------------------------|------------|------------|-------------------------------------------------|-------------------------------------------|
|                                            |   |                                           |       |       |                                            | **Three  Months  Ended  March 30,  2003** |   |
|                                            |   | **Period  from  March 15 to  March 28,  2004** |       |       | **Period  from  January 1 to  March 14,  2004** |                                      |   |
|                                            |   |                                           |       |       |                                            |                                      |   |   |
| **NET SALES**                                   |   | **$**                                          | **9,964**  | ** ** |                                            | **$**                                     | **20,247** | ** ** | **$** | **31,601** | ** ** |
| Cost of sales                                   |   | 5,988                                          |       |       | 11,871                                          |                                      | 19,753 |   |
| **GROSS PROFIT**                                |   | **3,976**                                      | ** ** |       | **8,376**                                       | ** **                                | **11,848** | ** ** |
|                                            |   |                                           |       |       |                                            |                                      |   |   |
| Selling, general and administrative  expenses   |   | 564                                            |       |       | 3,635                                           |                                      | 4,074 |   |
| Business development and start-up costs         |   | 83                                             |       |       | 100                                             |                                      | 125 |   |
| Transaction and reorganization expenses         |   | —                                         |       |       | 5,381                                           |                                      | — |   |
| Loss on early extinguishment of long-term  debt |   | —                                         |       |       | 9,217                                           |                                      | — |   |
| **OPERATING INCOME (LOSS)**                     |   | **3,329**                                      | ** ** |       | **(9,957**                                      | **)**                                     | **7,649** | ** ** |
|                                            |   |                                           |       |       |                                            |                                      |   |   |
| Interest expense, net of interest income        |   | 685                                            |       |       | 2,498                                           |                                      | 3,328 |   |
| Other expenses (income), net                    |   | 2                                              |       |       | (2                                              | )                                         | 5 |   |
| **INCOME (LOSS) BEFORE INCOME TAXES**           |   | **2,642**                                      | ** ** |       | **(12,453**                                     | **)**                                     | **4,316** | ** ** |
|                                            |   |                                           |       |       |                                            |                                      |   |   |
| Income taxes                                    |   | 1,045                                          |       |       | (2,845                                          | )                                         | 1,732 |   |
| **NET INCOME (LOSS)**                           |   | **$**                                          | **1,597**  | ** ** |                                            | **$**                                     | **(9,608** | **)** | **$** | **2,584** | ** ** |

 

See accompanying notes to condensedconsolidated financial statements

 

1

----

 

**TRUETEMPER SPORTS, INC.**

**(Awholly-owned subsidiary of True Temper Corporation)**

 

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

**(Dollarsin thousands)**

 
|                                                                                                       |   | **Successor  March 28,  2004** |        |       | **Predecessor  December 31,  2003** |       |
|------------------------------------------------------------------------------------------------------------|--------|--------------------------------|-------------|------------|-------------------------------------|------------|
|                                                                                                       |   |                           |        |       |                                |       |
| **ASSETS**                                                                                                 |   |                           |        |       |                                |       |
| **CURRENT ASSETS**                                                                                         |   |                           |        |       |                                |       |
| Cash and cash equivalents                                                                                  |   | $                              | 3,352       |       |                                | $          | 8,389 |   |
| Receivables, net                                                                                           |   | 19,890                         |        |       | 15,612                              |       |
| Inventories                                                                                                |   | 15,881                         |        |       | 15,656                              |       |
| Prepaid expenses and other current assets                                                                  |   | 3,046                          |        |       | 2,271                               |       |
| **Total current assets**                                                                                   |   | **42,169**                     | ** **  |       | **41,928**                          | ** ** |
|                                                                                                       |   |                           |        |       |                                |       |
| Property, plant and equipment, net                                                                         |   | 14,648                         |        |       | 15,026                              |       |
| Goodwill, net                                                                                              |   | 256,028                        |        |       | 71,506                              |       |
| Deferred tax assets                                                                                        |   | 50,835                         |        |       | 47,902                              |       |
| Other assets                                                                                               |   | 7,560                          |        |       | 3,254                               |       |
| **Total assets**                                                                                           |   | **$**                          | **371,240** | ** ** |                                | **$**      | **179,616** | ** ** |
|                                                                                                       |   |                           |        |       |                                |       |
| **LIABILITIES & STOCKHOLDER’S EQUITY**                                                            |   |                           |        |       |                                |       |
| **CURRENT LIABILITIES**                                                                                    |   |                           |        |       |                                |       |
| Current portion of long-term debt                                                                          |   | $                              | 1,100       |       |                                | $          | 4,500 |   |
| Accounts payable                                                                                           |   | 5,665                          |        |       | 4,992                               |       |
| Accrued expenses and other current  liabilities                                                            |   | 10,054                         |        |       | 8,675                               |       |
| **Total current liabilities**                                                                              |   | **16,819**                     | ** **  |       | **18,167**                          |       |
|                                                                                                       |   |                           |        |       |                                |       |
| Long-term debt, net of current portion                                                                     |   | 233,900                        |        |       | 109,230                             |       |
| Other liabilities                                                                                          |   | 6,134                          |        |       | 3,426                               |       |
| **Total liabilities**                                                                                      |   | **256,853**                    | ** **  |       | **130,823**                         |       |
|                                                                                                       |   |                           |        |       |                                |       |
| **STOCKHOLDER’S EQUITY**                                                                              |   |                           |        |       |                                |       |
| Common stock — par value $0.01 per share;  authorized 1,000 shares; issued and outstanding 100 shares |   | —                         |        |       | —                              |       |
| Additional paid-in capital                                                                                 |   | 112,715                        |        |       | 40,326                              |       |
| Retained earnings                                                                                          |   | 1,597                          |        |       | 8,796                               |       |
| Accumulated other comprehensive income  (loss), net of taxes                                               |   | 75                             |        |       | (329                                | )          |
| **Total stockholder’s equity**                                                                        |   | **114,387**                    | ** **  |       | **48,793**                          |       |
| **Total liabilities and stockholder’s equity**                                                        |   | **$**                          | **371,240** | ** ** |                                | **$**      | **179,616** |   |

 

See accompanying notes to condensed consolidatedfinancial statements

 

2

----

 

**TRUETEMPER SPORTS, INC.**

**(Awholly-owned subsidiary of True Temper Corporation)**

 

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

**(Dollarsin thousands)**

 
|                                                                                           |   | **Successor   Company**                        |       |       | **Predecessor  Company**                        |                                      |
|------------------------------------------------------------------------------------------------|--------|------------------------------------------------|------------|------------|-------------------------------------------------|-------------------------------------------|
|                                                                                           |   |                                           |       |       |                                            | **Three  Months  Ended  March 30,  2003** |   |
|                                                                                           |   | **Period  from  March 15 to  March 28,  2004** |       |       | **Period  from  January 1 to  March 14,  2004** |                                      |   |
|                                                                                           |   |                                           |       |       |                                            |                                      |   |   |
| **OPERATING ACTIVITIES**                                                                       |   |                                           |       |       |                                            |                                      |   |   |
| Net income (loss)                                                                              |   | $                                              | 1,597      |       |                                            | $                                         | (9,608 | ) | $ | 2,584 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities:             |   |                                           |       |       |                                            |                                      |   |   |
| Depreciation and amortization                                                                  |   | 78                                             |       |       | 671                                             |                                      | 743 |   |
| Amortization of deferred financing costs                                                       |   | —                                         |       |       | 109                                             |                                      | 213 |   |
| Transaction and reorganization expenses                                                        |   | —                                         |       |       | 5,381                                           |                                      | — |   |
| Loss on early extinguishment of long-term  debt                                                |   | —                                         |       |       | 9,217                                           |                                      | — |   |
| Deferred taxes                                                                                 |   | 1,081                                          |       |       | (3,015                                          | )                                         | 1,647 |   |
| Changes in operating assets and  liabilities, net                                              |   | (2,155                                         | )          |       | 227                                             |                                      | 504 |   |
| **Net cash provided by operating activities**                                                  |   | **601**                                        | ** ** |       | **2,982**                                       | ** **                                | **5,691** |   |
|                                                                                           |   |                                           |       |       |                                            |                                      |   |   |
| **INVESTING ACTIVITIES**                                                                       |   |                                           |       |       |                                            |                                      |   |   |
| Purchase of property, plant and equipment                                                      |   | (42                                            | )          |       | (330                                            | )                                         | (379 | ) |
| **Net cash used in investing activities**                                                      |   | **(42**                                        | **)**      |       | **(330**                                        | **)**                                     | **(379** | **)** |
|                                                                                           |   |                                           |       |       |                                            |                                      |   |   |
| **FINANCING ACTIVITIES**                                                                       |   |                                           |       |       |                                            |                                      |   |   |
| Proceeds from issuance of bank debt                                                            |   | 110,000                                        |       |       | —                                          |                                      | — |   |
| Proceeds from issuance of Senior  Subordinated Notes                                           |   | 125,000                                        |       |       | —                                          |                                      | — |   |
| Principal payments on bank debt                                                                |   | —                                         |       |       | (7,700                                          | )                                         | (1,000 | ) |
| Repay bank debt, including accrued interest                                                    |   | (6,335                                         | )          |       | —                                          |                                      | — |   |
| Call Senior Subordinated Notes, including  accrued interest and call premium                   |   | (109,455                                       | )          |       | —                                          |                                      | — |   |
| Payment of debt issuance costs                                                                 |   | (8,455                                         | )          |       | —                                          |                                      | (255 | ) |
| Dividends paid                                                                                 |   | (102,518                                       | )          |       | —                                          |                                      | (474 | ) |
| Transaction and reorganization expenses,  including cash payments for direct acquisition costs |   | (8,280                                         | )          |       | (463                                            | )                                         | — |   |
| Other financing activity                                                                       |   | —                                         |       |       | (42                                             | )                                         | (40 | ) |
| **Net cash used in financing activities**                                                      |   | **(43**                                        | **)**      |       | **(8,205**                                      | **)**                                     | **(1,769** | **)** |
|                                                                                           |   |                                           |       |       |                                            |                                      |   |   |
| Net increase (decrease) in cash                                                                |   | 516                                            |       |       | (5,553                                          | )                                         | 3,543 |   |
| Cash at beginning of period                                                                    |   | 2,836                                          |       |       | 8,389                                           |                                      | 7,070 |   |
| **Cash at end of period**                                                                      |   | **$**                                          | **3,352**  | ** ** |                                            | **$**                                     | **2,836** | ** ** | **$** | **10,613** |   |

 

See accompanying notes to condensedconsolidated financial statements

 

3

----

 

**TRUE TEMPER SPORTS, INC.**

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

 

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

**(Dollarsin thousands unless otherwise indicated)**

 

**1)  Basis of Presentation**

 

The accompanying unaudited financial statements of True Temper Sports,Inc. (“True Temper” or the “Company”) have been prepared in accordance with therules and regulations of the Securities and Exchange Commission (“SEC”) forquarterly reports on Form 10-Q and consequently do not include all thedisclosures required by accounting principles generally accepted in the UnitedStates of America. It is suggested that these financial statements be read inconjunction with the audited financial statements and the notes thereto for theyear ended December 31, 2003. In the opinion of management, the financialstatements include all adjustments which are necessary for the fairpresentation of results for interim periods.

 

The Company’s fiscal year begins on January 1 and ends onDecember 31 of each year. During the course of the year the Company closesits books on a monthly and quarterly basis following a 4,4,5 week closingcalendar. Since the Company uses Sunday as the last day of each period (withthe exception of December) the number of days in the first and fourth quartersof any given year can vary depending on which day of the week January 1st fallson.

 

On January 30, 2004, TTS Holdings LLC, a newcompany formed by Gilbert Global Equity Partners, L.P. and its affiliated funds(“Gilbert Global”), entered into a stock purchase agreement with our 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.  Inconnection with this acquisition, and effective on March 15, 2004, the Companyrepaid all of its outstanding 2002 senior credit facility, redeemed all of its10 7/8% senior subordinated notes due 2008, and madecertain dividends to True Temper Corporation. These payments were financed with the net proceeds of a new seniorcredit facility and new 8 3/8% senior subordinated notesdue 2011.

 

This transaction was accounted for by ourparent company using the purchase method of accounting.  As the Company is a wholly owned subsidiaryof True Temper Corporation, we have “pushed down” the effect of the purchasemethod of accounting to these financial statements.  Accordingly, these financial statements and accompanying notespresent the historical cost basis results of the Company as “predecessor”through March 14, 2004, and the results of the Company as “successor” fromMarch 15, 2004 through March 28, 2004. Accordingly, the financial statements have been separated by a verticalline into predecessor and successor company results.

 

**2)  Inventories**

 
|            |   | **Successor  March 28,  2004** |   |   | **Predecessor  December 31,  2003** |   |
|-----------------|--------|--------------------------------|--------|--------|-------------------------------------|--------|
| Raw materials   |   | $                              | 2,172  |   |                                | $      | 2,287 |   |
| Work in process |   | 2,167                          |   |   | 2,067                               |   |
| Finished goods  |   | 11,542                         |   |   | 11,302                              |   |
| Total           |   | $                              | 15,881 |   |                                | $      | 15,656 |   |

 

**3)  Segment Reporting**

 

The Company operates in two reportable business segments: golf shaftsand performance sports. The Company’s reportable segments are based on the typeof product manufactured and the application of that product in the marketplace.The golf shaft segment manufactures and sells steel, composite, andmulti-material golf club

 

4

----

 

shafts for use exclusively in the golf industry. The performance sportssegment manufactures and sells high strength, tight tolerance tubularcomponents for bicycle, hockey and other recreational sport markets. The Companyevaluates the performance of these segments based on segment sales and grossprofit. The Company has no inter-segment sales.

 
|               |   | **Successor  Company**                         |   |   | **Predecessor  Company**                        |                                      |
|--------------------|--------|------------------------------------------------|--------|--------|-------------------------------------------------|-------------------------------------------|
|               |   |                                           |   |   |                                            | **Three  Months  Ended  March 30,  2003** |   |
|               |   | **Period  from  March 15 to  March 28,  2004** |   |   | **Period  from  January 1 to  March 14,  2004** |                                      |   |
| Net sales:         |   |                                           |   |   |                                            |                                      |   |   |
| Golf shafts        |   | $                                              | 9,379  |   |                                            | $                                         | 19,067 |   | $ | 30,230 |   |
| Performance sports |   | 585                                            |   |   | 1,180                                           |                                      | 1,371 |   |
| Total              |   | $                                              | 9,964  |   |                                            | $                                         | 20,247 |   | $ | 31,601 |   |
| Gross profit:      |   |                                           |   |   |                                            |                                      |   |   |
| Golf shafts        |   | $                                              | 3,830  |   |                                            | $                                         | 8,142 |   | $ | 11,447 |   |
| Performance sports |   | 175                                            |   |   | 296                                             |                                      | 401 |   |
| Total              |   | $                                              | 3,976  |   |                                            | $                                         | 8,376 |   | $ | 11,848 |   |

 

Following is a reconciliation of total reportable segment gross profitto total Company income (loss) before income taxes:

 
|                                             |   | **Successor  Company**                         |   |   | **Predecessor  Company**                        |                                      |
|--------------------------------------------------|--------|------------------------------------------------|--------|--------|-------------------------------------------------|-------------------------------------------|
|                                             |   |                                           |   |   |                                            | **Three  Months  Ended  March 30,  2003** |   |
|                                             |   | **Period  from  March 15 to  March 28,  2004** |   |   | **Period  from  January 1 to  March 14,  2004** |                                      |   |
| Total reportable segment gross profit            |   | $                                              | 3,976  |   |                                            | $                                         | 8,376 |   | $ | 11,848 |   |
| Less:                                            |   |                                           |   |   |                                            |                                      |   |   |
| Selling, general and administrative  expenses    |   | 564                                            |   |   | 3,635                                           |                                      | 4,074 |   |
| Business development and start-up costs          |   | 83                                             |   |   | 100                                             |                                      | 125 |   |
| Transaction and reorganization expenses          |   | —                                         |   |   | 5,381                                           |                                      | — |   |
| Loss on early extinguishment of long-term  debt  |   | —                                         |   |   | 9,217                                           |                                      | — |   |
| Interest expense, net of interest income         |   | 685                                            |   |   | 2,498                                           |                                      | 3,328 |   |
| Other expense (income), net                      |   | 2                                              |   |   | (2                                              | )                                         | 5 |   |
| Total Company income (loss) before income  taxes |   | $                                              | 2,642  |   |                                            | $                                         | (12,453 | ) | $ | 4,316 |   |

 

5

----

 

**4)  Comprehensive Income**

 

Total comprehensive income and its componentsfor the periods covered by this report are as follows:

 
|                                                               |   | **Successor  Company**                         |   |   | **Predecessor  Company**                        |                                      |
|--------------------------------------------------------------------|--------|------------------------------------------------|--------|--------|-------------------------------------------------|-------------------------------------------|
|                                                               |   |                                           |   |   |                                            | **Three  Months  Ended  March 30,  2003** |   |
|                                                               |   | **Period  from  March 15 to  March 28,  2004** |   |   | **Period  from  January 1 to  March 14,  2004** |                                      |   |
| Net Income (loss)                                                  |   | $                                              | 1,597  |   |                                            | $                                         | (9,608 | ) | $ | 2,584 |   |
| Mark to market adjustment on derivative  instruments, net of taxes |   | 75                                             |   |   | (121                                            | )                                         | (50 | ) |
| Total Comprehensive Income (loss)                                  |   | $                                              | 1,672  |   |                                            | $                                         | (9,729 | ) | $ | 2,534 |   |

 

**5)  Transaction and Reorganization**

 

On March 15, 2004 TTS Holdings LLC, alongwith certain of the Company’s senior management, acquired all of theoutstanding common stock of the Company’s parent, True Temper Corporation, for$123.0 million in cash and existing common stock.  In addition, the Company borrowed $110.0 million under a termloan and issued $125.0 million in senior subordinated notes due 2011.  These debt instruments are further describedin Note 6 below.

 

The purchase price as stipulated in theJanuary 30, 2004 stock purchase agreement totaled $342.0 million, plus directacquisition costs and certain working capital adjustments of $18.4million.  The Company is in the processof evaluating the fair value of tangible and intangible assets acquired andliabilities assumed as of March 15, 2004. The following preliminary allocation of total consideration is,therefore, subject to change as the Company completes this evaluation.

 

| Current assets                |   | $       | 38,542  |   |
|-------------------------------|--------|---------|---------|--------|
| Property, plant and equipment |   | 14,684  |    |
| Deferred tax assets           |   | 62,218  |    |
| Deferred financing costs      |   | 7,366   |    |
| Goodwill                      |   | 256,028 |    |
| Other assets                  |   | 197     |    |
| Current liabilities           |   | (12,475 | )       |
| Other liabilities             |   | (6,130  | )       |
| Total                         |   | $       | 360,430 |   |

 

This transaction was accounted for by theCompany’s parent company using the purchase method of accounting.  As the Company is a wholly owned subsidiaryof True Temper Corporation, we have “pushed down” the effect of the purchasemethod of accounting to these financial statements.

 

In conjunction with the transaction andreorganization, the predecessor company recorded certain transaction relatedexpenses totaling $5.4 million.  Theseexpenses consist primarily of investment banking merger and acquisition fees,legal fees and other incidental costs and expenses typically incurred in anacquisition of this nature.

 

In addition, as a direct result of the earlyextinguishment of the predecessor company’s long term debt, expenses totaling$9.2 million were incurred consisting primarily of the write-off of theremaining deferred

 

6

----

 

financing costs related to the 10 7/8% seniorsubordinated notes due 2008 and the 2002 senior credit facility, and the earlyextinguishment call premium and related interest incurred when the Companyredeemed the 10 7/8% senior subordinated notes on March15, 2004.

 

**6)  Borrowings**

 

(a)  Long Term Debt

 

Long term debtat March 28, 2004 and December 31, 2003 consisted of the following:

 
|                                             |   | **Successor  March 28,  2004** |    | **Predecessor  December 31,  2003** |   |
|--------------------------------------------------|--------|--------------------------------|---------|-------------------------------------|--------|
| 10 7/8%  Senior Subordinated Notes due 2008 |   | $                              | —  |                                | $      | 99,730 |   |
| 2002 Senior credit facility                      |   | —                         |    | 14,000                              |   |
| 8 3/8% Senior  Subordinated Notes due 2011       |   | 125,000                        |    | —                              |   |
| 2004 Senior credit facility                      |   | 110,000                        |    | —                              |   |
| Total debt                                       |   | 235,000                        |    | 113,730                             |   |
| Less current maturities                          |   | 1,100                          |    | 4,500                               |   |
| Long-term debt                                   |   | $                              | 233,900 |                                | $      | 109,230 |   |

 

The 8 3/8% SeniorSubordinated Notes due 2011 (the “Notes”) provide for semi annual interestpayments, in arrears, due on March 15 and September 15.  At the option of the Company, up to 35% ofthe Notes are redeemable prior to March 15, 2007, at 108.375%, with the netcash proceeds of one or more public equity offerings.  In addition, at any time prior to March 15, 2008, the Company mayalso redeem all or a part of the Notes upon the occurrence of a change ofcontrol.  On or after March 15, 2008 theNotes may be redeemed, at the option of the Company, in whole or in part, at aredemption price of 104.188% beginning March 15, 2008 and declining ratablythereafter to 100.0% on March 15, 2010.

 

The 2004 senior credit facility provides forinterest on the term loan, at the Company’s option, at (i) the base rate of thebank acting as administrative agent plus a margin adder of 1.50%, or (ii) undera LIBOR option with a borrowing spread of LIBOR plus 2.50%.  The rate at March 28, 2004 was 5.5%.

 

The loans under the 2004 senior creditfacility are senior to the Notes, and are secured by substantially all of theCompany’s assets.

 

The 2004 senior credit facility and the Notescontain provisions which, among other things, limit the Company’s ability to(i) incur additional indebtedness, (ii) make acquisitions and capitalexpenditures, (iii) sell assets, (iv) create liens or other encumbrances, (v)make certain payments and dividends, or (vi) merge or consolidate.  In addition, both the senior credit facilityand the Notes contain customary change of control provisions that could, undercertain circumstances, cause accelerated debt repayment.  The 2004 senior credit facility alsorequires the Company to maintain certain specified financial ratios and testsincluding minimum interest coverage and fixed charge coverage ratios, andmaximum leverage ratios.  At March 28,2004 the Company was in compliance with all of the covenants in both the 2004senior credit facility and the Notes.

 

The terms of the extinguished debt weresubstantially similar to the 2004 senior credit facility and Notes.

 

7

----

 

At March 28,2004, future minimum principal payments on long term debt were as follows:

 
| 2004       |   | 825     |    |
|------------|--------|---------|---------|
| 2005       |   | 1,100   |    |
| 2006       |   | 1,100   |    |
| 2007       |   | 1,100   |    |
| 2008       |   | 1,100   |    |
| Thereafter |   | 229,775 |    |
| Total      |   | $       | 235,000 |   |
|            |        |         |         |  |

 

(b)  Line of Credit

 

The Company may borrow, through March 15, 2009, up to $20,000 under arevolving credit agreement included in the 2004 senior credit facility.  Borrowings under the agreement are subject tothe same provisions described in the long term debt section of this note.  The Company had no outstanding borrowingsunder this line of credit as of March 28, 2004.

 

8

----

 

**Item 2.****    *Management’s Discussion and Analysis of FinancialCondition and Results of Operations***

 

The following discussion should be read in conjunction with the moredetailed information in our 200**3**Annual Financial Statements, includingthe notes thereto, appearing most recently in our 2003 Annual Report onForm 10-K, filed with the SEC on March 12, 2004 and also disclosed in ourForm S-4 Registration Statement filed with the SEC on April 13, 2004.

 

**Company Overview**

 

True Temper Sports, Inc. (“True Temper” or the “Company”), a whollyowned subsidiary of True Temper Corporation (“TTC”), is a leading designer,manufacturer and marketer of steel, composite, and multi-material golf clubshafts for original equipment manufacturers (“OEM’s”) and distributors in thegolf equipment industry. In addition, True Temper produces and sells a varietyof performance sports products that offer high strength and tight tolerancetubular components to the bicycle, hockey and other recreational sportsmarkets. In calendar 2003, golf shaft sales represented 94% of total revenues,and performance sports sales represented 6%. This sales split has remainedrelatively consistent during the first quarter of 2004.

 

**Purchase Agreementfor True Temper Corporation**

 

On January 30, 2004, TTS Holdings LLC, a newcompany formed by Gilbert Global Equity Partners, L.P. and its affiliated funds(“Gilbert Global”), entered into a stock purchase agreement with our 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.  Inconnection with this acquisition, and effective on March 15, 2004, the Companyrepaid all of its outstanding 2002 senior credit facility, redeemed all of its10 7/8% senior subordinated notes due 2008, and madecertain dividends to True Temper Corporation. These payments were financed with the net proceeds of a new seniorcredit facility and new 8 3/8% senior subordinated notesdue 2011.

 

This transaction was accounted for by ourparent company using the purchase method of accounting.  As the Company is a wholly owned subsidiaryof True Temper Corporation, we have “pushed down” the effect of the purchasemethod of accounting to these financial statements.  Accordingly, these financial statements and accompanying notespresent the historical cost basis results of the Company as “predecessor”through March 14, 2004, and the results of the Company as “successor” fromMarch 15, 2004 through March 28, 2004.

 

For purposes of the following discussionregarding the Company’s results of operations and cash flow, the Company hascombined the results of the predecessor and successor companies in order tocompare the full quarter results to the prior year.  Material variances caused by the different basis of accountinghave been disclosed where applicable.

 

9

----

 

**Results of Operations**

 

The following table sets forth the components of net income as a percentageof net sales for the periods indicated:

 
|                                          |   | **Predecessor  Company**                        |   | **Successor  Company**                         |   | **Combined  Company**                             |   | **Predecessor  Company**                          |   |
|-----------------------------------------------|--------|-------------------------------------------------|--------|------------------------------------------------|--------|---------------------------------------------------|--------|---------------------------------------------------|--------|
|                                          |   | **Period  from  January 1 to  March 14,  2004** |   | **Period  from  March 15 to  March 28,  2004** |   | **For the  Three  Months Ended  March 28,  2004** |   | **For the  Three  Months Ended  March 30,  2003** |   |
| Net sales                                     |   | 100.0                                           | %      | 100.0                                          | %      | 100.0                                             | %      | 100.0                                             | %      |
| Cost of sales                                 |   | 58.6                                            |   | 60.1                                           |   | 59.1                                              |   | 62.5                                              |   |
| Gross profit                                  |   | 41.4                                            |   | 39.9                                           |   | 40.9                                              |   | 37.5                                              |   |
| Selling, general and administrative  expenses |   | 18.0                                            |   | 5.7                                            |   | 13.9                                              |   | 12.9                                              |   |
| Business development and start-up costs       |   | 0.5                                             |   | 0.8                                            |   | 0.6                                               |   | 0.4                                               |   |
| Transaction and reorganization expenses       |   | 26.6                                            |   | —                                         |   | 17.8                                              |   | —                                            |   |
| Loss on early extinguishment of debt          |   | 45.5                                            |   | —                                         |   | 30.5                                              |   | —                                            |   |
| Operating income (loss)                       |   | (49.2                                           | )      | 33.4                                           |   | (21.9                                             | )      | 24.2                                              |   |
| Interest expense, net of interest income      |   | 12.3                                            |   | 6.9                                            |   | 10.5                                              |   | 10.5                                              |   |
| Other expenses, net                           |   | —                                          |   | —                                         |   | —                                            |   | —                                            |   |
| Income (loss) before income taxes             |   | (61.5                                           | )      | 26.5                                           |   | (32.5                                             | )      | 13.7                                              |   |
| Income taxes                                  |   | (14.1                                           | )      | 10.5                                           |   | (6.0                                              | )      | 5.5                                               |   |
| Net income (loss)                             |   | (47.5                                           | )%     | 16.0                                           | %      | (26.5                                             | )%     | 8.2                                               | %      |

 

***First Quarter EndedMarch 28, 2004 Compared to the First Quarter Ended March 30, 2003***

 

***Net Sales***for the first quarter of 2004 decreased $1.4 million, or 4.4%, to $30.2 millionfrom $31.6 million in the first quarter of 2003. Golf shaft sales decreased$1.8 million, or 5.9%, to $28.4 million compared to the $30.2 million realizedin the first quarter of 2003.  Themajority of this change was driven by slightly reduced sales of our premiumsteel golf shafts reflecting some inventory corrections in the pipeline forcertain OEM customers, and the timing of OEM new product launches using ourshafts.  Sales of commercial grade steelshafts improved as expected and graphite shaft sales remained relatively flatbetween periods.

 

Performance sports sales increased $0.4 million, or 28.7%, to $1.8million in the first quarter of 2004 from $1.4 million in the first quarter of2003.

 

Net sales to international customers increased $1.7 million, or 18.4%,to $11.0 million in the first quarter of 2004 from $9.3 million in the sameperiod of 2003 reflecting the continued migration of golf club assembly toChina, plus the improvement in foreign currency exchange rates between years atmany of our foreign distribution locations.

 

***Gross Profit***for the first quarter of 2004 increased $0.5 million, or 4.3%, to $12.3 millionfrom $11.8 million in the first quarter of 2003. Gross profit as a percentageof net sales increased to 40.9% in the first quarter of 2004 from 37.5% in thefirst quarter of 2003.  Gross profitdollars and margin increased from several favorable factors, including i)improved foreign currency exchange rates, ii) increased selling prices onbranded and other products, and iii) favorable operating improvements fromproductivity programs and other elements. These favorable factors were somewhat offset by the mix impact ofselling a higher percentage of lower margin commercial grade steel productsduring the quarter, and inflation factors for wages, employee health andwelfare benefits, and increases in the cost of steel and nickel used in themanufacturing or our steel products.

 

***Selling, General andAdministrative Expenses*** (“SG&A”) for the firstquarter of 2004 increased $0.1 million, or 3.1%, to $4.2 million from $4.1million in the first quarter of 2003. SG&A as a percentage of net salesincreased to 13.9% in the first quarter 2004 from 12.9% in the first quarter of2003.

 

10

----

 

***Business Developmentand Start-Up Costs*** for the first quarter of 2004increased $0.1 million, or 46.4%, to $0.2 million from $0.1 million in thefirst quarter of 2003.  In 2003 and 2004these costs are comprised of travel, professional and legal fees, personnelrecruiting and compensation, rent, equipment installation, and other start-upbusiness costs related to the opening of our composite manufacturing operationin southern China.  These costsincreased slightly with the incremental level of activity and growingemployment base between periods.

 

***Transaction andReorganization Expenses*** for the first quarter of2004 were $5.4 million and were incurred in conjunction with the sale andpurchase agreement for TTC which closed on March 15, 2004.  These transaction related expenses include(i) investment banking merger and acquisition fees; (ii) legal fees; and (iii)other incidental costs and expenses related to the sale of TTC.  No such transaction and reorganizationexpenses were incurred during the first quarter of 2003.

 

***Loss on the EarlyExtinguishment of Long-Term Debt*** for the firstquarter of 2004 was $9.2 million.  Thecosts recorded as loss on the early extinguishment of long term debt include(i) the write-off of the remaining deferred financing costs related to our 107/8% senior subordinated notes and our 2002 senior credit facility, and (ii) theearly extinguishment call premium and related interest we incurred when weredeemed the 10 7/8% senior subordinated notes on March 15, 2004.  No long term debt was extinguished duringthe first quarter of 2003.

 

***Operating Income(Loss)*** for the first quarter of 2004 was anoperating loss of $6.6 million as compared to our operating income of $7.6million in the first quarter of 2003. This decline was primarily generated from the costs and expenses weincurred and recognized with the sale of TTC. Excluding the impact of the transaction and reorganization expenses andthe loss on early extinguishment of long-term debt, operating income in thefirst quarter of 2004 would have increased by approximately $0.3 million to$8.0 million from $7.6 million in the first quarter of 2003.  Operating income as a percentage of netsales would have increased to 26.4% in the first quarter of 2004 from 24.2% inthe first quarter of 2003.

 

***Interest Expense***for the first quarter of 2004 decreased to $3.2 million from $3.3 million inthe first quarter of 2003.

 

***Income Taxes***decreased in the first quarter of 2004 to an income tax benefit of $1.8 millioncompared to an income tax expense of $1.7 million in the first quarter of 2003.This decreased was driven primarily by the pretax expenses recorded as a resultof the transaction and reorganization on March 15, 2004.  The effective tax rate during these periodsdiffers from a federal statutory rate of 34% due primarily to the incrementaltax rate for state and foreign income tax purposes.  For the period from January 1, 2004 through March 14, 2004 theeffective tax rate also differs due to the nondeductible nature of a portion oftransaction and reorganization expenses. Excluding the affect of transaction and reorganization expenses and losson early extinguishment of long-term debt results of the company in the firstquarter of 2004 would have generated an income tax expense of $1.9 millioncompared to $1.7 million in the first quarter 2003.

 

***Net Income (Loss)***for the first quarter of 2004 was a net loss of $8.0 million as compared to our$2.6 million of net income in the first quarter of 2003. This decline wasprimarily generated from the costs and expenses we incurred and recognized withthe sale of TTC.  Excluding the affectof the transaction and reorganization expenses and the loss on earlyextinguishment of long-term debt, net income for the first quarter of 2004would have increased $0.3 million to $2.9 million, or 11.3%, from $2.6 millionin the first quarter of 2003.

 

**Liquidity and CapitalResources**

 

  ***General***

 

At the beginning of 2003 the Company had a senior credit facility (the“2002 senior credit facility”) which included a $15.0 million non-amortizingrevolving credit facility and a $25.0 million term loan. Amounts under therevolving credit facility were available on a revolving basis through December31, 2007.  The term loan

 

11

----

 

required quarterly cash interest and principal payments beginning inMarch 2003 and continuing through December 2007.

 

In addition, the Company had $99.7 million in 10 7/8% SeniorSubordinated Notes Due 2008 (the “10 7/8% Notes”). The 10 7/8% Notes requiredcash interest payments each June 1 and December 1, beginning June 1, 1999. The10 7/8% Notes were redeemable at the Company’s option, under certaincircumstances and at certain redemption prices, beginning December 1, 2003.

 

On March 15, 2004, TTC, True Temper’s parent company, was purchased byTTS Holdings LLC, an affiliate of Gilbert Global Equity Partners, L. P.  As part of the transaction 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.  The term loanrequires cash interest payments and quarterly principal payments beginning June30, 2004 and continuing through March 15, 2011.

 

Also in conjunction with the transaction the Company issued new 8 3/8%Senior Subordinated Notes due 2011 (the “8 3/8% Notes”).  The 8 3/8% Notes require cash interestpayments each March 15th and September 15th commencing onSeptember 15, 2004.  The 8 3/8% Notesare redeemable at the Company’s option, under certain circumstances and atcertain redemption prices, beginning March 15, 2008.

 

The Company used the proceeds from the 2004 senior credit facility andthe 8 3/8% Notes to pay off the existing debt that was outstanding at closingon March 15, 2004.  Also, a portion ofthe proceeds were used to pay a dividend to TTC in order that TTC could repaythe outstanding balance on its senior discount notes which carried a 13.25% PIKinterest rate or a 12.25% cash interest rate.

 

Both the 2004 senior credit facility and the 8 3/8% Notes containcovenants and events of default, including substantial restrictions andprovisions which, among other things, limit our ability to incur additionalindebtedness, make acquisitions and capital expenditures, sell assets, createliens or other encumbrances, make certain payments and dividends, or merge orconsolidate. The 2004 senior credit facility also requires the Company tomaintain certain specified financial ratios and tests including minimuminterest coverage and fixed charge coverage ratios, and maximum leverageratios. At March 28, 2004 the Company was in compliance with all of thecovenants in both the 2004 senior credit facility and the 8 3/8% Notes.Furthermore, the 2004 senior credit facility requires certain mandatoryprepayments including payments from the net proceeds of certain asset sales anda portion of our excess cash flow as defined within the credit agreement.

 

***First Quarter EndedMarch 28, 2004 Compared to the First Quarter Ended March 30, 2003***

 

Net cash provided by operating activities declined $2.1 million betweenperiods, as the Company built inventory in anticipation of an increase inretail activity.

 

Net cash used in investing activities was flat as we spent $0.4 millionduring the first quarter of 2004 and 2003 for capital expenditures.

 

The Company used $8.2 million of net cash for financing activities inthe first quarter of 2004 as compared to $1.7 million in 2003.  The 2004 first quarter activity included theproceeds from issuing the 2004 senior credit facility and the proceeds fromissuing the 8 3/8% Notes.  These proceeds,plus cash generated from operations during the first quarter, and cash on handat the beginning of the quarter were used to (i) repay the outstandingprincipal and interest on the Company’s 2002 senior credit facility, (ii) toredeem and repay the 10 7/8% Notes including their accrued and unpaid interestand early redemption call premium, (iii) to pay for debt issuance costs on the2004 senior credit facility and the 8 3/8% Notes, (iv) to pay for transactionand reorganization expenses, and (v) to issue a dividend to our parent company,TTC.

 

12

----

 

***Existing ContractualCash Obligations***

 

The followingtable reflects the Company’s contractual cash obligations for long-term debtand capital and operating leases as of March 28, 2004 (dollars in millions):

 
|                     |   | **Total** |   | **2004** |   | **2005  through  2006** |   | **2007  through  2008** |   | **Thereafter** |   |
|--------------------------|--------|-----------|--------|----------|--------|-------------------------|--------|-------------------------|--------|----------------|--------|
| Long-Term Debt(1)        |   | $         | 235.0  |     | $      | 0.8                     |   | $                       | 2.2    |           | $      | 2.2 |   | $ | 229.8 |   |
| Operating Leases         |   | 3.6       |   | 0.8      |   | 1.7                     |   | 1.1                     |   | —         |   |
| Purchase Commitments (2) |   | 0.2       |   | 0.2      |   | —                  |   | —                  |   | —         |   |
| Total(3)                 |   | $         | 238.8  |     | $      | 1.8                     |   | $                       | 3.9    |           | $      | 3.3 |   | $ | 229.8 |   |
|                          |        |           |        |          |        |                         |        |                         |        |                |        |  |  |  |  |  |  |

 

----

(1)   Our long-term debt agreements containcustomary change of control provisions that could, under certain circumstances,cause accelerated debt repayment.

 

(2)   Amount represents the purchase commitments fornatural gas used in the manufacture of steel golf shafts at our Amory,Mississippi facility.

 

(3)   This table does not include our futureobligations related to our funding of our pension benefits.

 

***Future CashGeneration and Use***

 

Currently our intention is to use existing cash and cash provided fromfuture operations, if any, as allowed within the covenants of our 2004 seniorcredit facility and our 8 3/8% Notes, to:

 

•      Repaythe principal on our 2004 senior 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.

 

In addition to the debt service obligations for principal and interestpayments, the Company’s liquidity needs largely relate to working capitalrequirements and capital expenditures for machinery and equipment.  The Company intends to fund our current andlong term working capital, capital expenditure and debt service requirementsthrough cash flow generated from operations. However, since there can be no assurance of future performance, as ofMarch 28, 2004 the Company has the $20.0 million revolving credit facilityavailable for future cash requirements. The maximum amount the Company may use of the $20.0 million revolvingcredit facility is limited by the financial covenants contained within the 2004senior credit facility.

 

In addition to the Company’s cash obligations for interest andprincipal payments related to its debt obligations, the Company also has amanagement services agreement with an affiliate of the principle common stockholder in its parent company, which requires the payment of an annual advisoryfee of $0.5 million.

 

Depending on the size, any future acquisitions, joint ventures, capitalexpenditures or similar transactions may require significant capital resourcesin excess of cash provided from operations, and potentially in excess of cashavailable under the revolving credit facility. There can be no assurance that the Company will be able to obtain thenecessary capital, under acceptable terms, from creditors or other sources thatwill be sufficient to execute any such business investment or capitalexpenditure.

 

13

----

 

**Impact of RecentlyIssued Accounting Standards**

 

In December2003, the FASB issued FASB Interpretation No. 46 (revised December 2003), *Consolidationof Variable Interest Entities*, which addresses how a businessenterprise should evaluate whether it has a controlling financial interest inan entity through means other than voting rights and accordingly shouldconsolidate the entity.  ThisInterpretation replaces FASB Interpretation No. 46, *Consolidation of Variable InterestEntities*, which was issued in January 2003.  The Company will be required to apply FIN46R to variable interests in VIEs created after December 31, 2003.  For variable interests in VIEs createdbefore January 1, 2004, the Interpretation will be applied beginning on January1, 2005.  For any VIEs that must beconsolidated under FIN 46R that were created before January 1, 2004, theassets, liabilities and non-controlling interests of the VIE initially would bemeasured at their carrying amounts with any difference between the net amountadded to the balance sheet and any previously recognized interest beingrecognized as the cumulative effect of an accounting change.  If determining the carrying amounts is notpracticable, fair value at the date FIN 46R first applies will be used tomeasure the assets, liabilities and non-controlling interest of the VIE.  The application of this Interpretation isnot expected to have a material effect on the Company’s financial statements.

 

In May 2003,the FASB issued Statement No. 150, *Accounting for Certain Financial Instruments withCharacteristics of both Liabilities and Equity*. This Statementestablishes standards for the classification and measurement of certainfinancial instruments with characteristics of both liabilities and equity.  The Statement also includes requireddisclosures for financial instruments within its scope.  For the Company, the Statement was effectivefor instruments entered into or modified after May 31, 2003 and otherwise was effectiveas of January 1, 2004, except for mandatorily redeemable financialinstruments.  For certain mandatorilyredeemable financial instruments, the Statement will be effective for theCompany on January 1, 2005.  Theeffective date has been deferred indefinitely for certain other types ofmandatorily redeemable financial instruments. The Company currently does not have any financial instruments that arewithin the scope of this Statement.

 

**Forward-LookingStatements**

 

The Private Securities Litigation Act of 1995 (the “Act”) provides asafe harbor for forward-looking statements made by our Company. This documentcontains forward-looking statements, including but not limited to Item 2“Management’s Discussion and Analysis of Financial Condition and Results ofOperations”. All statements which address future operating or financialperformance, events or developments that we expect, plan, believe, hope, wish,forecast, predict, intend, or anticipate will occur in the future, and othersimilar meanings or phrases, are forward-looking statements within the meaningof the Act.

 

The forward-looking statements are based on management’s current viewsand assumptions regarding future events and operating performance. However,there are many risk factors, including but not limited to, the Company’ssubstantial leverage, the Company’s ability to service its debt, the generalstate of the economy, the Company’s ability to execute its plans, fluctuationsin the price and availability of energy, fluctuations in the price andavailability of raw materials, potentially significant increases to employeehealth and welfare costs, competitive factors, and other risks that could causethe actual results to differ materially from the estimates or predictionscontained in our Company’s forward-looking statements. Additional informationconcerning the Company’s risk factors is contained from time to time in theCompany’s public filings with the SEC; and most recently in the Business Riskssection of Item 1 to Part 1 of our 2003 Annual Report onForm 10-K filed with the SEC on March 12, 2004 and also disclosed in ourForm S-4 Registration Statement filed with the SEC on April 13, 2004.

 

The Company’s views, estimates, plans and outlook as described withinthis document may change subsequent to the release of this statement.  The Company is under no obligation to modifyor 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.

 

14

----

 

**Item 3.****    *Quantitative and Qualitative Disclosures About MarketRisk***

 

**Interest Rate Sensitivity**

 

The table below provides information aboutthe Company’s debt obligations as of March 28, 2004 that are sensitive tochanges in interest rates. The table presents cash flows and related weightedaverage interest rates by expected maturity dates (dollars in millions).

 
|                                         |   | **Expected  Maturity Date** |   |     |   |     |   |
|----------------------------------------------|--------|-----------------------------|--------|----------|--------|----------|--------|
|                                         |   | **2004**                    |   | **2005** |   | **2006** |   | **2007** |   | **2008** |   | **There-  after** |   | **Total** |   | **Fair  Value** |   |
| LONG TERM DEBT                               |   |                        |   |     |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Fixed  Rate 8 3/8% Senior Subordinated Notes |   | $                           | — |     | $      | —   |   | $ | — |   | $ | — |   | $ | — |   | $ | 125.0 |   | $ | 125.0 |   | $ | 125.0 |   |
| Average Interest Rate                        |   |                        |   |     |   |     |   |   |   |   |   | 8.375 | % | 8.375 | % |   |   |
| Variable Rate Senior Credit Facility         |   | $                           | 0.8    |     | $      | 1.1      |   | $ | 1.1 |   | $ | 1.1 |   | $ | 1.1 |   | $ | 104.8 |   | $ | 110.0 |   | $ | 110.0 |   |
| Average Interest Rate (a)                    |   |                        |   |     |   |     |   |   |   |   |   | 5.5 | % | 5.5 | % |   |   |

 

----

(a)     Variable rate long-term debt is comprised ofterm loans under the 2004 senior credit facility. The 2004 senior creditfacility provides for interest at the Company’s option, at (1) the base rate ofthe bank acting as administrative agent plus a margin adder of 1.50%, or (2)under a LIBOR option with a borrowing spread of LIBOR plus 2.50%.

 

Information concerning the Company’s market risks related to foreignexchange rates and commodities is contained in the “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” section of our 2003Annual Report on Form 10-K, as filed with the SEC on March 12, 2004.

 

This information has been omitted from this report as there have beenno material changes to the Company’s risks related to foreign exchange ratesand commodities as of March 28, 2004.

 

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

 

**Evaluation ofDisclosure Controls and Procedures**

 

Evaluations required by Rule 13a-15 of theSecurities Exchange Act of 1934 of the effectiveness of the Company’sdisclosure controls and procedures (as defined in Rule 13a-15(e) under theSecurities Exchange Act of 1934) as of the end of the period covered by this Reporthave been carried out under the supervision and with the participation of theCompany’s management, including its Chief Executive Officer and Chief FinancialOfficer. Based upon such evaluations, the Chief Executive Officer and ChiefFinancial 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, theCompany’s internal controls over financial reporting.

 

15

----

 

**PART II****. OTHERINFORMATION**

 

**Item 1.****    *Legal Proceedings***

 

Various claimsand legal proceedings generally incidental to the normal course of business arepending or threatened against us. While we cannot predict the outcome of thesematters, in the opinion of management, any liability arising from these matterswill not have a material adverse effect on our business, financial condition orresults of operations.

 

**Item 2.****    *Changes in Securities and Use of Proceeds***

 

–Not applicable–

 

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

 

–None–

 

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

 

There were no matters submitted to a vote of security holders duringthe quarter ended March 28, 2004.

 

**Item 5.****    *Other Information***

 

–Not Applicable–

 

**Item 6.****    *Exhibits and Reports on Form 8-K***

 

a.     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).* |

 

16

----

 
|   | 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).*                                                                                                                 |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 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).*                                                                                                                                               |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 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**                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 31.3   |   | Certification  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed as  Exhibit 31.1 to True Temper Sports, Inc.’s 2003 Annual Report on  Form 10-K, as filed with the Securities and Exchange Commission on  March 12, 2004).*                                                                                                                                                                                                 |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 31.4   |   | Certification  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed as  Exhibit 31.2 to True Temper Sports, Inc.’s 2003 Annual Report on  Form 10-K, as filed with the Securities and Exchange Commission on  March 12, 2004).*                                                                                                                                                                                                 |

 

17

----

 
|   | 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.** |

 

 

b.     Reportson Form 8-K

 

On February 23, 2004, True Temper Sports Inc. (the “Company”) filed aForm 8-K announcing the commencement of a private placement of $125.0 millionof senior subordinated notes.  Theoffering is part of a stock purchase agreement of True Temper Corporation, theCompany’s parent, and a refinancing of certain indebtedness of the Company andTrue Temper Corporation.

 

----

*      Incorporatedby reference.

**   Filedherewith

 

18

----

 

**SIGNATURES**

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized, in the City of Memphis, State ofTennessee, on May 12, 2004.

 
|   | True Temper Sports, Inc. |
|--------|--------------------------|
|   |                     |
|   |                     |
|   | By:                      | /s/           SCOTT  C. HENNESSY |   |
|   |                     |
|   | Name:                    | Scott C. Hennessy |
|   | Title:                   | President and Chief Executive Officer |
|   |                     |
|   |                     |
|   | By:                      | /s/           FRED  H. GEYER |   |
|   |                     |
|   | Name:                    | Fred H. Geyer |
|   | Title:                   | Senior Vice President,  Chief Financial Officer and Treasurer |
|        |                          |  |  |  |  |

 

19

----